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After the Shakeout: Another Look at the Georgia Gas Market

Five suppliers are left. But that works when the utility gets out of the supply business.
Fortnightly Magazine - September 15 2001

not deregulated its natural gas market, the traditional purchased gas adjustment mechanism used in LDC ratemaking would have worked something like a variable rate plan. The increases in the wholesale cost of natural gas would have flowed through to customers over time. In contrast to the Georgia situation, customers of LDCs subject to traditional regulation would have had no opportunity to express their risk appetite.

There is no evidence from this analysis that, in general, Georgia customers paid more for natural gas than customers did in neighboring states. In fact, it is possible that Georgia customers paid a little bit less overall. In addition, this analysis does not support any contention that Georgia customers were price-gouged during the winter 2000/2001 heating season that saw record wholesale natural gas prices.

Service Quality and Customer Complaints

In the ideal case, competition should improve service relative to the level provided by a monopoly. At the very least, deregulation and restructuring should not degrade quality of service.

Last year the press reported much customer dissatisfaction with billing by some of the new natural gas suppliers. 9 Yet some level of billing problems is always to be expected in a market where 1.5 million natural gas customers change their supplier over a 10-month period.

Figure G shows that between August and December 2000, there was a dramatic and steady decrease in the level of complaints to the GPSC about billing practices, falling from a high of 1,517 in August to a low of 540 in December. This trend implies that billing service problems were being resolved.

The number of complaints then picked up dramatically in 2001, reaching an all-time high of 1,898 for the deregulated market in February. Also revealed by this perspective, however, is a strong decline in complaints while bills were stable, and then a sharp increase in complaints parallel to skyrocketing bills at about a one-month lag. It is likely that this increase in complaints was due to the large increases in bills, rather than billing problems, and in fact billing service remains greatly improved relative to 2000.

Several suppliers also offer bill payment convenience offerings such as level payment plans, automatic checking debit, pay by phone, and paystations - more options than were available from AGLC under regulated service.

Will the Georgia program encourage suppliers to offer new products or new technologies? The jury is still out - and likely to be out for some considerable time - on whether retail choice will foster such innovation, either in Georgia or elsewhere.

Nevertheless, it is clear that suppliers in Georgia are seeking to expand their offerings. SCANA is already bundling natural gas with HVAC financing and appliance warranty service and ACN Energy offers telecommunications services. New Power and Energy America appear poised to offer dual fuel bundles when the electricity market is opened to competition, based on their activities in other energy markets.

What Makes This Market Special

In hindsight, one can see the key advantage in Georgia's gas restructuring plan: Forcing the utility to exit the supply business. That, in turn, has forced