State PBF/USF History, Legislation, Implementation
Last Updated: August 2012
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 required to serve 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. SCANA has continued in that role ever since — the latest two-year reappointment was in February 2012. As of July 1, 2012, SCANA was serving 24,335 low-income customers, about a 13 percent decrease from December 2010.
Households meeting the low-income requirements established by the Georgia Department of Human Resources, the LIHEAP office, qualify for a reduced security deposit, special rates and a lower customer service fee. Customers apply through their local community action agencies.
According to the PSC website, rates for Group 1 households are approximately 10 to 14 cents per therm lower than the current variable rates, and low-income senior citizens receive an additional two cents per therm discount. Deposits for Group 1 customers cannot exceed $100 and the monthly customer service charge for Group 1 senior citizens is $2 less than for other customers.
The rates for Group 2 customers are higher than the current market rates to offset the added costs and risks associated with serving these customers. Group 2 customers are required to pay a deposit of $150 and a higher monthly customer service charge.
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 history section).
The regulated provider is partially funded through Georgia's Universal Service Fund (USF), another result of Georgia's gas deregulation. Established under the original deregulation law and funded through surcharges on large industrial users and certain 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 and 2002 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 "assisting low-income residential consumers in times of emergency as determined by the commission, and consumers of the regulated provider" were the primary purposes of the USF. According to the law, funding cannot exceed $25 million yearly.
In response to higher gas costs that have regularly hit the state, the PSC has utilized the USF on several occasions through 2011. The most recent release was the December 2011 distribution of approximately $10 million to low-income senior natural gas customers as a one-time $160 credit. An earlier release in January 2011 provided $5 million for bill payment assistance of up to $300 for low-income natural gas customers in the AGL distribution area. Low-income senior citizens received $4 million, with the remaining $1 million going to other low-income customers.
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, 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. Using the recommendations of his natural gas task force, Governor Barnes sponsored the Natural Gas Consumers' Relief Act and lawmakers voted overwhelmingly to approve it.
Along with creating the regulated provider, the Act clarified the purpose of the USF as "assisting low-income residential consumers in times of emergency as determined by the commission, and consumers of the regulated provider." It also established a number of consumer protections. It limited late fees to $10 or 1.5 percent of past due balance (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.
As mentioned above, the PSC has continued to utilize the USF to help low-income households when high natural gas prices have hit the state.
In May 2010, the PSC released matching funds of $500,000 from USF funds for a federal program called Fresh Start, which provides one-time crisis assistance payments for low-income customers' natural gas bills. The PSC did not release any other USF funds for low-income purposes in 2009 or 2010, perhaps because gas prices had fallen and LIHEAP funding had dramatically increased.
In February 2008, the PSC provided $7 million to assist over 26,000 low-income customers on the Atlanta Gas Light system with grants of up to $250 for winter natural gas bill.
The total amount of USF funds disbursed by the PSC to low-income households since 2001 is nearly $65 million.
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 has since been raised to $14,355 for Atlantic Gas Light and $22,340 for Georgia Power customers. Georgia Power customers who get the senior citizen's discount will also receive a $6.00 per month fuel credit to their bills.
Effective January 1, 2005, Georgia Power's senior citizen discount increased to $14 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. The amount of the waiver has increased over the years as part of electric and gas utility rate case settlements.
Each year, around 62,000 seniors receive the electric discount and about 35,000 receive the gas discount. The annual discounts amount to about $16 million.