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AGL: Sonat Settlement a Boon for Customers, Others Not So Sure

AGL: Sonat Settlement a Boon for Customers, Others Not So Sure

Atlanta Gas Light, the distribution utility for more than 1.5 million customers in Georgia, said last week that through a rate case settlement with Southern Natural Gas Pipeline (Sonat) and a new agreement with Transco's SouthCoast project, its customers stand to save anywhere from $10 million to $32 million annually.

The Sonat rate settlement was reached between the pipeline and all its customers earlier this month (see NGI, March 20). The pipeline is AGL's largest interstate delivery supplier, representing approximately 70% of interstate delivery service to Georgia. AGL and Georgia Public Service Commission (PSC) staff filed joint testimony at the PSC earlier this week in support of an amendment approving the three-year term extension for Sonat delivery and storage service. A decision from the PSC is expected in mid-April.

AGL said it also filed comments with the FERC yesterday in support of the settlement. Virtually all of Sonat's customers and the FERC staff have expressed support of the settlement. Sonat has implemented the settlement rates on an interim basis effective March 1. Based on these facts, AGL said it fully expects FERC approval soon.

Jim Scabareti, AGL vice president, gas services, attributed part of the ability to reduce customer rates to AGL's recent deregulation program. "We've seen competition at the retail level. Now competition is reaching the interstate pipelines serving Georgia. We anticipate the marketers will pass these savings on to the retail customers."

Bobby Baker, a commissioner for the PSC, was not so sure. "There is no guarantee that the marketers won't just take the savings themselves. We'll have to wait and see. Because this is the first time marketers will have the option, we don't know how they will react."

Since AGL's service territory opened to retail customer choice last year, all 1.5 million customers in the region have switched to an alternative supplier. There are more than 15 active marketers currently. 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%.

Savings from the rate case will show up on GNGS' customers bills starting April 1, said Steve Gunther, a company spokesman. He said the company expects that both the PSC and FERC will approve of the tree-year extension. "We recently announced that our price of gas, which is included in the gas charge section of a customer's bill will be reduced 6% starting April 1. A large part of this reduction was made possible because of the Sonat settlement

In the SouthCoast deal, AGL signed up for 10 years and 61,160 Dth/d beginning Nov. 1, when the pipeline is scheduled to come online. With the addition of these volumes, Transco will increase its percentage of firm delivery service to AGL from 25% to 30%.

The $108 million project will add 204,099 Dth/d of firm transportation capacity to serve new markets in Georgia and Alabama. The facilities will increase mainline capacity between Station 85 in Butler, AL, to delivery points in Zone 4.

AGL said the project meets a number of AGL's critical operational objectives, including increased operational flexibility, added reliability and lower customer costs by up to $2 million/ year. "SouthCoast is an obvious choice for enhanced delivery service into AGL's fastest growing market areas," said Scabareti. "Further, SouthCoast offers lower costs than current service from other interstate suppliers."

If all the savings were to be realized and passed directly to the customer, bill reductions could be as high as $20 annually over the length of the three-year deal, said Nick Gold, an AGL spokesman. He too, however, warned that the marketers are the ones who will ultimately decide if the customers will see any savings.

A recent study by PHB Hagler Bailly Inc. agreed with Scabareti's assessment that deregulation has helped the Georgia gas customer. The AGL-commissioned report, titled "Consumer Benefits from Deregulation of Retail Natural Gas Markets/Lessons from the Georgia Experience," indicated that through AGL's unbundling efforts, residential gas bills will be lower, innovative new suppliers have arrived on the scene and gas service has been enhanced.

John Norris

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