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Georgia Advances Model for Retail Competition

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, 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 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&ampE, 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

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ISSN © 2577-9877 | ISSN © 1532-1266
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