FERC ventured into unknown territory yesterday to help Georgia’slargest gas utility implement retail unbundling behind its citygateon Nov. 1 but avoid costs stranded by retail competition. In afour-to-one vote, the Commission granted Atlanta Gas Light alimited one-year waiver of certain federal regulations, allowing itto allocate, rather than release under the regulated competitivebidding procedure, 102,100 Dth/d of capacity on Southern NaturalGas to marketers taking over gas sales on its distribution system.

The Commission also granted AGL limited authority to bundle,rather than release, other upstream transportation and storagecapacity under a proposed Incremental Bundled Storage Service(IBSS) for its retail shippers. AGL must file with FERC within 30days tariff sheets setting the IBSS rates. AGL plans to chargerates that track the reservation, withdrawal and injection chargesit pays upstream interstate pipelines. It also plans to set penaltycharges.

FERC Chairman James Hoecker said the decision shows the goals ofFERC and the states are not mutually exclusive. In the draft order,the Commission said it “intends to encourage an environment whichwill allow state commissions and local distribution companies toimplement retail unbundling.” And to do that, Commissioner VickyBailey said the Commission is “willing to consider departures fromexisting practices.” But Hoecker noted the waiver is risky, andFERC is undertaking this departure from existing regulation as a”learning experience.”

Siding with a number of protesters who wanted FERC to schedule atechnical conference on the case, Commissioner William Masseydissented, saying the decision was “directly contrary to theprecepts” of FERC Order 636. He said the Commission should begin ageneric proceeding to discuss the issue of capacity allocation, asopposed to release, and its impact on the secondary market andstate unbundling. In an effort to help states move forward, FERCshould not have to take a step backward and “balkanize” theinterstate pipeline grid, Massey said.

AGL can request an extension of the waiver no later than July31, 1999. At that time it must explain the effects of the programon the interstate pipeline grid with data, including the volumesand prices its affiliates received under the program.

“We’re glad [FERC approved the waiver] because it was not a goodsituation for us to be in, where we had to start allocatingcapacity on our intrastate system but then there was this littleflaw in the slaw of federal regulation that created barriers tobeing able to match up that intrastate capacity with capacity thatbrings gas here to Georgia. It didn’t make sense,” said AGLspokesman Ross Willis. “Consumers are really the ones that aregoing to benefit from doing this the best way possible.”

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