Georgia Advances Model for Retail Competition
Georgia will be the first state in the nation to implement rules
forcing a regulated gas utility to exit the gas merchant function
and allow all of its customers to buy their gas from alternative
suppliers. Under state law passed last year and implemented by the
Georgia Public Service Commission last week, gas sales in the
Atlanta Gas Light (AGL) territory will be opened to competition as
early as Nov. 1. Once the market is fully deregulated, AGL will
become a distribution-only utility. Marketers will sell gas
directly to 1.4 million customers.
Georgia PSC Chairman Bobby Baker said he's confident competition
AAwill lead to "more efficient service, more choices and lower
prices." Only Ohio has shown equal resolve to install competition.
Earlier this month Ohio regulators approved plans to allow 1.8
million customers inside the territories of three major utilities
to shop around for gas starting Nov. 1.
While the Georgia PSC rules were generally lauded by all
stakeholders, AGL said some tweaking remains to be done. "We do not
agree with everything in the PSC decision. But we believe the
remaining issues will be resolved and that ultimately Georgia's
approach to competition will serve as a model nationwide," said
Walter M. Higgins, president of utility parent AGL Resources.
"Before they voted, the PSC said that they fully expect parties
in this case to ask for reconsideration because of the complex
nature of the many issues involved," said Catherine Land-Waters,
acting president of AGL. "We agree and expect to file a request for
reconsideration as soon as possible to work out the details of a
plan that will be successful in bringing the benefits of
competition to Georgia customers."
One item AGL might seek reconsideration on is performance-based
regulation, said Mark Caudill, AGL Resources vice president of
rates and regulatory affairs. "We had asked for performance-based
regulation, and they chose to retain the traditional
cost-of-service approach. They basically expressed that there are
so many uncertainties as we are going through this transition from
being the merchant and deliverer to being only the deliverer they
didn't know enough about what we were going to look like.
"The complexity [of deregulation] is certainly far greater than
anything the PSC had seen in a gas case before. And they certainly
invited us to come back to them with some of the operational
aspects on reconsideration, and I expect we will." Caudill said it
was too early to say exactly what issues AGL might seek
reconsideration or clarification on.
There were two changes in the final PSC rule from PSC staff
recommendations, said PSC spokesman Shawn Davis. Staff proposed a
cost of equity of 10.5%, and the commission ordered 11%. AGL had
asked for 12.25%. The staff position would have created an $11.2
million 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 on
consumers' gas meters. "They're allowed to index the meters
themselves so they can do innovative meter reading and so forth."
The PSC indicated a preference to allow marketers to own their
own meters. "However, there's still a question as to whether the
PSC would retain jurisdiction over safety issues if an unregulated
marketer is permitted to place their own meters on the pipe
system." This should be ironed out by the Nov. 1 start-up date,
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 receiving
customer information from AGL. AGL must provide services such as
meter reading, billing and collection at regulated rates until a
fully developed market for those services exists. Marketers can
also perform the functions themselves. The AGL electronic bulletin
board must be operational for real-time testing by Aug. 1, and if
it's not up and running by Nov. 1, AGL cannot assess penalties for
daily imbalances. Further, the PSC allowed for daily balancing
rather than monthly and also allowed for daily trading of
imbalances with a 5% tolerance, plus or minus, for imbalances.
A representative of a marketer involved in the Georgia
rulemaking process found parts of the rule attractive to marketers
and other parts not so attractive. Among the rule's features
attractive to the marketer, who wished to remain anonymous, is full
embedded cost credit for ancillary services, such as billing, the
marketer provides itself. According to her reading of the rule,
marketers who do their own billing will get a credit for the full
amount of the cost AGL associates with provision of its billing
service. An AGL spokesman said this is one feature the utility
might seek reconsideration of, however.
Another feature favored by the marketer is the prospect of
marketers owning their own meters. The PSC is seeking an attorney
general's opinion on whether it would still have oversight of
safety issues should marketers own their own meters. Should the
opinion say the PSC would retain oversight, presumably marketers
would be allowed to own meters.
Additional Tweaking Required
Among features the marketer doesn't like are the route required
to receive customer information. She said obtaining an account
number from the customer, then contacting the utility for customer
load information and then calling the customer back with a quote is
a too-cumbersome process. Also not favored is the commission
stipulation that distribution capacity may only be traded one time,
which the marketer said stifles development of a secondary market
for distribution capacity.
Finally, smaller marketers lacking abundant capital might find
the required prepayment of distribution service charges a barrier
to entry into the market.
Beginning this fall, consumers can expect to be contacted by as
many as 15 marketers offering to sell gas. The marketers must apply
for PSC certification by July 16 in order to compete in the fall.
PS Energy Group Inc. became the fifth company to seek marketer
certification, joining Williams Energy Services, Shell Energy
Services, PG&E, and Enron Corp. Through rates, customers will
pay for a $14.3 million public awareness campaign.
AGL will operate its own marketer that will compete against
other marketers. A PSC hearing officer ruled last week the company
may not name the affiliated marketer Atlanta Gas Light Services.
The hearing officer reasoned that using the same name and logos
would "accrue an advantage" unfair to other competitors and would
"mislead the public" as to whom the customer was dealing with.
Joe Fisher, Houston