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Atmos defends planned increase in natural gas prices

Hearing held Wednesday before Public Service Commission

POSTED: September 7, 2008 5:01 a.m.
SARA GUEVARA/The Times

Georgia Public Service Commissioner Chuck Eaton, center, addresses the prosecutor while Commissioners Doug Everett, left, and Angela Speir listen during a hearing on the Atmos Energy rate increase Wednesday at the Georgia Mountains Center.

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During a hearing in Gainesville, Atmos Energy representatives wasted no time in taking aim at a Public Service Commission staff report challenging the natural gas utility’s request for a $6.1 million rate increase for Georgia customers.

Three commission members, Doug Everett, Chuck Eaton and Angela Speir, heard the testimony, but Commissioners Stan Wise and Bobby Baker were not present.

Wednesday’s hearing at the Georgia Mountains Center was set aside for Atmos’ rebuttal to the public interest advocacy staff, which defends the public’s position in rate cases. The commission also set aside time for local people to offer comments on the rate case. But no local testimony was offered on Wednesday.

The advocacy staff recommended a $2.18 million increase, citing the company’s operating and depreciation costs. The report also questioned the company’s capital debt structure.

"The stated basis for the advocacy staff’s alternate capital structure is that the cost of gas in storage will balloon Atmos Energy’s short-term debt position and balloon that portion of the company’s capital structure to almost 30 percent," said Laurie M. Sherwood, Atmos’ vice president of corporate development and treasurer. "That’s simply not based in any form of reality."

Sherwood said while natural gas prices are higher, the company does not necessarily finance the gas it has in storage.

James H. Vanderweide, a Duke University finance and economics professor, appeared as an expert witness for the company. He said the advocacy staff’s contention that capital costs were low compared to the past 30 years was not correct.

"The interest rates that are shown for B-AA rated utility bonds are the highest since 2003," Vanderweide said. "The rate differential for B-AA versus Treasuries are the highest since 2002. So, capital costs are not lower than at anytime in the last 30 years. In fact, they’re higher than any level since 2003."

Another rebuttal point involved the company’s depreciation schedule for its distribution system.

Donald S. Roff of Depreciation Specialty Resources, a consulting firm for utilities, told the commission his company had conducted a depreciation study for Atmos.

"It is important as a commission that you understand that the choice of one depreciation rate over another does not translate into more or less earnings for the company in the short run," Roff said. "The goal is for each generation of customers to pay their fair share of depreciation, as well as removal costs. No more or no less."

The advocacy staff disputes Atmos’ method of calculating depreciation and operation and maintenance. The staff said the company used a different method than it did in its 2005 rate case.

The first of the public hearings on the rate increase began June 30 in Atlanta. The commission is scheduled to make a final decision on the Atmos case on Sept. 17. Any increase would take effect Sept. 21. Atmos’ full request, if approved, would result in an estimated monthly increase of $4.71 for the average residential customer’s bill.

In 2005, the PSC rejected a request by Atmos for a $4 million rate increase in Georgia, giving the company only $409,277, or about 38 cents per customer per month. The increase sought by the company that year would have increased bills by $4.52 per month, according to the PSC.

Atmos serves 65,000 customers in Gainesville, Columbus and a portion of Jackson County.



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