AGL wants customers to fund pipeline to resort

The proposed pipeline is the utility's most ambitious expansion ever, for which ratepayers -- and not AGL and its shareholders -- will shoulder the risk.  It pits the state's biggest gas utility against a small Greene County gas company that wants to serve Reynolds Plantation and is far closer to it and against utility regulators who question whether the project will ever justify its cost.

AGL says the first-of-its kind project will serve the public benefit by opening up a strategic corridor into a growing area that doesn't have natural gas service now. The growth will someday add enough new customer revenue to balance out what current customers would pay, the company says.

"Our research indicates the development of a natural gas pipeline to Lake Oconee would be a viable economic project benefiting both current and new Atlanta Gas Light customers," said spokeswoman Tami Gerke, adding that the pipeline will serve the entire Lake Oconee area, and not just Reynolds Plantation.

Critics say it could be decades before the pipeline earns its keep, if it ever does.

“Enormous financial boondoggle,” is how commission member Robert Baker put it, in a recent meeting on the proposal.

AGL wants “1.5 million customers to subsidize a luxury resort area to get gas at a subsidized rate,” he said, adding that the proposal poses zero risk to the company and its stockholders.  Ratepayers will pay AGL for both the pipeline's cost and a nearly 11 percent return on it, even if not a single Greene county customer signs on.

Commissioners Lauren McDonald and Chuck Eaton have also publicly questioned the financial wisdom of the project.

And an analysis by state Public Service Commission staff concluded that the pipeline isn’t financially viable, although the staff made no recommendation.

The state’s municipal gas association, meanwhile, is fighting the proposed pipeline on territorial grounds.

The Municipal Gas Authority of Georgia says AGL is using ratepayer dollars to engage in a territorial battle with city-owned gas companies, one of which is already poised to serve the Greene County and Reynolds Plantation area with a much shorter pipeline that would cost far less.

The Reynolds Plantation proposal could signal a larger push out into the state by Georgia’s biggest gas pipeline company, the authority says.

The PSC was scheduled to vote today on its Reynolds Plantation project, along with two smaller pipeline extensions in counties already served by AGL.

The utility has asked that the vote be delayed at least a week, saying it plans to provide commissioners with more detailed information about the project’s benefits.

According to the company, the information will show that the pipeline will pay for itself in 10 to 30 years if even a small proportion of residents and businesses tap in.

The Reynolds Plantation pipeline proposal is a bold debut for a newly-minted financing mechanism for AGL.

Last fall, the utility won permission to charge customers upfront for at least $200 million in capital improvements to its system through a special fee added on to bills.  Traditional monopoly regulation requires utilities to build first and charge customers only when they actually use what was built.

The fee will eventually add an estimated $3.13 per month to the bills customers get from gas marketers in will be in place for a decade.

Then, this winter, the utility won approval to collect the fee for few years longer in order to pay for economic development projects deemed to be in the public interest.

The “public interest” term is vague, but appears to allow the PSC to balance a project’s cost to ratepayers against other considerations, like bringing gas into areas that have no other way to get it or spurring economic development.

The company says the economic development fee allows it to “extend into areas with limited development to encourage future development, and to areas where communities and businesses exist but are not served by natural gas.”

The company plans $45 million in such projects over the next three years, of which the Reynolds Plantation project accounts for more than half. If approved, the project it would account for 10 cents to 12 cents per month of the surcharge AGL customers pay.

The company said it has been interested in serving the Lake Oconee area for years, but lacked an "infrastructure mechanism" to do it until this year.

AGL has never proposed a pipeline as long as the Greene County line, which would begin in Milledgeville, head north through Putnam County and end in Greene County, where one branch would run along Reynolds Plantation’s Linger Longer Road and another would head north, toward the site of a planned new hospital.

Putnam and Greene counties are both outside of AGL’s legally-assigned territory, which means AGL would need regulatory permission to expand there in addition to permission to build the pipe.

Municipal gas companies already serve parts of the two counties and would normally get first shot at extending gas lines to customers within their counties.

Tri-County Gas, a municipal gas company that serves Greensboro and Union Point, has been preparing to extend toward the Lake Oconee area for a long time, said Chris Stripplehoff, of the Municipal Gas Authority of Georgia.

Tri-County could get to the area by building six miles of new pipe.

AGL spokeswoman Gerke said that company proposed the Greene County project because it had “received a high number of requests from residents and business owners in the Lake Oconee area interested in using natural gas. Currently the area is served only by electricity and propane.”

But exactly who is pushing for the pipeline is unclear.

Neither Reynolds Plantation nor Linger Longer Development arm returned repeated calls for comment.

The pipe ends at the plantation's Ritz Carlton, which referred questions to the Greene County Chamber of Commerce, which sent them to the county’s Development Authority.

Authority director Phil Mellor said the authority wrote a letter in support of the project at the request of AGL.

“They approached us,” he said, adding that he was contacted by an AGL employee he’d known for 25 years who was asking for authority’s help.

“When he had heard there was an opportunity out there, he said `What can you do to help?’”

Local realtors said they hadn’t heard about the pipeline proposal, and were aware of no groundswell of demand for it.

“There’s been no talk that I’ve heard of,” said Valorie Park, a member of the region’s board of realtors, when asked whether realtors had been seeing that demand.

Local Remax realtor Ann Foster said she’s heard the idea of natural gas service kicked around, but usually in the context of a gas companies closer to home.

She questioned whether the demand would be there, given that many homeowners had already paid for buried propane tanks.

She said a lack of natural gas service had never cost her a sale and questioned whether areas other than Reynolds Plantation would be populated enough to justify branch-off gas distribution lines.

Reynolds Plantation is clearly a big draw: “I think that’s the whole point,” Greene County’s Mellor.

The municipal gas authority said Tri-County Gas is also interested. The authority’s Stripplehoff said three new developments are planned there.

“You’re talking large homes, with multiple gas fireplaces, multiple water heaters, outdoor fireplaces, gas grills."

In the past several days, both AGL and the municipal gas authority have presented the state PSC with a flurry of proof about demand for their services in the area.

The first was a letter to the Greene County Commission from the president of St. Joseph East Hospital, which is building a new Lake Oconee campus along the proposed pipeline route.

President Mike Huff said the hospital was working with Tri-County Gas and that “We are delighted to know they will be serving our new Lake Oconee campus when it goes into operation in late 2011.”

In the next few days, the state PSC received letters of support for the AGL pipeline from a Waffle House, a Greene County planning commission chairman, and a project manager and board member for the same hospital whose president said it planned to use Tri-County to get natural gas.

A final letter also came on June 11, from a Todd Ciavola of Greensboro, who described himself as “in commercial real estate in the Lake Oconee market.”

“I want to express my support for bringing natural gas to the Lake Oconee market,” it said. “I think natural gas is better for heating and cooking.”

Ciavola is a vice president for business development for Reynolds Plantation.