Because of Peachtree Natural Gas’ filing for Chapter 11protection earlier this week, Atlanta Gas Light (AGL) filed amotion Wednesday with the federal bankruptcy court requesting all177,000 Peachtree customers be randomly assigned to more”creditworthy” suppliers, the LDC said yesterday. Peachtree, whichis the third largest marketer in the state, has assured the GeorgiaPublic Service Commission (GPSC) that gas service will continueundisturbed despite the filing, and is pinning its future inGeorgia on a potential suitor to bail it out of its monetarytroubles.

The bankruptcy court is holding an emergency meeting today at10:30 a.m. at the bequest of AGL. Judge Robert Brizendine will ruleon when and if the random assignment will take place. GPSC ChairmanStan Wise said it is unlikely that the court will allow theassignment process to occur for service beginning Nov. 1, as AGLwould like, but a schedule for customers to start service withtheir new supplier Dec. 1 is a more likely possibility.

“I would be very surprised if that petition is granted,” Wisesaid. “More accurately… [it is more likely] that Dec. 1 is thedate.”

The wild card in the equation is DCE Services, a subsidiary ofTexas-based Denton County Electric, which is in the middle ofassessing the pros and cons of buying Peachtree. If the deal goesthrough, DCE would be a white knight and Peachtree’s debt problemswould improve dramatically. A letter of intent has been signed, butany deal is still a long way from being set. Peachtree has said itwill know by Nov. 24 if the sale will go through. Peachtree, valuedbetween $40 million to $50 million.

Deborah Latham, Peachtree’s CEO, said the Chapter 11 filing wasa strategic move to gain time. “We don’t want to lose any customersat all. We filed for Chapter 11 to ensure service for our customersand to get the intervention of the bankruptcy court so that therewas time to complete this sale. Once complete, our pockets shouldbe deep enough to meet all our billing challenges. We fully expectto emerge out of Chapter 11 with all our bills current.”

When filing its request, AGL said Peachtree owes the LDC $10million in distribution and storage fees. AGL is pushing for randomassignment because it does not believe Peachtree is on stableground.

“The deregulation legislation included a system to deal withmatters similar to this. It anticipated a situation like this, andrules are laid down which we are attempting to follow,” saidMillicent Hunter, an AGL spokeswoman. “Chapter 11, in and ofitself, creates a shaky financial situation. We just feel it’s amatter of public well-being to get customers away from such a shakysituation.”

Peachtree, which is 42% owned by Latham, 40%-owned byMississippi-based Blossom Gas and 18%-owned by employees, cited”unexpected capital needs and billing problems” in Tuesday’sbankruptcy filing. Specifically, Latham said the GPSC’s requirementfor suppliers to purchase liquefied natural gas supplies from AGLand delays in billing by the 80% AGL-owned Utilipro billing companywere the causes for the debt. Peachtree had been in discussionswith AGL on creating a format for the debt to be paid, but thosetalks proved ineffective.

“The best case scenario would be for DCE to buy Peachtree assoon as possible,” GPSC Commissioner Robert Baker said. “That way,the debt problems lessen, Peachtree can continue supplying gas andcustomers don’t have to fret about random assignment.”

Yet the random assignment issue is not the only obstaclePeachtree is facing, Wise said. “The Commission will consider onTuesday (Nov. 2) if a hearing should be held to consider therevocation of Peachtree’s [marketing] certificate. The hearingwould be on [Latham’s] technical and financial capability.Certainly, a bankruptcy filing should send some messages. The scopeof the hearing could be expanded to consider a broader range ofissues.”

Under stipulations in the state’s 1997 deregulation law, AGL isrequired to take over as the supplier of last resort, should amarketer go out of business. The LDC is required to maintain this roleonly until the customers can be assigned to other marketers inaccordance to market share. Under these guidelines, SCANA and GeorgiaNatural Gas Services (GNGS), the two most active marketers during theeight month deregulation process that ended last August (see DailyGPI, Aug. 16), would each be allottedover 50,000 new customers. Both SCANA and GNGS said adding thecustomers would not be a problem.

“Many of the calls we are getting are from people who don’t wantto be randomly assigned,” said Baker. “But we are also seeing thatPeachtree’s customers are starting to leave because they areunhappy with the situation. What we want to avoid is panic amongthe customers. Peachtree has assured the Commission that theircustomers absolutely have reliable gas service, but as always, theyhave the ability to switch suppliers at any time.”

The gain of Peachtree customers is the second major customeracquisition GNGS is currently involved in. The AGL affiliate isalso in the final steps of buying GasKey’s 24,000 customers.GasKey, a brand name for PS Energy, was founded in 1985 by itscurrent CEO Livia Whisenhunt. The small marketer was overwhelmed bythe amount of business and is selling its customers in an effort torecover costs. No financial terms were announced, but GasKey didsay it will honor all contracts.

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