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The Evolving Roles and Responsibilities of Gas Utilities In Today’s Markets

The Evolving Roles and Responsibilities of Gas Utilities In Today’s Markets. How Georgia Is Giving Customers More Choices, Options and Opportunities. Presented by: Hank Linginfelter Executive Vice President, Utility Operations. AGL Resources. NEW JERSEY. MARYLAND.

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The Evolving Roles and Responsibilities of Gas Utilities In Today’s Markets

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  1. The Evolving Roles and Responsibilities of Gas Utilities In Today’s Markets How Georgia Is Giving Customers More Choices, Options and Opportunities Presented by: Hank Linginfelter Executive Vice President, Utility Operations

  2. 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.

  3. Why deregulate? Historic natural gas price advantage was at risk of being eroded Anticipated electric deregulation The sale of natural gas was characterized by asymmetricregulatory risk Proposed legislation in 1996 led to formation of a legislative study committee

  4. 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

  5. Phase 0: LDC election and marketer certification Phase 1: Competition began Phase 2: Forced Assignment Phase 3: Full-scale competition 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 Certifications began 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 10/6/98 until 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 Description Dates & Duration 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 Key Phases of Deregulation provided for by SB 215* 100% of customers served by a natural gas marketer * Completed independently for each of Georgia’s 9 delivery groups, but all 9 were on the same schedule.

  6. 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 Role of the Utility, Marketers, and Commission Commission • Responsible for traditional regulatory oversight of AGLC • Rate Cases • Service Standards • Operational Safety • Responsible for regulatory oversight of marketers • Service Standards • Billing practices

  7. Georgia’s 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 Bundled Billing, Collections, Remittance Meter Reading Unbundled Bundled Marketing Unbundled Bundled

  8. 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

  9. 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

  10. Southeastern Rate Comparison Annual bill for residential consumer based on usage of 717 therms annually; 12 months ending Jan. 2007

  11. 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 Default Provider Under other deregulation models, some customers are allowed to receive utility service Problem: • Under the Georgia model, the utility serves no end-use customers

  12. 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

  13. 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

  14. The Evolving Roles and Responsibilities of Gas Utilities In Today’s Markets How Georgia Is Giving Customers More Choices, Options and Opportunities Presented by: Hank Linginfelter Executive Vice President, Utility Operations

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