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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

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

slide2

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.

why deregulate
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

goals of deregulation legislation
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
key phases of deregulation provided for by sb 215

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.

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

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
slide7

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

interstate capacity
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
marketer choice
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
southeastern rate comparison
Southeastern Rate Comparison

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

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

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
regulated provider
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
deregulation success
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 markets14

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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