Friday represented the eye of the storm for Georgia’s gasindustry, as Atlanta Gas Light (AGL), the state’s largestdistributor, and Peachtree Natural Gas, the bankrupt supplier to177,000 gas customers, brokered an interim solution to theirproblems at a federal bankruptcy court hearing. The hearing was aresult of an earlier AGL filing with the bankruptcy court, seekingto distribute Peachtree’s customers to other, “more creditworthy”suppliers.

Under the terms of the settlement, Peachtree will pay AGL andits other creditors enough money to ensure service through Nov. 4,at which time the court will reconvene to assess Peachtree’sfuture.

“There was a huge turn out for the hearing, with many peopleexpecting a ruling on AGL’s request for a random assignment ofPeachtree’s customers,” said Bobby Baker, a commissioner at theGeorgia Public Service Commission (GPSC). “Although that didn’thappen, [Hon. Robert Brizendine, the bankruptcy court judge] did agood job in getting all the information presented. An interimfinancial plan was devised that will satisfy all Peachtreecreditors through Nov. 4. In the meantime, all the interestedparties will work on a long-term solution.”

All payments are due by noon today. Through the solution, AGLwill be paid $500,000, and gain permission to draw down an $11million surety bond Peachtree had posted. “We are happy with thetemporary solution,” Millicent Hunter, an AGL spokeswoman said.”All interested parties are meeting in Birmingham, AL, on Tuesday,where we will assess Peachtree’s viability as a marketer and tryand hammer out a long-term solution. If we can, then the solutionwill be presented when the court reconvenes. If no solutionpresents itself at Tuesday’s meeting, then we’ll ask the court toallow the GPSC to re-assign Peachtree’s customers.”

The court, AGL and the GPSC have all been assured that Peachtreecan still reliably provide gas to its customers until Nov. 4.

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 said itis valued between $40 million to $50 million.

Deborah Latham, Peachtree’s CEO, said the company filed forChapter 11 early last week in a strategic move to gain time. “Wedon’t want to lose any customers at all. We filed for Chapter 11 toensure service for our customers and to get the intervention of thebankruptcy court so that there was time to complete this sale. Oncecomplete, our pockets should be deep enough to meet all our billingchallenges. We fully expect to emerge out of Chapter 11 with allour 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,” Huntersaid. “Chapter 11, in and of itself, creates a shaky financialsituation. We just feel it’s a matter of public well-being to getcustomers away from such a shaky situation.”

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,” Baker said. “That way, the debt problems lessen,Peachtree can continue supplying gas and customers don’t have tofret about random assignment.”

Yet the random assignment issue is not the only obstaclePeachtree is facing, GPSC Chairman Stan Wise said. “The Commissionwill consider on Tuesday (Nov. 2) if a hearing should be held toconsider the revocation of Peachtree’s [marketing] certificate. Thehearing would 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 thisrole only until the customers can be assigned to other marketers inaccordance to market share. Under these guidelines, SCANA andGeorgia Natural Gas Services (GNGS), the two most active marketersduring the eight month deregulation process that ended last August,would each be allotted over 50,000 new customers. Both SCANA andGNGS said adding the customers 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.

John Norris

©Copyright 1999 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.