the evolving roles and responsibilities of gas utilities in today’s markets presented by: hank...
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The Evolving Roles and Responsibilities of Gas Utilities In Today’s Markets
Presented by:Hank LinginfelterExecutive Vice President, Utility Operations
How Georgia Is Giving Customers More Choices, Options and Opportunities
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Virginia Joint-Use Pipeline
AGL Resources
MARYLAND
*Jefferson Island Storage & Hub current total capacity; working gas capacity is 7.2 Bcf.
**FERC does not regulate rates for AGL Resources’ six utility jurisdictions.
NEW JERSEY
Company ProfileAssets $5.7 billionCustomers 2.3 millionMarket Capitalization $2.8 billionEmployees 2,400Distribution Pipeline 45,000 milesSalt-Dome Storage 10 Billion cubic feet (Bcf)*Liquefied Natural Gas 5 facilitiesRegulatory Jurisdictions 6 States and FERC**
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Why deregulate?
Anticipated electric
deregulation
The sale of natural gas was
characterized by asymmetric
regulatory risk
Proposed legislation in 1996 led to formation of a legislative study
committee
Historic natural gas price advantage
was at risk of being eroded
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Goals of Deregulation Legislation• Promote Competition• Protect the Consumer• Maintain and encourage safe and reliable natural gas service• Deregulate those components of the natural gas industry
where competition exists• Continue to regulate those natural gas services subject to
monopoly power• Promote an orderly and expeditious transition toward fully
developed competition• Provide for various rate-making methods (Straight Fixed
Variable rate design) and depart from cost of service based rates
• Allow gas companies the opportunity to compete effectively in a competitive marketplace
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Key Phases of Deregulation provided for by SB 215*
*Completed independently for each of Georgia’s 9 delivery groups, but all 9 were on the same schedule.
Phase 0: LDC election and marketer certification
Phase 1: Competition began
Phase 2: Forced Assignment
Phase 3: Full-scale competition
Description
Dates &Duration
AGLC filed an election rate case and marketers (unregulated providers) filed petitions for certification to compete
Rate case began 11/26/97 (7 month duration)Initial Certificationsbegan 7/15/98(3.5 month duration)
Customers had the option of choosing an unregulated gas provider; customers who did not select a marketer remained with AGLC
Began 10/6/98until conditions of a competitive market were satisfied
Customers were notified that they must choose a marketer within 100 days or they would be randomly assigned one
5/3/99 - 8/11/99
Customers currently are free to switch suppliers, constrained only by the terms and conditions of their agreements with new unregulated providers
After 10/1/99
Forced assignment: customers who had not chosen
a marketer were assigned to marketers according to each
marketer’s share of customers who had chosen; AGLC exited the merchant function entirely
100% of customers
served by a natural gas marketer
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Role of the Utility, Marketers, and Commission
Utility• Unbundled Services• Performance Based
Rates• Subject to Service
Standards• Subject to Traditional
LDC Regulation– Safety Monitoring– Rate Cases
Utility• Unbundled Services• Performance Based
Rates• Subject to Service
Standards• Subject to Traditional
LDC Regulation– Safety Monitoring– Rate Cases
Marketers• All customer service
functions– Billing– Call center– Gas purchasing
Marketers• All customer service
functions– Billing– Call center– Gas purchasing
Commission• Responsible for
traditional regulatory oversight of AGLC
– Rate Cases– Service Standards– Operational Safety
• Responsible for regulatory oversight of marketers
– Service Standards– Billing practices
Commission• Responsible for
traditional regulatory oversight of AGLC
– Rate Cases– Service Standards– Operational Safety
• Responsible for regulatory oversight of marketers
– Service Standards– Billing practices
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Georgia’s Unbundling Model Compared to Other Models
"Pipes" Transportation Service
Gas Sales – Interruptible
Marketing
Gas Sales - Firm
Meter Reading
Billing, Collections, Remittance
Regulated
Unbundled
Unbundled
Unbundled
Unbundled
Unbundled
Regulated
Bundled
Unbundled
Bundled
Bundled
Bundled
Georgia ModelMost
Other Models
Traditional Local
Distribution Company Bundle of Services
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Interstate Capacity• Commission requires that a Capacity Supply
Plan be filed every 3 years• AGLC contracts for all interstate capacity on
behalf of marketers– Marketers are responsible for all gas purchases– Capacity allocation based on market share– 70% of capacity release is 36 month; 30% is month-
to-month to allow for changes in customer base
• Marketers and PSC staff participate in creation of the Plan
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Marketer Choice• 11 active marketers currently• Marketers offer both fixed and variable rate
plans• Senior Citizen rates available through most
marketers• Low-Income (including low-income senior)
plans available through Regulated Provider• Customers are allowed 1 free marketer switch
per year• Customers often make non-priced marketer
choices
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Southeastern Rate ComparisonAnnual Bill
Ten
nes
see,
$96
0
Geo
rgia
Mu
nic
ipal
itie
s,
$975
No
rth
Car
olin
a, $
1,04
2
Flo
rid
a, $
1,15
0
So
uth
Car
olin
a, $
1,21
0
Ala
bam
a, $
1,23
9
Geo
rgia
Mar
kete
r (a
vera
ge
low
est
3 fi
xed
p
lan
s), $
1,02
0
Geo
rgia
Mar
kete
r (a
vera
ge
low
est
3 va
riab
le
pla
ns)
, $1,
055
Geo
rgia
Mar
kete
r (a
vera
ge
all p
lan
s), $
1,13
6
Geo
rgia
Hig
hes
t M
arke
ter
(hig
hes
t va
riab
le p
lan
),
$1,1
89
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
Annual bill for residential consumer based on usage of 717 therms annually; 12 months ending Jan. 2007
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Default Provider
Solution: Regulated Provider
• Established in Natural Gas Consumers’ Relief Act of 2002
• Designed to serve LIHEAP qualified (Group 1) and high-risk (Group 2) customers
Solution: Regulated Provider
• Established in Natural Gas Consumers’ Relief Act of 2002
• Designed to serve LIHEAP qualified (Group 1) and high-risk (Group 2) customers
Under other deregulation models, some customers are allowed to receive utility service
Under other deregulation models, some customers are allowed to receive utility service
Problem: • Under the Georgia
model, the utility serves no end-use customers
Problem: • Under the Georgia
model, the utility serves no end-use customers
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Regulated Provider• RP is not a traditional provider of last resort• Group 1 Customers in arrears are automatically
transferred the Group 2 (service is not lost) until the customer becomes current
• The regulated provider is chosen through an RFP process conducted by the Georgia Public Service Commission
• Regulated provider offers fixed and variable rate plans for each group
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Deregulation Success?10 years after deregulation began….• All Georgia natural gas consumers have the
opportunity to realize lower prices through customer choice of marketers
• Customers choose marketers on more than price alone
• Low-income and high-risk customers have choice
The Evolving Roles and Responsibilities of Gas Utilities In Today’s Markets
Presented by:Hank LinginfelterExecutive Vice President, Utility Operations
How Georgia Is Giving Customers More Choices, Options and Opportunities