The Evolving Roles and Responsibilities of Gas Utilities In Todays Markets

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The Evolving Roles and Responsibilities of Gas
Utilities In Todays Markets

• How Georgia Is Giving Customers More Choices,
  Options and Opportunities

Presented by Hank Linginfelter Executive Vice
President, Utility Operations
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AGL Resources
NEW JERSEY
MARYLAND
Virginia Joint-Use Pipeline
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.
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Why deregulate?
Historic natural gas price advantage was at risk
of being eroded
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
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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
100 of customers served by a natural gas marketer
Completed independently for each of Georgias
9 delivery groups, but all 9 were on the same
schedule.
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Role of the Utility, Marketers, and Commission

• 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

• Utility
• Unbundled Services
• Performance Based Rates
• Subject to Service Standards
• Subject to Traditional LDC Regulation
• Safety Monitoring
• Rate Cases

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Georgias Unbundling Model Compared to Other
Models
Most Other Models
Georgia Model
"Pipes" Transportation Service
Regulated
Regulated
Traditional Local Distribution Company Bundle of
Services
Unbundled
Gas Sales - Firm
Bundled
Unbundled
Gas Sales Interruptible
Unbundled
Unbundled
Billing, Collections, Remittance
Bundled
Meter Reading
Unbundled
Bundled
Marketing
Unbundled
Bundled
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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 Comparison
Annual bill for residential consumer based on
usage of 717 therms annually 12 months ending
Jan. 2007
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Default Provider
Under other deregulation models, some customers
are allowed to receive utility service

• 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

• 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

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The Evolving Roles and Responsibilities of Gas
Utilities In Todays Markets

• How Georgia Is Giving Customers More Choices,
  Options and Opportunities

Presented by Hank Linginfelter Executive Vice
President, Utility Operations