**Merrill
      Lynch**


**2006
      Power & Gas Conference**


New
      York


September
      27, 2006





**Forward-Looking
      Statements**


Statements
      contained in this presentation that include company expectations or predictions
      of the future are forward-looking statements intended to be covered by the
      safe
      harbor provisions of the Securities Act of 1933 and the Securities Exchange
      Act
      of 1934. It is important to note that the actual results of company earnings
      could differ materially from those projected in any forward-looking statements.
      For additional information refer to Southern Union Company’s Securities and
      Exchange Commission filings.





Southern
      Union Contact:


Jack
      Walsh, Director of Investor Relations


800-321-7423





**Southern
      Union Company**





**Portfolio
      Asset Mix**





**Create
      Shareholder Value**





**Reposition
      Portfolio**


ü  Building
      portfolio of franchise-quality assets


ü  Repositioning
      portfolio to higher returning businesses


–  2003:
      Acquisition of Panhandle Energy/Sale of Texas distribution assets


–  2004:
      Investment in Cross Country


–  2006:
      Acquisition of Sid Richardson/Sale of PA & RI distribution
      assets


–  2006:
      Exchange 50% interest in TW for additional 25% interest in FGT


ü  Focusing
      on growth around quality assets


**SUG
      Actively Manages Portfolio to Optimize Value**





**Transaction
      Overview**


ü  Multi-step
      transaction designed to increase ownership in FGT to 50% and eliminate ownership
      in Transwestern


ü  Energy
      Transfer Partners (ETP) to purchase CCEH Class B interests from GE & others
      for $1B cash


ü  ETP
      exchanges its Class B interests in CCEH for 100% of Transwestern Pipeline valued
      at $1.465 billion


ü  Expected
      to close 4Q 2006


**Positions
      SUG for Future Growth**








**Transaction
      Rationale**


ü  SUG
      improves risk profile


ü  FGT
      is a
      franchise quality asset strategically positioned for growth in the Florida
      market


ü  Transwestern
      has more strategic value to ETP


**Increasing
      Interest in Franchise Asset**





**Financial
      Impacts**


ü  Expected
      to be neutral to near term earnings


ü  CCEH
      responsible for $455MM of Transwestern Holding’s debt


ü  Enhances
      intrinsic value of assets


**Long-Term
      Value Focus**





**Efficiently
      Manage Assets**


ü  Efficiently
      manage existing assets


–  Integrating
      Panhandle and Cross Country produced synergies of $25MM


–  Pursuing
      rate cases at both LDCs


–  Driving
      future savings and efficiencies with shared services


**Assets
      Managed to Maximize Free Cash Flow**





**Fund
      Growth & Optimize Capitalization**


ü  Utilize
      free cash flow to fund growth and optimize capitalization


–  Reinvest
      in high returning growth projects


•  Trunkline
      LNG


•  Trunkline
      Field Zone Expansion


•  SUGS
      projects


–  Optimize
      debt level - maximize return to shareholders


•  Conversion
      of $125MM equity units in August


**Building
      Value through Reinvestment**





**Improve
      Visibility**


ü  Steps
      to
      provide more transparency in our communications


–  Changed
      fiscal year end from June to December


–  Implemented
      $.40 per share cash dividend in 2006


–  Redesigned
      shareholder communications


–  Improved
      disclosures


**Raising
      Profile through Clarity**





**Delivering
      Value**





**Consistent
      EPS Growth**





**Strong
      Cash Generator**





**Diversified
      Earnings Base**





**Strengthened
      Balance Sheet**





**2Q
      2006 Segment Highlights ($000s)**


•  Includes
      SUG’s 50% of Transwestern’s total interest and depreciation of $23 million plus
      SUG’s 25% of Citrus’ total interest, taxes, and depreciation of $67
      million.


•  Includes
      $21.8 million of cash settlement from 2Q options plus $1.3 million non-cash
      loss
      related to the time value portion of the hedge.





**2Q
      EBIT Reconciliation ($000s)**





**Asset
      Overview**





**Distribution
      Assets**


•  Headquartered
      in Kansas City, MO


•  Regulated
      by the Missouri PSC


•  Serves
      approximately 500,000 customers


•  Serves
      34
      counties throughout MO


•  Filed
      for
      $41.7 million rate increase





•  Headquartered
      in Wilkes-Barre, PA


•  Regulated
      by the Pennsylvania PUC


•  Serves
      approximately 160,000 customers


•  Serves
      13
      counties in northeastern and central PA


•  Sold
      PA
      assets to UGI for $580 million





•  Headquartered
      in Providence, RI


•  Regulated
      by the RI PUC and the Massachusetts DT&E


•  Serves
      approximately 250,000 customers in RI


•  Serves
      approximately 50,000 customers in MA


•  Sold
      RI
      assets to National Grid for $575 million including assumed debt of $77
      million





**Transportation
      & Storage Business**





**Key
      Characteristics**


•  FERC
      regulated


•  Diverse
      access to supply


•  Strong
      and growing customer base


•  Significant
      organic growth opportunities


•  Consolidated
      operations


**One
      of the Nation’s Largest Interstate Pipeline Companies**





**Trunkline
      LNG Company**


•  North
      America’s largest operating facility


•  Fully
      contracted with high credit quality counterparty-


BG
      Group
      - until 2028


•  1.8
      Bcf/d
      baseload sendout


•  9.0
      Bcf
      storage


•  Ambient
      air vaporization and NGL extraction to be in service by 2008


**Trunkline
      LNG is a Leading Player in LNG Sector**





**Strong
      Organic Growth**





**Gathering
      & Processing Business**


•  Southern
      Union Gas Services acquired by Southern Union on March 1, 2006


•  Major
      provider of gas gathering and processing services in the Permian
      basin


•  Unregulated,
      high growth business





**System
      Detail**





**Differentiating
      Factors**





**Attractive
      Contract Risk**


•
            Percent
                of Proceeds Contracts


–
            45%
                by volume


–
            80
                - 85% by margin


–
            Spreads
                price risk to both producer and
                pipeline


–
            Fixed
                recovery and fuel % in contract


–
            Allows
                pipeline and producer to hedge their
                interests


–
            Allows
                pipeline to benefit from operational
                flexibility


–
            Creates
                pipeline option to optimize revenue when processing is
                economic


–
            Contract
                contains recovery of treating, compression and gathering
                services





•
            Fee
                Based/Conditioning Fee Contracts


–
            55%
                by volume


–
            15
                - 20% by margin


–
            Contracts
                contain fixed fees for service


–
            Depending
                on gas quality, contracts may contain upside for processing and no
                downside risk below base fee


–
            Creates
                exposure to diverse producer base with no downside commodityrisk





**Operational
      Reliability**


•  Operating
      Risks reduced by...


–  Diversified
      inter-connected assets


–  Strong
      reliable operations


•  High
      run
      rate


•  Low
      FF&U (fuel, flared and unaccountable)


•  Low
      operating costs


•  Gas
      rejection


•  Blending





**Manageable
      Commodity Exposure**


•  SUGS’
      system flexibility allows it to hedge equity BTU volumes using various
      instruments


•  Current
      hedging done through put options so that SUGS maintains upside while mitigating
      downside





**SUGS
      Growth Projects**


**•**  **Deep
      Atoka Gas Development - Loving, Winkler and Ward Counties,
      Texas**


–  ~200MMcf/d
      currently producing


–  Expect
      to
      double that by 2008 with 16 to 18 rigs


–  5
      to
      30MM/d per well


**•**  **Eunice
      Area Expansion Projects - Lea County, New Mexico**


–  70
      MMcf/d
      expansion


–  Expect
      to
      connect additional volumes from major active producers in 2006 and
      2007


–  High
      margin, rich, sour, low pressure gas


**•**  **Spraberry
      Trend Expansion - Reagan County, Texas**


–  20
      mile
      extension of system into Spraberry trend


–  Over
      15
      MMcf/d of 6.6 GPM gas


–  Infill
      drilling continues at a steady pace


**•**  **West
      Texas Barnett Shale - Culberson, Reeves, Pecos & Jeff Davis Counties,
      TX**


–  Over
      2 MM
      acres have been leased in past 2 years in area with little infrastructure for
      gas or NGL’s


–  Approximately
      40 evaluation wells have been drilled, are drilling or are permitted


–  Chesapeake
      recently acquired 135,000 acres and active exploratory program with established
      commercial production in the area from Hallwood and Four Sevens
      (Alpine)


–  Additional
      players include, EOG, Encana, Petro-Hunt, Burlington, Quicksilver and
      Southwestern Energy





**Questions**