Marketer Bankruptcy Puts GA Customers in Limbo
Friday represented the eye of the storm for Georgia's gas
industry, as Atlanta Gas Light (AGL), the state's largest
distributor, and Peachtree Natural Gas, the bankrupt supplier to
177,000 gas customers, brokered an interim solution to their
problems at a federal bankruptcy court hearing. The hearing was a
result of an earlier AGL filing with the bankruptcy court, seeking
to distribute Peachtree's customers to other, "more creditworthy"
Under the terms of the settlement, Peachtree will pay AGL and
its other creditors enough money to ensure service through Nov. 4,
at which time the court will reconvene to assess Peachtree's
"There was a huge turn out for the hearing, with many people
expecting a ruling on AGL's request for a random assignment of
Peachtree's customers," said Bobby Baker, a commissioner at the
Georgia Public Service Commission (GPSC). "Although that didn't
happen, [Hon. Robert Brizendine, the bankruptcy court judge] did a
good job in getting all the information presented. An interim
financial plan was devised that will satisfy all Peachtree
creditors through Nov. 4. In the meantime, all the interested
parties will work on a long-term solution."
All payments are due by noon today. Through the solution, AGL
will be paid $500,000, and gain permission to draw down an $11
million surety bond Peachtree had posted. "We are happy with the
temporary solution," Millicent Hunter, an AGL spokeswoman said.
"All interested parties are meeting in Birmingham, AL, on Tuesday,
where we will assess Peachtree's viability as a marketer and try
and hammer out a long-term solution. If we can, then the solution
will be presented when the court reconvenes. If no solution
presents itself at Tuesday's meeting, then we'll ask the court to
allow the GPSC to re-assign Peachtree's customers."
The court, AGL and the GPSC have all been assured that Peachtree
can still reliably provide gas to its customers until Nov. 4.
The wild card in the equation is DCE Services, a subsidiary of
Texas-based Denton County Electric, which is in the middle of
assessing the pros and cons of buying Peachtree. If the deal goes
through, DCE would be a white knight and Peachtree's debt problems
would improve dramatically. A letter of intent has been signed, but
any deal is still a long way from being set. Peachtree has said it
will know by Nov. 24 if the sale will go through. Peachtree said it
is valued between $40 million to $50 million.
Deborah Latham, Peachtree's CEO, said the company filed for
Chapter 11 early last week in a strategic move to gain time. "We
don't want to lose any customers at all. We filed for Chapter 11 to
ensure service for our customers and to get the intervention of the
bankruptcy court so that there was time to complete this sale. Once
complete, our pockets should be deep enough to meet all our billing
challenges. We fully expect to emerge out of Chapter 11 with all
our bills current."
When filing its request, AGL said Peachtree owes the LDC $10
million in distribution and storage fees. AGL is pushing for random
assignment because it does not believe Peachtree is on stable
"The deregulation legislation included a system to deal with
matters similar to this. It anticipated a situation like this, and
rules are laid down which we are attempting to follow," Hunter
said. "Chapter 11, in and of itself, creates a shaky financial
situation. We just feel it's a matter of public well-being to get
customers away from such a shaky situation."
Peachtree, which is 42% owned by Latham, 40%-owned by
Mississippi-based Blossom Gas and 18%-owned by employees, cited
"unexpected capital needs and billing problems" in Tuesday's
bankruptcy filing. Specifically, Latham said the GPSC's requirement
for suppliers to purchase liquefied natural gas supplies from AGL
and delays in billing by the 80% AGL-owned Utilipro billing company
were the causes for the debt. Peachtree had been in discussions
with AGL on creating a format for the debt to be paid, but those
talks proved ineffective.
"The best case scenario would be for DCE to buy Peachtree as
soon as possible," Baker said. "That way, the debt problems lessen,
Peachtree can continue supplying gas and customers don't have to
fret about random assignment."
Yet the random assignment issue is not the only obstacle
Peachtree is facing, GPSC Chairman Stan Wise said. "The Commission
will consider on Tuesday (Nov. 2) if a hearing should be held to
consider the revocation of Peachtree's [marketing] certificate. The
hearing would be on [Latham's] technical and financial capability.
Certainly, a bankruptcy filing should send some messages. The scope
of the hearing could be expanded to consider a broader range of
Under stipulations in the state's 1997 deregulation law AGL is
required to take over as the supplier of last resort, should a
marketer go out of business. The LDC is required to maintain this
role only until the customers can be assigned to other marketers in
accordance to market share. Under these guidelines, SCANA and
Georgia Natural Gas Services (GNGS), the two most active marketers
during the eight month deregulation process that ended last August,
would each be allotted over 50,000 new customers. Both SCANA and
GNGS said adding the customers would not be a problem.
"Many of the calls we are getting are from people who don't want
to be randomly assigned," said Baker. "But we are also seeing that
Peachtree's customers are starting to leave because they are
unhappy with the situation. What we want to avoid is panic among
the customers. Peachtree has assured the Commission that their
customers absolutely have reliable gas service, but as always, they
have the ability to switch suppliers at any time."
The gain of Peachtree customers is the second major customer
acquisition GNGS is currently involved in. The AGL affiliate is
also in the final steps of buying GasKey's 24,000 customers.
GasKey, a brand name for PS Energy, was founded in 1985 by its
current CEO Livia Whisenhunt. The small marketer was overwhelmed by
the amount of business and is selling its customers in an effort to
recover costs. No financial terms were announced, but GasKey did
say it will honor all contracts.