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Marketer Bankruptcy Puts GA Customers in Limbo

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" suppliers.

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 future.

"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 ground.

"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 issues."

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.

John Norris

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ISSN © 2577-9877 | ISSN © 1532-1266
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