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
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
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
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.