The first of three planned hearings on a $6.1 million rate increase for Atmos Energy began Monday before the Georgia Public Service Commission in Atlanta.

Atmos, the major provider of natural gas service in the Gainesville area, is seeking to separate its fixed costs from the cost of natural gas. Under the proposal, residential customers would see their monthly service charge increase from $7 to $13.

Small-business users would see their service charge go from $12 to $20.

Kevin Akers, president of Atmos Kentucky/mid-states division, which includes Georgia, said the company has seen a decline in both residential and commercial customers in Georgia.

At the same time, Akers told the commission that customers also are conserving their usage of natural gas.

"Gainesville is a market where we are seeing little commercial, but some residential growth," Akers testified. "We continue to get some residential customers in that area."

Akers said his company faced stiff competition from electric utilities.

"They are providing incentives that are tough for us to compete with," he testified.

Without an increase, Akers said the company’s return on equity in Georgia would be negative by March 2009, according to company projections.

Under questioning by Charles B. Jones III, an attorney for the Georgia Traditional Manufacturers Association, Akers conceded that the increased portion for large industrial gas customers represented a jump of more than 50 percent.

"I certainly understand the challenges of some of our larger industrial customers," Akers said. "Their annual load factor is higher and they employ lots of our customers."

But Akers said the increased portion represented only 20 percent of the monthly bill for large users.

In 2005, the Public Service Commission 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 commission.

The hearing will resume at 11 a.m. today in Atlanta.

Hearings have been scheduled in Gainesville on Sept. 3 and 4, when the company will present its rebuttal.

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