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AGL Prepares Final Retail Exit as Another Marketer Faces Trouble

AGL Prepares Final Retail Exit as Another Marketer Faces Trouble

Atlanta Gas Light (AGL) announced last week that it will refund $34 million to its former retail customers. The $26 per customer refund will be issued by the 13 marketers in AGL's service territory during the May/June billing cycle.

The money being refunded is the surplus in AGL's purchased gas cost account as of October 1999. The Georgia Public Service Commission (GPSC) approved the refund earlier this year.

There are two requirements for refund eligibility: 1) the customer had to be receiving gas service from AGL or a marketer on May 25, 1999 and 2) the customer had to be a customer of a marketer on April 3, 2000. Customers who are not in good credit standing with AGL will have their refund used first to reimburse the utility.

Nick Gold, an AGL spokesman, said the surplus was a result of an over-collection in AGL's purchased gas cost (PGC) for 1999. The PGC is the price AGL was allowed by the GPSC to charge customers for natural gas. It includes the commodity cost of gas plus the costs for pipeline transportation, storage services, fuel loss and pipeline surcharges. The company based the rate on its estimates of how much gas it would use during the year. Because of the unknown effects of deregulation and the unusually warm winter, the utility's estimates were too high.

"Normally, you'd like the PGC and the actual amount of gas used to be in the same neighborhood. And normally they are. Yet, because of a host of factors last year, AGL over-collected way too much," said Robert Baker, a GPSC commissioner.

It will be noted on customers' bills as a "GA PSC Ordered Credit," which will be deducted from the total amount owed for service for the particular billing period. The state commission was very involved with setting up the refund, Baker said. "We helped audit AGL's books and determine the amount of the over-collection. The funds were put in an escrow account that we held on to. Also, we decided what form the refund would take. Many people wanted it weighted so that the customers who use more gas get a larger refund, but in the end we decided that the simplest course of action was the best, and ordered that the payments be flat for everyone."

The company was "very pleased with the level of cooperation [it] received from the GPSC and its staff throughout the process of determining how to facilitate the refund," said Hank Linginfelter, AGL's vice president, rates and regulations.

This refund closes out AGL's role in buying and selling natural gas in the state. "This activity is now managed by the various gas marketers," said Linginfelter.

While the refund represents the final act for AGL's retail operations, Gold said the company has been effectively removed from the retail side since last October. Now, Gold said AGL is out to enlarge the size of its distribution system through an aggressive M&A strategy. "We're going to aggressively look at increasing the size and scope of our system as we attempt to be the best distribution company in the country," he said. He would not say when or what the company's next move would be.

Last June, AGL CEO Walter Higgins predicted that the company would merge after its exit from retail operation was complete. "I'd say we won't look like we do in two years. That doesn't mean we're going to announce a merger tomorrow," he told NGI, following a speech at the Natural Gas Roundtable in Washington, D.C. "But I wouldn't be surprised if we're not in some sort of alliance, whether strategic or not, or some sort of a merger, or somebody just plain acquires us within the next couple years."

Thirteen marketers now operate in AGL's service territory. 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%.

The transition of supply responsibility from AGL to the marketers has not been smooth. Late last year, Peachtree Natural Gas fell in to bankruptcy and was forced to sell its supply contracts to Shell (see NGI, Nov. 22, 1999).

Recently, Energy America, a joint venture between Sempra Energy and Direct Energy of Canada, has come under fire for slamming violations. Last week during an administrative session, the GPSC commissioners unanimously voted to launch an investigation into Energy America's practices in the state. If found guilty, Energy America could be fined up to $15,000 per violation and have its marketer status revoked. The marketer has signed more than 60,000 customers, representing a 4% market share.

John Norris

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