The Georgia Public Service Commission (GPSC) on Friday voted 3-2 to approve a settlement in the Atlanta Gas Light Co. (AGL) rate case that provides for a five-year rate freeze for natural gas customers in the AGL distribution area.
Under the proposal by Commissioner David Burgess, AGL customers and low-income senior citizens will save $32.5 million over the next five years due to a three-year freeze in charges for the Pipeline Replacement Program (PRP) and an increase in the monthly low-income senior citizen discount.
“I am offering this settlement because it makes good policy, and if we get the policy right it drives a good decision,” said Burgess. He noted that there were four guiding principles that shaped his decision, including:
The Commission voted 3-2 to vacate its April 29 Order (see Daily GPI, April 29) and approve the proposed settlement, which AGL has accepted. The five-year freeze in the company’s rates are effective from May 1, 2005 through April 30, 2010. The settlement also includes a return on equity (ROE) of 10.90% and an extension of the PRP from its current 10-year schedule to 15 years with current rates frozen for the next three years. This will save consumers $25 million, the commission said.
Voting against the settlement, GPSC Chair Angela Elizabeth Speir said the agreement falls short of protecting the company’s ratepayers. “The commission originally cut rates by $21.9 million in its April 29, 2005 order,” she said. “The proposed settlement is only $5 million a year, less than a quarter of the original order.”
While the settlement freezes rates for five years, it freezes them at higher rates than in the original commission order, Speir argued. “Rate stability certainly can be a good thing but you have to balance the value of rate stability against what you are giving up in order to get that rate stability. Most consumers, I believe, would rather have lower rates that fluctuate than unreasonably high rates that are stable.” In addition, there is no mechanism to share over-earnings with consumers which deprives them of the opportunity to benefit if there are excess earnings.”
Speir also took exception to the fact that the settlement allows the PRP to increase automatically even if the company is grossly over-earning. By extending the PRP from 10 to 15 years, she believes the settlement ignores the commission’s Pipeline Safety Staff recommendations to keep the PRP at 10 years amid strong concerns about safety issues.
While agreeing to the settlement, AGL said it is still disappointed with the outcome because it believes its proposed rate increase was fully justified. “The majority of the commission did the right thing in vacating its earlier April decision,” said Suzanne Sitherwood, president of Atlanta Gas Light Co.
“We basically found ourselves with little choice but to accept a settlement that will reduce our base revenues by $25 million over five years and have an even greater impact on our earnings,” she said. “The alternative would have been another lengthy rate case and appeal through the courts.”
Sitherwood said the company supports those commissioners who have cited the importance of maintaining a pro-business environment in Georgia and called for a more balanced regulatory process. “The regulatory process is clearly broken and needs to be overhauled,” Sitherwood said.
“We have reduced base rates by more than $90 million since 1998 by becoming one of the nation’s most efficient natural gas distributors. One disappointment from today’s agreement is that one of the nation’s most efficient natural gas utilities has taken its third consecutive revenue reduction in its home state,” she said. “But despite the significant reduction in our revenue, we will not change course and we will find a path to innovate yet again. And, rest assured, we will never compromise safety, reliability, or customer service.”
In support of the settlement, Commissioner Stan Wise also called for a more defined role of commission staff and other parties in future rate case proceedings. “I hope this commission will revisit the use of adversary and advisory staff roles,” Wise said, “The commission staff’s job is to provide unbiased and neutral analysis not to act as adversaries to those entities regulated by the commission.”
The settlement also increases the monthly discount for low-income senior citizens by $3.50; from the current $10.50 to $14.00 or the amount of the AGL base charge whichever is less, giving those qualified senior citizens a rate decrease of as much as $42 a year. A majority of the commission approved an increase in the company’s proposed Home and Heart Warming program to $1 million. The monies will be used to buy space heaters for qualified low-income recipients.
AGL’s original rate increase request sought an increase in annual revenues of $24 million, which would have raised monthly residential bills about $1.39.
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