Overview of Low-Income Restructuring
Legislation and Implementation
Georgia
Last Updated: August 2007
One unique result of Georgia's experience with natural gas deregulation was the creation of a regulated provider — designed to offer low-income households lower cost gas and to serve customers who cannot get service elsewhere.
The regulated provider is assigned with serving two types of customers: Group 1 customers, defined as LIHEAP-eligible, and Group 2 customers, defined as those unable to obtain natural gas service as a result of poor credit or those who have been refused service by another marketer.
The Georgia Public Service Commission (PSC) chose SCANA Energy as the regulated provider in June of 2002, and, as of June 2005, it again chose SCANA as the regulated provider for two years through August 2007.
As of mid-2007, SCANA was serving approximately 25,000 low-income customers. According to PSC website, the rates for Group 1 households are approximately 10 to 14 cents per therm lower than the current variable rates, and low-income seniors citizens receive an additional two cents per therm discount, plus their monthly customer service charge is $1.00 less and the $100 deposit for new senior citizen accounts is waived. The rate for Group 2 customers are higher than the current market rates to offset the added costs and risks associated with serving these customers.
Group 1 customers must meet LIHEAP income guidelines and they can apply through the LIHEAP subgrantee offices, most of which are community action agencies.
While the regulated provider's gas prices are supposed to be lower than prices of other providers, that has not always been the case; as a result, the PSC has had to step in and provide supplemental funding for low-income customer's gas bills. (See background section).
Another result of Georgia's gas deregulation has been creation of a Universal Service Fund (USF). Established under the original deregulation law and funded through surcharges on large industrial users and certain kinds of profits from Atlanta Gas Light (AGL), the deregulated natural gas company, the USF was originally designed to reimburse marketers for uncollectible accounts and pay for extension of natural gas service into new territory; any balance at the end of the fiscal year was to be reimbursed to customers.
The law was amended in 2001 to allow a portion of the fund to be used for low-income energy assistance programs. The Natural Gas Consumers' Relief Act changed the law so that low-income energy assistance is now the primary goal of the universal service fund; according to the law, its funding cannot exceed $25 million yearly. From 2001 through August of 2007, the PSC has approved about $43 million from the USF to help low-income families with their winter heating bills
A third result of the state's gas deregulation has been the imposition of fines on gas marketers, some of which the PSC has directed be paid to the state LIHEAP office.
During 2003, the PSC ordered three marketers to contribute to LIHEAP: 1) Energy America, $400,000, for "slamming" customers — that is, signing them up without their consent; 2) Southern Company, $100,000, for failure to abide by disconnection rules; and 3) ACN Energy, $17,000, also for disconnection violations.
In January of 2004, natural gas marketer Energy America was ordered to pay at least $60,750 to the state LIHEAP because of its failure to properly credit payments from LIHEAP to over 50 customers' accounts. Included was a $125 credit to each customer who had been wrongly disconnected, plus $5 for each day of disconnection. In August of 2004, Shell Energy Services was ordered to contribute $50,000 to the Georgia LIHEAP as punishment for switching customers without their authority.
Background
Georgia's 1997 Natural Gas Competition and Deregulation Act forced most natural gas customers to choose a competitive marketer. One provision required that customers who had not selected a marketer by May 1999 be randomly assigned to a competitive supplier. (The law applied to customers of Atlanta Gas Light Company (AGL), the state's largest utility; the other large utility, United Cities, decided not to open its territory to competition.)
Nineteen marketers entered a field previously dominated by two companies, bringing with them new pricing methods, delayed billings, erroneous billings and, in some cases, illegal practices such as slamming.
To complicate matters, Georgia consumers were hit with increased prices for natural gas during the unusually cold winter of 2000-01 when monthly bills soared to hundreds of dollars.
In response to public outcry over high heating bills, the PSC voted in January 2001 to prohibit natural gas marketers from disconnecting residential customers for nonpayment until April 1, 2001. When the moratorium expired, marketers disconnected 124,000 customers. As the winter of 2001-02 began, about 64,000 customers remained disconnected because of arrearages, and many did not have the means to have their gas turned back on. In November, then-Governor Roy Barnes appointed a task force to investigate how to protect natural gas customers from high prices and disconnection.
In February 2002, the Governor's Blue Ribbon Task Force on Natural Gas released its final report, calling for a "multi-pronged approach" that neither dismantled deregulation nor relied entirely on the free market. The task force dismissed the increasingly popular idea of returning to a natural gas monopoly because of serious financial and legal barriers. Its report noted, for example, that legal claims from marketers could run as high as $500 million if the state were to put them out of business.
Instead, the task force recommended that the PSC designate a provider with regulated rates that could serve low-income and other residential consumers who needed an alternative to competitive marketers. The General Assembly rated the natural gas issue a top priority for its 2002 session, and based upon the recommendations of the natural gas task force, the Natural Gas Consumers' Relief Act was approved.
Along with the regulated provider, the law established a number of consumer protections. It limited late fees to $10 or 1.5 percent of past due balances (whichever is greater), limited deposits to $150, and prohibited newly published prices from being applied to already consumed gas.
In June 2002, the PSC selected SCANA, one of three marketers to bid, as the regulated natural gas provider. When its program started in September 2002, SCANA was offering rates 10 to 14 cents per therm less than other residential rates; seniors were to receive rates of 12 to 16 cents less per therm.
However, the company did not procure enough gas through long-term contracts to honor those prices for longer than a few months. Its regulated-provider contract with the PSC allowed the company to adjust prices to reflect higher wholesale prices the first half of 2003. Because that adjustment was so severe — forcing the company's low-income enrollees to pay the highest prices in the state — the PSC tapped the state's USF for $750,000 to give the regulated-provider enrollees a $50 bill credit in June of 2003. Customers transferred to SCANA because of credit problems did not receive the bill credit.
In response to higher gas costs that have continued to hit the state, the PSC has utilized the USF on several other occasions from 2003 through 2006. The most recent were: the release in October 2005 of $6 million to the Georgia Department of Human Resources, the LIHEAP grantee, to help low-income gas customers pay bills or deposits; the release in March of 2006 of $8 million for the winter's high natural gas bills, of which $5.1 million was for low-income seniors and the remainder for other low-income natural gas customers, and the release in December of 2006 of $5.2 million which provided a $150 credit to about 35,000 low-income seniors.
Other Payment Assistance
In 1987, the PSC mandated that major gas and electric utilities waive their monthly service charge for customers age 65 or over earning less than $10,000 per year (the income limit was raised to $12,000 in 2001). The amount of the waiver has increased over the years as part of electric and gas utility rate case settlements.
Effective January 1, 2005, Georgia Power's senior citizen discount increased to $14.00 per month from $10.50; the same increase in the discount was effective May 1, 2005 for low-income seniors who are customers of Atlanta Gas Light. Around 55,000 seniors receive the electric discount yearly, and about 35,000 receive the gas discount.
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Page Last Updated: August 24, 2007
