AGL Prepares Final Retail Exit as Another Marketer Faces Trouble
Atlanta Gas Light (AGL) announced last week that it will refund
$34 million to its former retail customers. The $26 per customer
refund will be issued by the 13 marketers in AGL's service
territory during the May/June billing cycle.
The money being refunded is the surplus in AGL's purchased gas
cost account as of October 1999. The Georgia Public Service
Commission (GPSC) approved the refund earlier this year.
There are two requirements for refund eligibility: 1) the
customer had to be receiving gas service from AGL or a marketer on
May 25, 1999 and 2) the customer had to be a customer of a marketer
on April 3, 2000. Customers who are not in good credit standing
with AGL will have their refund used first to reimburse the
Nick Gold, an AGL spokesman, said the surplus was a result of an
over-collection in AGL's purchased gas cost (PGC) for 1999. The PGC
is the price AGL was allowed by the GPSC to charge customers for
natural gas. It includes the commodity cost of gas plus the costs
for pipeline transportation, storage services, fuel loss and
pipeline surcharges. The company based the rate on its estimates of
how much gas it would use during the year. Because of the unknown
effects of deregulation and the unusually warm winter, the
utility's estimates were too high.
"Normally, you'd like the PGC and the actual amount of gas used
to be in the same neighborhood. And normally they are. Yet, because
of a host of factors last year, AGL over-collected way too much,"
said Robert Baker, a GPSC commissioner.
It will be noted on customers' bills as a "GA PSC Ordered
Credit," which will be deducted from the total amount owed for
service for the particular billing period. The state commission was
very involved with setting up the refund, Baker said. "We helped
audit AGL's books and determine the amount of the over-collection.
The funds were put in an escrow account that we held on to. Also,
we decided what form the refund would take. Many people wanted it
weighted so that the customers who use more gas get a larger
refund, but in the end we decided that the simplest course of
action was the best, and ordered that the payments be flat for
The company was "very pleased with the level of cooperation [it]
received from the GPSC and its staff throughout the process of
determining how to facilitate the refund," said Hank Linginfelter,
AGL's vice president, rates and regulations.
This refund closes out AGL's role in buying and selling natural
gas in the state. "This activity is now managed by the various gas
marketers," said Linginfelter.
While the refund represents the final act for AGL's retail
operations, Gold said the company has been effectively removed from
the retail side since last October. Now, Gold said AGL is out to
enlarge the size of its distribution system through an aggressive
M&A strategy. "We're going to aggressively look at increasing
the size and scope of our system as we attempt to be the best
distribution company in the country," he said. He would not say
when or what the company's next move would be.
Last June, AGL CEO Walter Higgins predicted that the company
would merge after its exit from retail operation was complete. "I'd
say we won't look like we do in two years. That doesn't mean we're
going to announce a merger tomorrow," he told NGI, following a
speech at the Natural Gas Roundtable in Washington, D.C. "But I
wouldn't be surprised if we're not in some sort of alliance,
whether strategic or not, or some sort of a merger, or somebody
just plain acquires us within the next couple years."
Thirteen marketers now operate in AGL's service territory.
Georgia Natural Gas Services (GNGS), an AGL affiliate, and Scana
Corp. have the largest market share with over 30% each. Shell
Energy Services is third with over 20%.
The transition of supply responsibility from AGL to the
marketers has not been smooth. Late last year, Peachtree Natural
Gas fell in to bankruptcy and was forced to sell its supply
contracts to Shell (see NGI, Nov. 22, 1999).
Recently, Energy America, a joint venture between Sempra Energy
and Direct Energy of Canada, has come under fire for slamming
violations. Last week during an administrative session, the GPSC
commissioners unanimously voted to launch an investigation into
Energy America's practices in the state. If found guilty, Energy
America could be fined up to $15,000 per violation and have its
marketer status revoked. The marketer has signed more than 60,000
customers, representing a 4% market share.