While AGL Resources reported markedly improved results for itsthird fiscal quarter ended June 30, the company said returns werehurt by costs due to the rapid pace at which Atlanta Gas LightCustomers have chosen alternate suppliers.
The company posted 3Q net income of $7.2 million compared with anet loss of $1.2 million for the year-ago quarter. The boost camemainly from an expected increase in operating margin for utilityoperations due to the July 1, 1998 change in rate design fordelivery service for Georgia utility operations. Instead ofcollecting revenues predominantly in the winter months, the newrate design spreads utility delivery service revenues and marginsmore evenly throughout the year.
Earnings also were affected by a $6.3 million increase inutility operating expenses for the quarter compared with lastyear’s third quarter. Customer service activity associated with therapid pace at which customers are switching from the utility tomarketers for their gas sales service and increased depreciationexpense were the main factors for the increase.
A final factor affecting earnings was the start-up costs ofabout $5 million from the company’s retail energy marketing jointventure associated with establishing market share in Georgia’sderegulated gas market.
Operating revenues for the third quarter were $185.9 millioncompared with $246.4 million for the same period last year, adecrease of $60.5 million. The decrease is mainly from customersswitching from the utility to marketers for gas sales service. Asutility sales service revenues decline there is a comparabledecline in utility purchased gas costs, so the revenue decline doesnot affect earnings.
The company also announced an agreement with Sonat Inc. for thesale of AGL Resources’ interests in two joint ventures-SonatMarketing Co. LP, a gas marketer, and Sonat Power Marketing LP, apower marketer. Both deals are subject to various governmentapprovals. The Sonat Marketing interest sale is expected to closesome time during the company’s fourth quarter. The sale of theSonat Power Marketing interest is expected to close by the end of1999.
AGL Resources acquired a 35% interest in Sonat Marketing inAugust 1995 for about $32 million and acquired a 35% interest inSonat Power Marketing in June 1996 for about $1 million. Theagreement would give AGL Resources $40 million for its interest inSonat Marketing and $25 million for its interest in Sonat PowerMarketing.
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