Adding its name to the lengthy list of marketers that have exited Georgia’s retail gas market, Energy America, Centrica’s U.S. retail gas marketing subsidiary, said last week that it is calling it quits after struggling to build its customer base there last year and then being hit with a fine and other penalties last month by the Georgia Public Service Commission (PSC) for slamming.
The company announced Tuesday that it has begun negotiations to sell its business to interested parties. It said it would cooperate fully with the PSC to ensure an orderly transition. “Once transition plans are finalized with the PSC, Energy America will communicate those plans to its customers,” the company said in a statement. It said its “aim was to ensure that customers did not suffer any adverse consequences because of this decision.”
Energy America serves 50,000 retail gas customers in the deregulated Atlanta Gas Light (AGL) market. The company said the decision to exit the market was “made in the context of a challenging business environment where it was proving difficult to achieve the necessary scale of operation to create real shareholder value.”
In September, the PSC slapped Energy America with a $413,800 fine for 138 allegations of slamming customers, which is switching a consumer’s natural gas marketer without the consumer’s authorization. The PSC ordered the company to contribute $400,000 to the Low Income Heat Energy Assistance Program (LIHEAP), with no tax benefits from the contribution, plus $100 in credits to each of the 138 customers slammed for a total payment of $413,800. In addition, Energy America was ordered to pay $5 to each customer for each day that they were not returned to their preferred provider after being slammed. It was the largest fine ever handed down against a Georgia natural gas marketer, and was the fourth fine this year against a retail marketer.
Energy America spokeswoman Cynthia Cordova said the slamming ruling had very little to do with Energy America’s decision to leave the state. “We had a small customer base in AGL,” she said. “The AGL market also has lower usage per customer than any of our other markets. Also current cost to serve this small customer base, combined with related infrastructure investments, wouldn’t allow us to economically serve the customers.”
Centrica’s U.S. retail marketing arm serves about 1.5 million customers in four other U.S. states: Michigan, Ohio, Pennsylvania and Texas. Cordova said the company has no intention of exiting any of its other markets.
PSC spokesman Bill Edge said the company is still in the process of meeting the requirements of the order and is required to complete the requirements.
While marketers continue to drop out of Georgia’s deregulated natural gas market five years after its inception, the state’s customer choice program remains remarkably competitive and rate competition and falling wholesale costs should lead to attractive winter pricing, according to the PSC.
“It looks like the prices are going down,” Edge said. “All the marketers have dropped their prices from September, which is good news for consumers right now.” He noted that despite concerns earlier in the year that the storage refill was lagging, it now appears to be normal for this time of year.
Currently, Georgia Natural Gas (GNG) is offering the lowest rate in the state under a special fixed rate of 74.9 cents per therm for retail customers signing up for its 12-month fixed rate plan during October. In addition, GNG’s variable market price for October is 74.9 cents per therm, a 9% decrease from a month ago and the lowest market price currently available, the company said. GNG said lower wholesale prices in response to rising storage inventories allowed the company to offer lower fixed rates.
Scana Energy also has a special deal in place. The company lists a variable rate of 79.9 cents per therm, a fixed rate of 79.9 cents per therm with 12-month commitment and a fixed rate of 78.9 cents per therm with a six-month commitment.
Shell Energy Services is also offering 79.9 cents per therm with a 12-month commitment. The company noted that its customers who locked in with a guaranteed fixed rate before the 2002-03 winter season were protected from cold weather price increases. As a group, Shell said, its fixed rate customers saved $14 million over what they would have paid on a variable plan from November 2002 through April 2003.
For October pricing with variable rate plans, the PSC tabbed GNG’s Marketer Advantage as the lowest “Apples to Apples” price per therm at $1.28, which includes all applicable marketer charges. ACN Energy logged the highest at $1.85/therm.
For October fixed plans, Walton EMC Natural Gas came in with the lowest total charge of $1.14/therm, while marketer Infinite Energy maxed out at $1.24/therm.
News of improving competitive rates comes at a much needed time as the deregulation program absorbs Energy America’s exit. To date, half of the original 21 marketers have departed, while four Georgia marketers have filed for Chapter 11 bankruptcy protection, including Titan Energy of Georgia, Inc., Southeastern States Energy, Inc., Peachtree Natural Gas LLC and The New Power Co. (see NGI, Nov. 1, 1999; July 10, 2000; Sept. 4, 2000; June 17, 2002).
Launched in October 1998, gas deregulation in Georgia has been watched closely by other states as a test case and has performed well despite the significant bumps in the road.
Georgia tops the list for customer participation in a report by the American Gas Association (AGA), which details state and utility choice programs for residential customers (see NGI, Sept. 15). Choice succeeded in Georgia because the legislature forced all of the residential and commercial customers of utility Atlanta Gas Light (AGL) to choose an alternative supplier other than the utility, or be allocated to a new supplier. The program succeeded, in effect, because customers had no choice.
Next to AGL’s 100% residential choice participation rate, which covers 1.4 million households, Kinder Morgan’s retail program in Nebraska shows a 98% participation rate with 74,000 participants. Next on the list are Dominion East Ohio Gas at 49% or 551,000 customers participating and Columbia Gas of Ohio with 47% or 582,000 customers participating. Columbia of Kentucky had 33% participation or 41,500 customers.
“We are always glad to see that the market is competitive,” said Edge. “That was the whole reason for deregulation of the gas market in Georgia.”
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