CORPORATE GOVERNANCE

Members of the Board’s Committees

SHARE OWNERSHIP

Directors and Executive Officers

The following table presents information as of December 31, 20042008, concerning the beneficial ownership of AGL Resources common stock by each director and director nominee, by each executive officer named in the Summary Compensation Table under the caption “Executive Compensation—Compensation Paid to Executive Officers,” whom we refer to collectively as the “named executive officers,” and by all executive officers and directors as a group, based on information furnished by them to us. We are unaware of any person or group who beneficially owned more than 5% of our common stock as of December 31, 2004.

Beneficial ownership as reported in the table below has been determined in accordance with SEC regulations and includes shares of common stock which may be acquired within 60 days after December 31, 20042008, upon the exercise of outstanding stock options but excludes shares and share equivalents held under deferral plans.plans which are disclosed in a separate column. See footnote (2)note (3) below. Unless otherwise indicated, all directors, director nominees and executive officers have sole voting and investment power with respect to the shares shown.

* The shares shown represent beneficial ownership As of less thanDecember 31, 2008, no individual director, director nominee, named executive officer, or executive officers and directors as a group owned beneficially 1% or more of our common stock.

Notes to Share Ownership Table

Name		Shares of Common Stock Beneficially Owned				Shares and Share Equivalents Held Under Deferral Plans(3)		Total
		Owned Shares(1)		Option Shares(2)
Sandra N. Bane		1,000		—		2,423		3,423
Thomas D. Bell, Jr.		15,525		—		—		15,525
Charles R. Crisp		7,087		—		5,150		12,237
Arthur E. Johnson		1,061		7,173		25,451		33,685
Wyck A. Knox, Jr.		12,122		—		24,487		36,609
Dennis M. Love		3,649		9,874		28,379		41,902
Charles H. McTier		2,106		—		4,514		6,620
Dean R. O’Hare		8,283		—		681		8,964
D. Raymond Riddle(4)		6,496		9,545		36,316		52,357
James A. Rubright		5,527		7,173		19,181		31,881
John W. Somerhalder II		49,716		61,100		4,177		114,993
Felker W. Ward, Jr.		20,896		9,159		23,349		53,404
Bettina M. Whyte		7,230		—		4,549		11,779
Henry C. Wolf		12,441		—		5,980		18,421
Andrew W. Evans		19,396		61,500		—		80,896
Henry P. Linginfelter		31,213		28,034		33		59,280
Kevin P. Madden		66,696		86,258		—		152,954
Douglas N. Schantz		46,822		38,200		6,464		91,486
All executive officers and directors as a group (21 persons)(5)		366,018		401,522		191,134		958,674

GeneralOwner of More Than 5% of AGL Resources Common Stock

We are aware of the following shareholder that beneficially owns more than 5% of AGL Resources common stock.

The board of directors presently consists of twelve members, eleven of whom are non-employee directors. The board is divided into three classes of approximately equal size, with the directors in each class serving a three-year term. The terms are staggered so that the term of one class expires at each annual meeting.

The board of directors, based on the recommendation of its Nominating and Corporate Governance Committee, has nominated Thomas D. Bell, Jr., Arthur E. Johnson, Paula Rosput Reynolds, James A. Rubright and Bettina M. Whyte for election as directors at the annual meeting. If elected, Mr. Bell will hold office for a two-year term ending at the annual meeting of shareholders in 2007 and each of the remaining nominees will hold office for three-year terms ending at the annual meeting of shareholders in 2008. Each

of the nominees has agreed to serve as a director if elected by the shareholders.

If any nominee becomes unable to stand for election, the board may:

Set forth below is information as of December 31, 2004 about the five director nominees and all other current directors whose terms of office will continue after the annual meeting. Unless otherwise stated, all directors have been engaged in their principal occupations for more than the past five years.

Nominees For Election:

		Arthur E. Johnson, Senior Vice President, Corporate Strategic Development, of Lockheed Martin Corporation, an advanced technology company engaged in research, design development, manufacture and integration of advanced technology systems, since December 2001; Vice President, Corporate Strategic Development, of Lockheed Martin Corporation from 1999 until December 2001; President and Chief Operating Officer of Lockheed Martin Corporation Information and Services Sector from 1997 until 1999; President of Lockheed Martin Corporation Systems Integration Group from January 1997 to August 1997; President of Loral Corporation Federal Systems Group from 1994 until 1996; and currently a director of IKON Office Solutions Corporation. Mr. Johnson, 58, has been a director of AGL Resources since February 2002.
		Paula Rosput Reynolds, our Chairman of the Board since February 2002; our President and Chief Executive Officer since August 2000; Chairman of Atlanta Gas Light Company, our wholly-owned subsidiary from November 2000 until June 2003; Chairman, President and Chief Executive Officer of Atlanta Gas Light Company from August 2000 until November 2000; President and Chief Operating Officer of Atlanta Gas Light Company from September 1998 until November 2000; President and Chief Executive Officer of Duke Energy Power Services, LLC., a subsidiary of Duke Energy Corporation, from 1997 until September 1998; President of PanEnergy Power Services, Inc. from 1995 until 1997; and currently a director of Coca-Cola Enterprises Inc. and Delta Air Lines, Inc. Ms. Reynolds, 48, has been a director of AGL Resources since August 2000.
		James A. Rubright, Chairman of the Board and Chief Executive Officer of Rock-Tenn Company, an integrated paperboard and packaging company, since 1999; Executive Vice President of Sonat, Inc., an energy company, from 1996 until 1999; and currently a director of Avondale Incorporated and Oxford Industries, Inc. Mr. Rubright, 58, has been a director of AGL Resources since August 2001.
		Bettina M. Whyte, Managing Director of AlixPartners, LLC, a business turnaround management and financial advisory firm, since April 1997; and currently a director of Amerisure Companies and Washington Group International, Inc. Ms. Whyte, 55, has been a director of AGL Resources since October 2004.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” EACH OF THE ABOVE NOMINEES.

Directors Whose Terms Continue Until the Annual Meeting in 2006:

Directors Whose Terms Continue Until the Annual Meeting in 2007:

Under our Corporate Governance Guidelines, each member of the board of directors is required to attend the annual meeting of shareholders unless unavoidable circumstances preclude attendance. All but one of our then current directors attended our 2004 annual meeting of shareholders.

CORPORATE GOVERNANCE

Board of Directors

Our business affairs are managed under the direction of the board of directors in accordance with the Georgia Business Corporation Code, our articles of incorporation and our bylaws. The role of the board of directors is to govern our affairs for the benefit of our shareholders and other constituencies, which include our employees, customers, suppliers, creditors and the communities in which we do business. The board strives to ensure the success and continuity of our business through the appointment of qualified executive management, overseen by the board.

Director Independence

All of our directors are independent, non-employee directors except Ms. Reynolds, our Chairman, President and Chief Executive Officer. Ms. Reynolds does not participate in any action of the board relating to her compensation or any other matters requiring action by only non-employee directors. The board of directors has determined that each of the independent directors meets the standards adopted by the board of directors to determine director independence. These standards for determining director independence are attached as Annex A to this proxy statement and are also available on our web site atwww.aglresources.com.

In making its determination as to the independence of each of its non-employee members, the board of directors considered certain transactions between our company and each of Messrs. Bell, Knox and Wolf. For more detailed information about these transactions and the board’s determinations, please see “Certain Relationships and Related Transactions.”

Board and Committee Meetings

Members of the board are kept informed through reports routinely presented at board and committee meetings by the Chief Executive Officer and other officers and through other means. During 2004, the board of directors held eight meetings. Each director attended 75% or more of the aggregate of all meetings of the board and each committee on which he or she served.

Executive Sessions Without Management

To promote open discussion among the non-employee directors, the board of directors schedules regular executive sessions in which the non-employee directors meet without management’s participation. Such sessions typically occur at every regularly scheduled board meeting. The presiding director at such executive sessions is the Chairman of the Executive Committee of the board of directors. D. Raymond Riddle served during 2004 and currently serves as Chairman of the Executive Committee. During 2004, the board met in executive session three times.

Committees of the Board

The board of directors has established seven standing committees to assist it in discharging its duties. Actions taken by any committee of the board are reported to the board, usually at the board meeting next following a committee meeting. The committees of the board and their current members are as shown below.

Members of the Board’s Committees

Audit Committee

The Audit Committee, established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, met six times during 2004. All members of the Audit Committee are independent directors, as defined under the listing standards of the New York Stock Exchange and the rules of the SEC. The Audit Committee’s primary function is to assist the board of directors in fulfilling its oversight responsibilities. Among other things, the Audit Committee monitors (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) the independent auditor’s qualifications and independence, and (4) the performance of our internal audit function and the performance of the independent auditor.

The board of directors has determined that Mr. Durham, the Audit Committee Chair, is a “financial expert” within the meaning of SEC regulations.

Additional information regarding the Audit Committee and its functions and responsibilities is included in this proxy statement under the captions “Audit Committee Report” and “Proposal 4—Ratification of the Appointment of PricewaterhouseCoopers LLP as Our Independent Auditor for 2005.” The Audit Committee has adopted a written charter that it recently amended and which we have attached as Annex B to this proxy statement and which is available on our web site atwww.aglresources.com.

Compensation and Management Development Committee

The Compensation and Management Development Committee met six times during 2004. All members of the Compensation and Management Development Committee are independent, non-employee directors, as defined under the listing standards of the NewYork Stock Exchange. Among other things, the Compensation and Management Development Committee assists the board of directors in fulfilling its responsibility to ensure that officers, directors and employees are compensated in accordance with our compensation philosophy, objectives and compensation policies. A copy of the Compensation and Management Development Committee charter is available on our web site atwww.aglresources.com.

Corporate Development Committee

The Corporate Development Committee was formed in October 2004 and met one time during 2004. The Committee’s primary function is to assist the board of directors in fulfilling its oversight responsibilities by reviewing (1) management’s efforts to identify and evaluate opportunities to acquire or develop assets that complement our asset base and support our long-term strategic plan for growth and expansion, and (2) any other matters that the board of directors may delegate to the Corporate Development Committee from time to time. A copy of the Corporate Development Committee charter is available on our web site atwww.aglresources.com.

Environmental and Corporate Responsibility Committee

The Environmental and Corporate Responsibility Committee met two times during 2004. Among other things, the Environmental and Corporate Responsibility Committee (1) reviews and monitors corporate policy with respect to our relationships with employees, shareholders, customers, competitors, suppliers and our communities, (2) identifies and monitors emerging political, social and environmental trends and public policy issues that may affect our business operations, performance or public image, and (3) reviews and monitors matters relating to employee and community health and safety. In 2004, this Committee assumed responsibility to monitor the integration of Elizabethtown Gas, one of our newly acquired natural gas local distribution utilities, pursuant to an order by the New Jersey Board of Public Utilities. A copy of the Environmental and Corporate Responsibility Committee charter is available on our web site atwww.aglresources.com.

Executive Committee

The Executive Committee met two times during 2004. The Executive Committee may meet during intervals between board meetings and has all the authority of the board, subject to limitations imposed by law or our bylaws. A copy of the Executive Committee charter is available on our web site atwww.aglresources.com.

Finance and Risk Management Committee

The Finance and Risk Management Committee met four times during 2004. Among other things, the Finance and Risk Management Committee (1) reviews management’s analysis of significant risks to us on an enterprise scale including market, operational, regulatory, financial, credit, and weather-related risks, (2) oversees the management of our balancesheet, including leverage, liquidity, funding sources, and related matters, (3) oversees the management of our pension and 401(k) assets, and (4) oversees other matters that the board of directors may delegate to the Finance and Risk Management Committee from time to time. The Company’s Chief Risk Officer reports to, and meets in executive session with, the Finance and Risk Management Committee at each regularly scheduled meeting. A copy of the Finance and Risk Management Committee charter is available on our web site atwww.aglresources.com.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee met four times during 2004. All members of the Nominating and Corporate Governance Committee are independent, non-employee directors, as defined under the listing standards of the New York Stock Exchange and other applicable rules and regulations. The Nominating and Corporate Governance Committee’s primary responsibilities include (1) identifying individuals qualified to serve on the board of directors and recommending director nominees for selection by the full board of directors or shareholders, and (2) evaluating, formulating and recommending to the board of directors corporate governance policies. The Nominating and Corporate Governance Committee has adopted a written charter, a copy of which is available on our web site atwww.aglresources.com.

In 2004, the Nominating and Corporate Governance Committee recommended, and the board of directors adopted, amendments to our standards for determining director independence, which are attached as Annex A to this proxy statement. These amendments are consistent with recent amendments adopted by the New York Stock Exchange to its listing standards concerning director independence.

Nomination of Director Candidates. The board of directors is responsible for recommending director candidates for election by the shareholders and for electing directors to fill vacancies or newly created directorships. The board of directors has delegated the screening and evaluation process for director candidates to the Nominating and Corporate Governance Committee, which identifies, evaluates and recruits highly qualified director candidates and recommends them to the board of directors. The Nominating and Corporate Governance Committee considers potential candidates for director, which may come to the attention of the Nominating and Corporate Governance Committee through current directors, management, professional search firms, shareholders or other persons.

If the Nominating and Corporate Governance Committee has either identified a prospective nominee or determines that an additional or replacement director is required, the Nominating and Corporate Governance Committee may take such measures that it considers appropriate in connection with its evaluation of a director candidate, including candidate interviews, engagement of an outside firm to gather additional information and inquiry of persons with knowledge of the candidate’s qualifications and character. In its evaluation of director candidates, including the members of the board of directors eligible for reelection, the Nominating and Corporate Governance Committee considers the current size and composition of the board of directors and the needs of the board of directors and the respective committees of the board in view of the criteria for directors described in our Corporate Governance Guidelines, a copy of which is available on our web site at.www.aglresources.com.

The Nominating and Corporate Governance Committee will consider director nominees proposed by shareholders. A shareholder may recommend a person for nomination for election to our board of directors by writing toour corporate secretary at: Corporate Secretary, AGL Resources Inc., P.O. Box 4569, Location 1466, Atlanta, Georgia 30302-4569. Each submission must include:

A shareholder’s recommendation for a candidate for nomination to be elected at the next annual meeting of shareholders must be received by our corporate secretary no later than 45 days prior to the end of the year preceding such annual meeting of shareholders. The Nominating and Corporate Governance Committee will evaluate these recommendations in the same manner as it evaluates all other nominees, using the criteria described in our Corporate Governance Guidelines.

The Nominating and Corporate Governance Committee periodically engages a third party search firm, Russell Reynolds Associates, Inc.,

to identify possible candidates for the Nominating and Corporate Governance Committee’s consideration based on skills and characteristics identified by the Nominating and Corporate Governance Committee and in light of gaps in board composition that the Nominating and Corporate Governance Committee may identify from time to time as the issues facing the board evolve. Such skills and characteristics desirable in the context of the then current make-up of the board of directors may include diversity, age, business or professional background, financial literacy and expertise, availability and commitment, independence and other relevant criteria. The one director who is new to our board and who is standing for election, Ms. Whyte, was identified by Russell Reynolds.

AUDIT COMMITTEE REPORT

The Audit Committee of the board of directors is composed of four directors who are independent directors, as defined under the listing standards of the New York Stock Exchange. The Audit Committee operates under a written charter adopted by the board of directors.

The Audit Committee reviews our financial reporting process on behalf of the board of directors. In fulfilling its responsibilities, the Audit Committee has reviewed and discussed the audited financial statements contained in our Annual Report on Form 10-K for 2004 with management and the independent auditors. Management is responsible for the Company’s financial statements and the financial reporting process, including the system of internal controls. The independent auditors are responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States of America.

The Audit Committee has discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61,Communication with Audit Committees, as amended, regarding the independent auditor’s judgments about the quality of the Company’s accounting principles as applied in its financial reporting. In addition, the Audit Committee has discussed with the independent auditors the auditor’s independence from us and our management, including the matters in the written disclosures and the letter provided to the Audit Committee as required by Independence Standards Board Standard No. 1,Independence Discussions with Audit Committees.

Based on the reviews and discussions referred to above, the Audit Committee recommended and concurred with the board of directors’ decision to approve the inclusion of the audited financial statements in our Annual Report on Form 10-K for 2004 for filing with the Securities and Exchange Commission.

Michael J. Durham (Chair)

Dennis M. Love

D. Raymond Riddle

Henry C. Wolf

The information contained in the Audit Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate it by reference in such filing.

COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT

Introduction

The Compensation and Management Development Committee of the board of directors, which we refer to in this report as the “Committee,” has prepared the following report regarding 2004 executive compensation. All members of the Committee are independent, non-employee directors, as defined under the listing standards of the New York Stock Exchange. At least two members of the Committee are “non-employee directors” for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, which we refer to as the “Code.” The Committee is responsible for all components of the Company’s management compensation programs, succession planning, director compensation and employee benefit plans. This report is required by rules established by the Securities and Exchange Commission and provides specific information regarding compensation for the Company’s Chairman, President and Chief Executive Officer, the other named executive officers and all other executives of the Company.

Compensation Philosophy and Objectives of Executive Compensation Programs

It is the philosophy of the Company and the Committee that all executive compensation programs should (1) link pay and performance and (2) attract, motivate, reward and retain the executive talent required to achieve corporate objectives. AGL Resources also focuses strongly on compensation tied to stock price performance and the attainment of earnings per share targets, since the Committee believes that these measures provide a clear link to enhanced shareholder value.

The Company and the Committee believe that the Company’s executive officers should have an ongoing stake in the success of the Company. The Company and the Committee also believe that these key employees should have a significant portion of their total compensation tied to the achievement of annual financial goals and the Company’s long-term stock performance. In order to meet the objectives outlined above, the Committee retains the services of an independent compensation consultant to advise it on executive compensation matters.

For benchmarking executive compensation practices and levels, the Committee examines data from two primary sources:

The natural gas service providers included in the proxy peer group are as follows:

While the proxy peer group includes companies from the S&P Utilities Index used in the stock performance graph provided later in this proxy statement, the Committee believes

that the above peer group of companies is more comparable to the Company than is the broader S&P Utilities Index.

Given the limited detail associated with proxy pay data, the Committee also examines published compensation survey data for a broader range of energy services industry companies (i.e., electric utilities, gas utilities, exploration and production companies, etc.). While many of the energy services industry survey participants are in the S&P Utilities Index used in the stock performance graph provided later in this proxy statement, the two groups are not identical. The energy services market data are also utilized because it reflects energy service providers of a comparable revenue size to the Company and provides survey benchmarks with job duties and responsibilities comparable to those of the Company’s named executive officers.

The Company’s compensation program for executives includes base salaries, annual incentives and long-term incentives. Each year the Committee sets levels for base salary, target annual incentive pay and long-term incentives using both proxy peer group and survey data. The Committee does not place a particular emphasis on any one set of data but considers both market perspectives when making pay decisions.

In general, for 2004 the Committee established total compensation opportunities for the Company’s executive officers between the 50^th and 75^th percentiles of the market of energy industry peers. Given that a majority of an executive’s potential compensation is performance-based (i.e., pay at risk), actual total compensation may be above or below the market median based on individual and/or Company performance.

Base Salaries

In 2004, the Committee reviewed base salaries for the named executive officers andother executives. In determining base salary adjustments, the Committee considered several factors, including pay for comparable positions reported in the market data, a review of individual performance, time elapsed since the last increase and the Company’s performance. The Committee does not consider any financial performance criteria on a formulaic basis in determining salary increases. In 2004, base salary adjustments included: for Ms. Reynolds, an 8% increase from $625,000 to $675,000; for Mr. O’Brien, a 3.1% increase from $350,000 to $361,000; for Mr. Madden, a 5.1% increase from $295,000 to $310,000; for Mr. Shlanta, a 3% increase from $270,000 to $278,000; and for Ms. Platt, a 2.3% increase from $215,000 to $220,000.

Annual Incentive Compensation

The Committee previously established the 2004 Annual Team Performance Incentive Plan, which is referred to as the “2004 ATPI Plan.” The 2004 ATPI Plan was designed to motivate employees to devote their maximum efforts toward the realization by the Company of aggressive and significant, yet achievable, improvements in financial performance.

Eligibility

Historically, all employees, including executives, have been eligible to participate in the Annual Team Performance Incentive Plan.

How the Plan Worked

Under the 2004 ATPI Plan, annual cash incentives were tied to the achievement of Company earnings per share targets, business unit goals and individual performance goals. Threshold, target and maximum performance benchmarks were developed for each performance measure. The Company must meet or surpass its corporate earnings per share, or “EPS”, performance threshold in order for any incentive payments to be made, irrespective of the level of business unit achievement or individual performance achievement.The Committee has discretion

each year to remove the effects of all or a portion of significant one-time items from reported EPS.

For purposes of administering the 2004 ATPI Plan, business units included Distribution Operations, AGL Services Company and AGL Networks. Business unit performance for Distribution Operations was measured by a combination of Earnings Before Interest and Taxes, capital expenditures and service criteria. Performance for AGL Services Company was measured by a combination of direct operating and maintenance expenses and capital expenditures. Performance for AGL Networks was measured by a combination of Earnings Before Interest and Taxes and capital expenditures.

For the named executive officers, individual performance goals were linked directly to the Company’s stated goals and objectives. For 2004, the Company’s stated goals and objectives were:

Under the 2004 ATPI Plan, each participant had a target annual incentive compensation opportunity, expressed as a percentage of annual base salary. The 2004 ATPI Plan gave weight to corporate performance, business unit performance and individual performance. For each of the named executive officers other than the Chief Executive Officer, target annual incentive compensation opportunity was based on the following weights: 50% corporate EPS performance and 50% individual performance. For the Chief Executive Officer, the weights are: 75% corporate EPS performance and 25% individual performance. Under the 2004ATPI Plan, maximum awards for the named executive officers could be up to 200% of the target annual incentive compensation opportunity. In 2004, target annual incentive compensation opportunities for the named executive officers were not adjusted from 2003 and were as follows (as a percentage of 2004 base salary): for Ms. Reynolds – 67%; for Messrs. O’Brien, Madden and Shlanta – 50% and for Ms. Platt – 40%.

Calculation and Payment of 2004 Annual Incentive Awards

For each of the named executive officers, based on achievement of corporate EPS above the maximum performance level in 2004, the corporate EPS component of the 2004 ATPI Plan paid out at the maximum level, while individual performance objectives were achieved in varying degrees by each executive officer. As set forth in the Summary Compensation Table, annual cash incentive payments under the 2004 ATPI Plan were as follows: for Ms. Reynolds, $904,500; for Mr. O’Brien, $361,000; for Mr. Madden, $310,000; for Mr. Shlanta, $278,000; and for Ms. Platt, $132,000.

Long-Term Incentive Compensation

In order to link the interests of AGL Resources’ shareholders and key executives and to encourage executive retention, AGL Resources maintains the Long-Term Incentive Plan. Stock options, restricted stock and performance shares and units may be granted under the plan. Awards are based on position and individual performance.

2002 Performance Unit Awards

In February 2002, the Company granted performance units with a performance measurement period that ended December 31, 2004. The performance measures under the units were intended to:

The performance units were granted to a select group of key executives, including the named executive officers.

How the Performance Units Worked

At the end of the three-year performance period, a predetermined percentage of the units vested based on the highest average closing price of Company common stock over any ten consecutive trading days during the performance measurement period and could range from a minimum of 10% to 100% of the granted units. The performance units were entitled to dividend credits during a portion of the performance measurement period. Upon vesting, the performance units were payable in shares of the Company’s common stock, provided, however, at the election of the participant, up to 50% was eligible for payment in cash.

Ms. Reynolds was granted 350,000 units, and the other named executive officers were granted between 125,000 and 175,000 units. Based on the highest average closing stock price over any ten consecutive trading days during the measurement period, 18.31% of the units vested. The corresponding dollar value of vested awards (including accrued dividend credits) for each of the named executive officers was as follows based on the closing price of the Company’s common stock on December 31, 2004 of $33.24 per share: for Ms. Reynolds, 67,461 units or $2,242,418; for each of Messrs. O’Brien and Madden, 33,730 units or $1,121,209; and for each of Mr. Shlanta and Ms. Platt, 24,093 units or $800,863.

2003 Performance Share Awards

In 2003, the Company awarded performance shares to the named executive officers. Thepurpose of the awards was to align executives’ and shareholders’ interests and to encourage executive retention and serve as a bridge until the Committee could review the design of all long-term incentive compensation, with the goal being that a new overall plan would be adopted in 2004.

Eligibility

Participation was limited to the named executive officers.

How the Performance Shares Worked

Awards were made based on the executive’s position and a subjective assessment of individual performance. The awards were scheduled to vest one year from grant based on the achievement of selected cash flow performance measures. Ms. Reynolds was granted 50,000 performance shares, and the other named executive officers were granted between 5,500 and 24,000 performance shares.

In August 2004, the performance shares vested based on the achievement of the pre-established performance criteria, which related to several measures of cash flow. The number and dollar value of performance shares earned in 2004 for the named executive officers was as follows based on the closing price of the Company’s common stock on August 11, 2004 of $29.02 per share: for Ms. Reynolds, 50,000 shares or $1,451,000; for Mr. O’Brien, 24,000 shares or $696,480; for Mr. Madden, 16,000 shares or $464,320; for Mr. Shlanta, 8,500 shares or $246,670; and for Ms. Platt, 5,500 shares or $159,610.

Long-Term Incentive Structure

During 2004, the Committee considered alternatives to the Company’s existing long-term incentive structure. As a result of the long-term incentive structure being under review, the Committee did not grant any

annual long-term incentive awards to named executive officers during 2004.

However, in December 2004, the Committee granted restricted stock to select key employees in connection with their role in the acquisition of NUI Corporation. The number and dollar value of the restricted shares as of the date of grant that were issued to the named executive officers was as follows: 5,500 shares or $182,545 for Messrs. O’Brien and Madden and 4,000 or $133,760 shares for Mr. Shlanta. Effective January 3, 2005, the Committee made long-term incentive awards to the named executive officers in the form of stock options, restricted stock and performance cash. In the future, the Company anticipates making annual long-term incentive awards to the named executive officers.

Share Ownership Guidelines

Consistent with the Committee’s belief that management’s interests should be aligned with those of the shareholders, AGL Resources has adopted share ownership guidelines, expressed as a multiple of base salary, for every Company officer. Each executive’s ownership guideline is based on the executive’s position. The guideline for the Chairman of the Board, President and Chief Executive Officer is five times base salary. The guideline for other named executive officers ranges from two to three times base salary, and for the other officers of the Company, the guideline is one to two times base salary. Each current officer is expected to make progress every year toward achieving compliance with the applicable ownership guidelines and may not dispose of stock until such guideline levels of ownership are reached, absent extenuating circumstances. As of December 31, 2004, each of the named executive officers had exceeded his or her respective share ownership guideline.

Chief Executive Officer Compensation

The Committee reviews the performance and compensation of the Company’s Chief Executive Officer, Ms. Reynolds, on an annual basis. The compensation policy described above is applied in setting Ms. Reynolds’ compensation and includes consideration of factors such as Ms. Reynolds’ (1) performance and accomplishments, including meeting the Company’s goals for expansion, performance, technology implementation and business improvement; (2) demonstrated leadership abilities and vision in a complex marketplace of volatile energy pricing and significant industry distress; and (3) compensation relative to other energy industry executives. Ms. Reynolds participates in the same compensation programs available to other company executives. As noted above, in 2004, Ms. Reynolds received a base salary adjustment of 8% to $675,000 due to base salary being below competitive norms. No adjustment was made to Ms. Reynolds’ target annual incentive opportunity of 67% (expressed as a percentage of 2004 base salary).

Ms. Reynolds’ cash compensation in 2004 was $1,579,500, which includes her base salary and an ATPI payout of $904,500. For the 2004 measurement period, Ms. Reynolds’ ATPI award represented a payout of 200% of target and is the result of the Company exceeding the maximum corporate EPS target and Ms. Reynolds’ individual performance exceeding the Committee’s expectations. Ms. Reynolds’ 2004 ATPI payout was determined as follows: 75% was determined by the Company’s financial EPS performance, and 25% was determined by achievement of individual performance objectives established by the Committee. Ms. Reynolds, like other executive officers, receives no incentive payment under the ATPI Plan unless the threshold levels of Company performance are met or surpassed.

As discussed previously in this report, the Committee did not grant any long-term incentive awards to Ms. Reynolds in 2004 as the current long-term incentive structure was being reviewed by the Committee and alternative designs were being considered. Long-term incentive awards made in prior years to Ms. Reynolds that paid out in 2004 include:

Other Compensation Plans

The Company maintains a competitive package of employee benefit plans which are generally available to all employees. Executives are eligible to participate in the RSP Plan, which is the Company’s qualified 401(k) plan, the Company’s Nonqualified Savings Plan and the Company’s Employee Stock Purchase Plan. Under the terms of the Company’s RSP Plan and Nonqualified Savings Plan, the Company provides a matching contribution of 65%, which under the two plans is capped at an aggregate of 8% of covered compensation as defined under each of the plans. Under the Employee Stock Purchase Plan, employees may purchase Company common stock at a 15% discount.

Code Section 162(m) Implications for Executive Compensation

It is the responsibility of the Committee to address the issues raised by Section 162(m) of the Code. Code Section 162(m) limits the Company’s annual deduction to $1,000,000 for compensation paid to its Chief Executive Officer and to each of the next four most highly compensated executives of the Company. Certain compensation which qualifies as “performance-based” or which meets other requirements under the Code may be exempt from the Code Section 162(m) limit. The Company intends to qualify certain compensation paid to executive officers for deductibility under the Code, including Code Section 162(m). The Committee anticipates that awards under the Company’s long-term incentive program and the corporate portion of the ATPI award will continue to qualify as “performance-based” compensation. However, since the Committee believes that a company’s and shareholders’ interests may sometimes be best served by providing compensation which is not deductible in order to attract, retain, motivate and reward executive talent, the Committee retains the flexibility to provide for payments of such compensation.

Arthur E. Johnson (Chair)

Thomas D. Bell, Jr.

D. Raymond Riddle

James A. Rubright

Bettina M. Whyte

The information contained in the Compensation and Management Development Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate it by reference in such filing.

COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The following directors served on the Compensation and Management Development Committee during 2004: Thomas D. Bell, Jr., Arthur E. Johnson, Dennis M. Love, D. Raymond Riddle, James A. Rubright and Bettina M. Whyte. None of such persons was, during 2004 or previously, an officer or employee of AGL Resources or any of its subsidiaries.

Mr. Thomas D. Bell, Jr. is Chief Executive Officer of Cousins Properties Incorporated, or “Cousins.” Cousins holds a 50% general partnership interest in Ten Peachtree Place Associates, or “TPPA,” which owns the building where we lease space for our corporate headquarters. Mr. Bell is not an officer of TPPA. Although Cousins is the managing member of TPPA, major business decisions for the TPPA partnership must be

decided unanimously by Cousins and its partner. Prior to Mr. Bell joining our board of directors, we entered into a ten-year lease agreement with TPPA that commenced in 2003. Cousins’ 50% interest in the amount we paid in lease payments to TPPA in 2004, approximately $2,863,000, and that we expect to pay in 2005, approximately $2,920,796, does not and will not exceed 5% of our consolidated gross revenues or Cousins’ consolidated gross revenues for the year ended December 31, 2004. The board of directors determined that Mr. Bell is independent because our business relationship with TPPA is not material as our payments to TPPA in 2003 and 2004 did not exceed 1% of either our consolidated gross revenues or Cousins’, which is the standard as set forth in our Standards for Determining Director Independence.

DIRECTOR COMPENSATION

2008 Non-Employee Director Compensation Paid For the 2004 Term of Service

Notes to Non-employee Director Compensation Paid Table

(6)

The number of stock options outstanding at December 31, 2008, for each of the non-employee directors who held options as of such date was as follows:

PROPOSAL 1—ELECTION OF DIRECTORS

GENERAL

Nominees For Election

		Charles H. “Pete” McTier, former President of the Robert W. Woodruff Foundation, the Joseph B. Whitehead Foundation, the Lettie Pate Evans Foundation and the Lettie Pate Whitehead Foundation, which are all based in Atlanta and make up one of the largest foundation groups in the Southeast, from 1988 until his retirement in 2006; Vice President, Secretary and Treasurer of the foundations from 1987 until 1988; Secretary and Treasurer of the foundations from 1977 until 1987; Secretary of the foundations from 1971 until 1977; prior to that, several administrative positions at Emory University; and currently a director of Coca-Cola FEMSA, S.A. de C.V. Mr. McTier, 70, has been a director of AGL Resources since December 2006.
		Henry C. Wolf, former Vice Chairman and Chief Financial Officer of Norfolk Southern Corporation, a holding company that controls a major freight railroad and owns a natural resources company and telecommunications company, from 1998 until his retirement in 2007; Executive Vice President Finance of Norfolk Southern Corporation from 1993 until 1998; Vice President Taxation of Norfolk Southern Corporation from 1991 until 1993; various other positions with increasing responsibility at Norfolk Southern Corporation in the finance division from 1973 until 1991; and currently a director of Hertz Global Holdings, Inc. Mr. Wolf, 66, has been a director of AGL Resources since April 2004.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” EACH OF THE ABOVE NOMINEES.

Directors Whose Terms Continue Until the Annual Meeting in 2010

		D. Raymond Riddle, our Lead Director since October 2007; Chairman of the Board of Directors from March 2006 until October 2007; our Interim Chairman and Chief Executive Officer from January 2006 until March 2006; our Chairman of the Board of Directors from 2000 until 2002; Chairman of the Board and Chief Executive Officer of National Service Industries, Inc., a diversified manufacturing and services company, from 1994 until 1996; and currently a director of Atlantic American Corporation and AMC, Inc. Mr. Riddle, 75, has been a director of AGL Resources since May 1978.
		Felker W. Ward, Jr., Managing Member of Pinnacle Investment Advisors, LLC, an investment advisory services firm, since 1994. Mr. Ward, 75, has been a director of AGL Resources since August 1988.

Directors Whose Terms Continue Until the Annual Meeting in 2011

		John W. Somerhalder II, our Chairman since October 2007 and our President and Chief Executive Officer since March 2006; Executive Vice President of El Paso Corporation, a natural gas and related energy products provider and owner of North America’s largest natural gas pipeline system and one of North America’s largest independent natural gas producers, from 2000 until May 2005, where he continued service under a professional services agreement from May 2005 until March 2006; President, El Paso Pipeline Group from 2001 until 2005; President of Tennessee Gas Pipeline Company, an El Paso company from 1996 until 1999; President of El Paso Energy Resources Company from April 1996 until December 1996; Senior Vice President, Operations and Engineering, El Paso Natural Gas Company from 1992 until 1996; Vice President, Engineering, El Paso Natural Gas Company from 1986 until 1990; from 1977 until 1990, various other positions with increasing responsibility at El Paso Corporation and its subsidiaries until being named an officer in 1990; and currently a director of AGL Resources Inc. and Quicksilver Gas Services GP LLC. Mr. Somerhalder, 53, has been a director of AGL Resources since March 2006.
		Bettina M. Whyte, Chairman of the Advisory Board of Bridge Associates, LLC, a leading turnaround, crisis and interim management firm, since October 2007; Managing Director and Head of the Special Situations Group of MBIA Insurance Corporation, a world leader in credit enhancement services and a global provider of fixed-income asset management services, from March 2006 until October 2007; Managing Director of AlixPartners, LLC, a business turnaround management and financial advisory firm, from April 1997 until March 2006; Partner and National Director of Business Turnaround Services, Pricewaterhouse LLP from 1990 until 1997; Partner, Peterson & Co. Consulting, from 1988 until 1990; President, KRW Associates from 1982 until 1988; Vice President and Manager of Houston Regional Office, Continental Bank of Chicago from 1975 until 1982; Loan Officer, Harris Trust from 1971 until 1975; and currently a director of Amerisure Companies and Rock-Tenn Company. Ms. Whyte, 59, has been a director of AGL Resources since October 2004.

Under our Guidelines on Significant Corporate Governance Issues, each member of the board of directors is required to attend the annual meeting of shareholders unless unavoidable circumstances preclude attendance. All of our then current directors attended our 2008 annual meeting of shareholders.

PROPOSAL 2—APPROVAL OF AMENDMENT TO OUR ARTICLES OF INCORPORATION TO ELIMINATE THE CLASSIFICATION OF THE BOARD OF DIRECTORS

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE AMENDMENT TO OUR ARTICLES OF INCORPORATION TO ELIMINATE THE CLASSIFICATION OF THE BOARD OF DIRECTORS

AUDIT COMMITTEE REPORT

PROPOSAL 3—RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2009

Audit and Non-Audit Fees

The following table summarizes certain fees billed by PricewaterhouseCoopers for 2008 and 2007:

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2009.

COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT

COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE

INTERLOCKS AND INSIDER PARTICIPATION

COMPENSATION DISCUSSION AND ANALYSIS

Using the proxy peer and energy industry peer group information, the Compensation Committee evaluates our aggregate executive compensation on an annual basis by comparing the compensation of our named executive officers with executive pay in the peer groups. For 2008 we compared our named executive officers to executives at the following levels:

Allocation of Total Direct Compensation

Long-Term vs. Annual Compensation.We seek to maintain an executive compensation program that is balanced in terms of each element of pay relative to competitive practices, with more weighting placed on long-term than short-term incentives. The Compensation Committee developed target total direct compensation and the allocations between short- and long-term incentives for 2008 in coordination with Towers Perrin, based on its research regarding effective and emerging practice among proxy peers and energy industry peers. The following table provides the elements of total direct compensation for our named executive officers for 2008.

Corporate Performance.The Compensation Committee approved a Plan EPS target of $2.76 as the 2008 corporate performance metric for annual incentives, as detailed below. The Compensation Committee considered the following factors when approving this goal: it would require us to meet the 4% year-over-year growth commitment made to shareholders, it is consistent with our Institutional Brokers’ Estimate System (IBES) earnings estimate, it was an appropriate stretch target when considering our 2008 business objectives, and it accounts for anticipated volatility and treatment of earnings with Sequent. IBES is a system that gathers and compiles estimates made by stock analysts on the future earnings of U.S. publicly traded companies. Corporate performance results are set forth in the table below.

Taking into consideration the individual achievements in the performance categories noted above, the Compensation Committee determined the appropriate level of performance payouts, as set forth in the table below, based upon their assessment that each named executive officer’s individual performance had exceeded target levels for the year.

Discretion to Modify Awards.The Compensation Committee reserves the right to adjust individual goals during the course of the year in order to reflect changes in the Company and its business. In determining the corporate performance component under our 2007 Omnibus Performance Incentive Plan, the Compensation Committee has the authority to (i) exclude extraordinary one-time effects, which could increase or decrease award payments, if, in its overall judgment, our Company and our shareholders are better served by that result, and (ii) exercise negative discretion against reported results which would serve to reduce an award otherwise due. The Compensation Committee did not exercise such discretion in determining award payments for 2008 performance.

Determination of 2008 Long-Term Incentive Payouts

Performance-Based Restricted Stock Units.As mentioned above, performance-based restricted stock units constitute 40% of the annual long-term incentive at the target award level and are subject to a one-year EPS performance hurdle. For 2008, as noted in the following table, the performance hurdle for restricted share units was attained and all such units were approved.

The following chart details the value of the approved restricted stock units, which will convert to restricted shares of common stock, subject to three-year time-based ratable vesting. Details regarding the grant of these awards can be found on the “Grants of Plan-Based Awards” table on page 49.

Performance Cash Payouts.Performance cash awards granted to named executive officers in January 2006 and having a measurement period that ended December 31, 2008, resulted in payments based on the performance set forth below, as certified by the Compensation Committee.

EXECUTIVE COMPENSATION

Compensation Paid to Named Executive Officers

The Summary Compensation Table below reflects for 2002, 2003 and 2004, the total compensation paid to, or accruedearned by us for, our Chief Executive Officerchief executive officer, our chief financial officer and each of our otherthree most highly compensated executive officers who served as an executive officer as of December 31, 2004.2008. These five officers are our “named executive officers.”

Summary Compensation Table