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No peace over pipes

Deregulation talk little more than hot air

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Gas cutoffs, gross over-billing, bankrupt marketers, lawsuits.

Is this the big payoff from deregulating Georgia's natural gas industry? Wasn't the point to increase competition and drive down gas bills?

Maybe in theory. The reality is that the ground rules still favor Atlanta Gas Light Co. -- so much so that 12 of the utility's competitors have either gone under since 1998 or left town. And, this month, the old gas monopoly is angling to use a corporate sleight of hand to tilt the playing field even further.

That maneuver -- which involves AGL spinning off a new unregulated subsidiary called Sequent -- already has state Public Service Commission staff wrangling with the company over whether Sequent's role should be subject to the same oversight as AGL.

The real losers of this cozy alliance are Georgia residents. Gas prices won't go down as long as AGL and Sequent stifle competition, which is the complete opposite of the original goal of deregulating Georgia's natural gas industry.

"You really need to open up the deregulated market fully to get it to work," says Jeff Dickerson, a spokesman for Scana, a gas marketer.

Deregulation was supposed to rid the state of monopolies held by AGL and other big gas companies.

Lawmakers wanted to establish a free market in Georgia for the first time, where marketers compete for customers by offering lower prices and better services.

But the Public Service Commission has slowed deregulation and allowed AGL to keep its dominant position. Commissioners have so far refused to turn AGL's control of the interstate pipelines that ship gas into Georgia over to gas marketers. That, theoretically, would have let the other markets compete without having to go through AGL.

The seven natural gas marketers that have stuck around -- which include an AGL subsidiary called Georgia Natural Gas -- compete with each other to sign up customers, and they can buy the gas they sell to consumers.

But AGL controls most of the capacity in the pipelines. Marketers get to use only 30 percent of space in the pipelines themselves. The remaining 70 percent is controlled by AGL.

That means marketers don't have a reliable way to import gas, so they can't compete on the wholesale or spot markets, and that's where they could save customers big bucks simply by buying in bulk.

"What [marketers] want to be able to do is offer the best prices to consumers in order to gain more customers over their competitors," says Dickerson. "Lower [wholesale] prices are the best way to do that."

Until the Public Service Commission allows marketers to get their own gas free from AGL's influence, gas prices will remain high and Georgia will be in limbo, somewhere between a competitive market and a monopoly.

And now, AGL is on the verge of pushing marketers out of the loop even more.

On April 9, AGL Energy Services LLC, a subsidiary, changed its name to Sequent Energy Management. Then, on July 1, AGL gave Sequent the legal power to contract with the out-of-state companies that deliver gas to Georgia -- exactly what the marketers have been begging the PSC for since they opened for business.

And here's what has the marketers worried: Unlike AGL, Sequent does not have to answer to the Public Service Commission, or anybody else for that matter.

That raises a slew of legal questions because AGL, not Sequent, is required by law to make sure there's enough gas flowing through the pipelines for Georgia customers.

The big question is, if AGL transferred power of attorney to Sequent, then did it also transfer its obligations to an unregulated company?

So far, PSC employees can't answer that question, but it's not because they haven't tried. Two PSC staffers tried to inspect the two contracts that outline Sequent's new role, but the access they were given to the documents was "inadequate," according to a letter obtained by Creative Loafing.

The letter, sent by the PSC's Nancy Tyer to AGL attorneys Aug. 6, also said AGL's failure to provide the PSC with actual copies of the contracts was unacceptable.

When AGL finally turned over the contracts with Sequent the next day, they were marked as "trade secret documents," meaning that gas marketers and the public may never know the details of the relationship between AGL and Sequent.

Marketers, sensing that AGL and Sequent are about to take control of the gas pipelines for good, are planning to file a flurry of protests with the PSC in the coming weeks. Most marketers wouldn't condemn AGL or Sequent publicly, claiming they don't want to show their cards until they get in front of the Public Service Commission. But Commissioner Stan Wise says he's heard Scana and Shell Energy "rumbling about Sequent."

One marketing consultant says lawsuits are inevitable unless the Public Service Commission reverses the AGL/Sequent deal.

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