SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
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                                    FORM 8-K
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                                 CURRENT REPORT
                       PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


        Date of Report (Date of Earliest Event Reported): July 10, 2006

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                               RGC RESOURCES, INC.
             (Exact name of Registrant as specified in its charter)

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      Virginia                   000-26591                    54-1909697
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(State or other                 (Commission                 (IRS Employer
jurisdiction of                 File Number)               Identification No.)
incorporation)


519 Kimball Ave., N.E.        Roanoke, Virginia                  24016
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(Address of principal executive offices)                       (Zip Code)


Registrant's telephone number, including area code: 540-777-4427


(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:

|__|  Written communications pursuant to Rule 425 under the Securities Act (17
      CFR 240.425)

|__|  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
      240.14a-12)

|__|  Pre-commencement communications pursuant to Rule 14d-2(b) under the
      Exchange Act (17 CFR 240.14d-2(b))

|__|  Pre-commencement communications pursuant to Rule 13c-4(c) under the
      Exchange Act (17 CFR 240.13e-4(c))

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ITEM 1.01.     ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

               On July 10, 2006, Diversified Energy Company d/b/a Highland
               Energy, a wholly owned subsidiary of RGC Resources, Inc.
               ("Resources" or "Company"), entered into an asset purchase and
               sale agreement for the sale of the assets relating to its energy
               marketing business to Atmos Energy Marketing, LLC ("Atmos"). The
               assets to be sold include the gas supply contracts between
               Highland Energy and its customers and related business records.
               The date of transfer is set as the date from the first meter read
               performed for each of the end user customers on or after August
               1, 2006.

               Highland Energy and Resources agreed with Atmos for a period of
               three years ending July 1, 2009 to not sell any natural gas for
               consumption by an existing customer at any facility serviced
               under the assigned contracts with the exception of tariff gas
               sales by a public utility subsidiary or affiliate.

               The purchase price for the assets sold by Highland Energy is
               valued at up to $414,270. Atmos will pay Highland Energy the sum
               of $233,216 at closing. The remaining $181,054 will be paid by
               Atmos to Highland Energy on the first anniversary of the closing
               provided that all such customers with assigned contracts remain
               as customers of Atmos Energy as of the anniversary date. However,
               the remaining balance payable will be adjusted downward by a
               prescribed amount to the extent (i) a customer pursuant an
               assigned contract is no longer a customer on the anniversary date
               and such customer was not a customer for two of the preceding
               twelve months or (ii) any customer reduces their average natural
               gas consumption by more than 20 percent from current annualized
               levels.

               As a result of the sale of the assets of Highland Energy, the
               Company recognized a loss of approximately $147,000 related to
               the unassigned basis (the transportation component of the gas
               purchase agreements) not acquired by Atmos. The loss reflects the
               difference in the original cost of such basis in excess of the
               current net realizable value that Highland Energy expects to
               receive for resale of the basis in current gas market conditions.



                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                   RGC RESOURCES, INC.



Date: July 13, 2006                 By: s/Howard T. Lyon

                                       Howard T. Lyon
                                       Vice-President, Treasurer and Controller
                                      (Principal Financial Officer)