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Titan Energy's Gas Customers Up for Grabs

Titan Energy's Gas Customers Up for Grabs

Parties will meet in an Atlanta courtroom today to decide which company will win the right to supply the 50,000 customers of gas marketerTitan Energy of Georgia, which filed for Chapter 11 over the Fourth of July weekend. Titan became the second marketer to seek bankruptcy protection in Georgia in less than a year.

Titan and AGL Resources, parent of Atlanta Gas Light, and other parties met in an emergency bankruptcy session Friday in a Newnan, GA, court, but Bankruptcy Court Judge W. Homer Drake postponed making a decision until today (Monday) while Titan Energy tries to work out a deal to transfer its customers to marketer Shell Energy Services. The judge, who is a shareholder in SCANA Energy and Duke Energy (both of which are parties in the case), said he might be forced to recuse himself if a dispute should arise.

If Titan Energy and Shell Energy fail to come to an agreement by today, AGL spokesman Nick Gold said AGL Resources will push to invoke an "interim pooler" agreement under which Titan's customers would be assigned equally to Georgia Natural Gas Services (an AGL affiliate) and SCANA Energy to serve as suppliers-of-last-resort.

Titan Energy said it sought Chapter 11 after its wholesale natural gas supplier, DukeSolutions, filed a lawsuit against the Roswell, GA, marketer in federal court in Houston, accusing it of breach of contract. DukeSolutions, a subsidiary of Duke Energy, contends Titan Energy owes it more than $10 million.

AGL Resources told the bankruptcy court that Titan owes it $2.8 million in gas distribution costs, and that the amount is growing with each passing day. Titan Energy gave AGL a letter of credit last Thursday for $1.75 million, but spokeswoman Millicent Hunter said AGL can't draw on it for 30 days.

Titan Energy's case closely parallels that of Peachtree Natural Gas, which last year became the first marketer serving the deregulated Georgia natural gas market to file for bankruptcy. In that case, Peachtree also sold its customers to Shell Energy.

"We started out with 20-22 gas marketers, and now we're down to 13. We've had a pretty serious winnowing out here," said Chairman Bob Durden of the Georgia Public Service Commission, who conceded that he hasn't been a "big fan" of gas deregulation from the start. "Every aspect of the business has gone kaflooey" since Georgia unbundled its natural gas market, he noted. But, "you can't put toothpaste back in the tube."

In the past year, the Georgia PSC has had to deal with slamming, delinquent billing and bankruptcy cases involving gas marketers serving the state. "Two bankruptcies in one year is not a good record.....It's just been a nightmare, and every time I think it's over here comes something else." One of the slamming cases was against Titan Energy.

Georgia was "at the cutting edge" of gas deregulation in the nation, Durden said. "Now [you have to question] how much of this is due to a flaw in the design." Some states "are holding out based on the problems we've had," he noted.

"From an economic standpoint, there are some industries that do not lend themselves well to deregulation," Durden said, adding that utilities are one of them. "I think something is wrong with deregulation [period], not just in the Georgia system."

If he could turn back the clock, Durden said he would prefer to see a modified regulatory framework in Georgia where marketers in the state would have to file rate structures with state regulators. He also noted he would prefer a modified fixed variable rate design, giving customers low bills in the summer and higher ones in the winter.

A key mistake that Georgia made was allowing a shift in rate burden from industrial customers to residential customers in terms of who pays the fixed costs, Durden noted.

Susan Parker

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