Atlanta Gas Light Co. (AGLC) last week fired the latest volley in its battle with Scana Energy Marketing over rights to the interstate pipeline capacity feeding the AGLC system and the deregulated Georgia retail market. AGLC blasted Scana for attempting to enmesh in the capacity fray an AGLC deal to buy out connections to the Southern Natural Gas system.

The case involves Southern Natural’s application for abandonment and sale for $32 million about 253 miles of various diameter pipe and facilities located between Southern’s south and north main lines which serve Atlanta. The lines would provide connections between AGLC’s Macon LNG peaking plant and other parts of its distribution system. The deal also includes contract extensions for transportation capacity on the Southern line for various existing agreements with the Atlanta distribution company.

AGLC’s July 6 filing at FERC (CP04-340) said Scana’s protest is a collateral attack on AGLC’s allocation of its interstate transportation capacity that has already been reviewed and rejected by the Georgia Public Service Commission (GPSC). Scana, which is one of the four largest retail marketers on AGLC’s system, had asked the GPSC to order the permanent release of the capacity to marketers. The state commission, however, opted for an AGLC plan, which was submitted jointly with other marketers, for temporary release to the marketers based on their market share, with certain recall rights.

The state commission is tussling with FERC over which agency would oversee capacity allocation if AGLC were to permanently release the capacity to the marketers. In a declaratory order (RP04-92), issued in April, responding to a petition from the GPSC, FERC cited its exclusive federal jurisdiction over interstate pipeline capacity. Georgia Commissioner Stan Wise has since written to FERC Chairman Pat Wood, saying FERC should not strictly apply its capacity release rules in Georgia because the market there, the only one that is completely unbundled, is unlike markets in other states. Rehearing still is pending.

AGLC said that Scana Energy Marketing, a subsidiary of South Carolina-based Scana Corp., which “fancies itself the champion of Georgia retail competition and the protector of Georgia retail customers,” is attempting to get FERC to upset the state commission’s decision and require the permanent assignment of AGLC’s interstate capacity assets. “Specifically, Scana takes issue with AGLC’s decision to extend its firm transportation contracts with Southern for varying terms up to the year 2015,” the AGLC filing said. The contract extensions would create a new $125 million stranded cost barrier to the marketers exercising their rights to acquire interstate capacity, Scana alleges.

However, Scana is aware, AGLC said, that other marketers have entered into a joint stipulation, filed with the GPSC July 1 for AGLC’s “2004-2007 Capacity Supply Plan” which includes the deal with Southern Natural.

“In seeking relief at the federal level, Scana ignores the provisions of the Deregulation Act that clearly place responsibility with the Georgia Commission to determine the propriety of the use of AGLC’s interstate capacity assets and the recovery of associated costs,” AGLC said.

Southern Natural pointed out that Scana’s main objection is not to the sale of pipeline assets, but to the extension of the contracts, and the fact that the contracts are extended would have no bearing on whether the firm capacity can ultimately be released on a temporary or permanent basis. Southern also says that both ratepayers on the Southern system and on the AGLC system will see savings from the transaction.

Chairman Paula Rosput of parent AGL Resources told a Washington DC news briefing that the Southern contracts that were renewed were for specialty services such as no-notice service “that it was inconceivable to abandon (see related story). Where we have left a lot of optionality is on long haul, non-specialty services where we can think through over time what this depletion of the Gulf Coast means vis-a-vis greater access at Elba [Island LNG terminal]. We’re trying to be smart about the environment we’re in. We’ve renewed the no-notices services, but we have not renewed all of the long haul, 365-day capacity from the Gulf Coast.”

AGL is not looking to monopolize the market, but “the fact is marketers don’t make long term commitments to gas supply. So as a practical matter you have to determine what’s the best configuration of pipeline that’s going to assure you the best mix of long-term access in an environment where nobody contracts for the supply,” Rosput said.

Kevin Madden, former FERC general counsel, now executive vice president of distribution and pipeline operations for AGL, pointed out that the parent Scana Corp., while challenging the rules in Georgia had withdrawn its support for deregulation in its home market in South Carolina. Madden said the deal with Southern Natural would rationalize AGL’s system and ensure access to supplies coming in at Elba Island. AGL also is looking at the possibility of a deal with producers to construct an LNG import terminal on waterfront property it owns near Norfolk, VA, and connection with a high pressure pipeline to carry more supply into the area.

Scana maintains that while marketers are able to compete in Georgia based on gas supply management and customer service skills, they have not been allowed to compete on the basis of their management of interstate transportation and storage capacity, but must use the capacity signed on by AGLC without the no-notice flexibility that Atlanta Gas had access to under the Southern no-notice contracts prior to the Deregulation Act. “Although the marketers, not Atlanta Gas, now face the fluctuations in demand from temperature sensitive loads Atlanta Gas historically served, the marketers lack the same tools (such as no-notice storage flexibility) historically available to Atlanta Gas under Commission policy.”

Scana also points to FERC’s declaratory order which said Georgia marketers should be free to acquire interstate capacity on their own outside of the capacity available from Atlanta Gas. If they did that AGLC ratepayers could conceivably be made to pay stranded costs for the distributor’s unused capacity. The extended contracts “would postpone the day that Georgia consumers can gain the benefit of the marketers competing in the contracting and management of the interstate assets, for as far into the future as the year 2015,” Scana said.

Meanwhile, the parent Scana Corp. recently announced it was merging its South Carolina Pipeline (SCPC), a 2,000-mile intrastate line, and SCG Pipeline, a 32-mile interstate that delivers natural gas in Georgia and South Carolina into a single interstate pipeline. The line would have connections to Elba Island LNG terminal in Georgia, Southern Natural and Transcontinental Gas Pipe Line.

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