Georgia will be the first state in the nation to implement rulesforcing a regulated gas utility to exit the gas merchant functionand allow all of its customers to buy their gas from alternativesuppliers. Under state law passed last year and implemented by theGeorgia Public Service Commission last week, gas sales in theAtlanta Gas Light (AGL) territory will be opened to competition asearly as Nov. 1. Once the market is fully deregulated, AGL willbecome a distribution-only utility. Marketers will sell gasdirectly to 1.4 million customers.

Georgia PSC Chairman Bobby Baker said he’s confident competitionAAwill lead to “more efficient service, more choices and lowerprices.” Only Ohio has shown equal resolve to install competition.Earlier this month Ohio regulators approved plans to allow 1.8million customers inside the territories of three major utilitiesto shop around for gas starting Nov. 1.

While the Georgia PSC rules were generally lauded by allstakeholders, AGL said some tweaking remains to be done. “We do notagree with everything in the PSC decision. But we believe theremaining issues will be resolved and that ultimately Georgia’sapproach to competition will serve as a model nationwide,” saidWalter M. Higgins, president of utility parent AGL Resources.

“Before they voted, the PSC said that they fully expect partiesin this case to ask for reconsideration because of the complexnature of the many issues involved,” said Catherine Land-Waters,acting president of AGL. “We agree and expect to file a request forreconsideration as soon as possible to work out the details of aplan that will be successful in bringing the benefits ofcompetition to Georgia customers.”

One item AGL might seek reconsideration on is performance-basedregulation, said Mark Caudill, AGL Resources vice president ofrates and regulatory affairs. “We had asked for performance-basedregulation, and they chose to retain the traditionalcost-of-service approach. They basically expressed that there areso many uncertainties as we are going through this transition frombeing the merchant and deliverer to being only the deliverer theydidn’t know enough about what we were going to look like.

“The complexity [of deregulation] is certainly far greater thananything the PSC had seen in a gas case before. And they certainlyinvited us to come back to them with some of the operationalaspects on reconsideration, and I expect we will.” Caudill said itwas too early to say exactly what issues AGL might seekreconsideration or clarification on.

There were two changes in the final PSC rule from PSC staffrecommendations, said PSC spokesman Shawn Davis. Staff proposed acost of equity of 10.5%, and the commission ordered 11%. AGL hadasked for 12.25%. The staff position would have created an $11.2million revenue reduction, while the commission order results in a$7.4 million revenue reduction. The PSC denied AGL requests for an$18 million rate increase.

The second change allows marketers to place their own indexes onconsumers’ gas meters. “They’re allowed to index the metersthemselves so they can do innovative meter reading and so forth.”

The PSC indicated a preference to allow marketers to own theirown meters. “However, there’s still a question as to whether thePSC would retain jurisdiction over safety issues if an unregulatedmarketer is permitted to place their own meters on the pipesystem.” This should be ironed out by the Nov. 1 start-up date,Davis said.

Provisions of the rules address such issues as slamming,ancillary services, AGL’s electronic bulletin board and balancing.Marketers must seek authorization from consumers before receivingcustomer information from AGL. AGL must provide services such asmeter reading, billing and collection at regulated rates until afully developed market for those services exists. Marketers canalso perform the functions themselves. The AGL electronic bulletinboard must be operational for real-time testing by Aug. 1, and ifit’s not up and running by Nov. 1, AGL cannot assess penalties fordaily imbalances. Further, the PSC allowed for daily balancingrather than monthly and also allowed for daily trading ofimbalances with a 5% tolerance, plus or minus, for imbalances.

A representative of a marketer involved in the Georgiarulemaking process found parts of the rule attractive to marketersand other parts not so attractive. Among the rule’s featuresattractive to the marketer, who wished to remain anonymous, is fullembedded cost credit for ancillary services, such as billing, themarketer provides itself. According to her reading of the rule,marketers who do their own billing will get a credit for the fullamount of the cost AGL associates with provision of its billingservice. An AGL spokesman said this is one feature the utilitymight seek reconsideration of, however.

Another feature favored by the marketer is the prospect ofmarketers owning their own meters. The PSC is seeking an attorneygeneral’s opinion on whether it would still have oversight ofsafety issues should marketers own their own meters. Should theopinion say the PSC would retain oversight, presumably marketerswould be allowed to own meters.

Additional Tweaking Required

Among features the marketer doesn’t like are the route requiredto receive customer information. She said obtaining an accountnumber from the customer, then contacting the utility for customerload information and then calling the customer back with a quote isa too-cumbersome process. Also not favored is the commissionstipulation that distribution capacity may only be traded one time,which the marketer said stifles development of a secondary marketfor distribution capacity.

Finally, smaller marketers lacking abundant capital might findthe required prepayment of distribution service charges a barrierto entry into the market.

Beginning this fall, consumers can expect to be contacted by asmany as 15 marketers offering to sell gas. The marketers must applyfor PSC certification by July 16 in order to compete in the fall.PS Energy Group Inc. became the fifth company to seek marketercertification, joining Williams Energy Services, Shell EnergyServices, PG&ampE, and Enron Corp. Through rates, customers willpay for a $14.3 million public awareness campaign.

AGL will operate its own marketer that will compete againstother marketers. A PSC hearing officer ruled last week the companymay not name the affiliated marketer Atlanta Gas Light Services.The hearing officer reasoned that using the same name and logoswould “accrue an advantage” unfair to other competitors and would”mislead the public” as to whom the customer was dealing with. Joe Fisher, Houston

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