Natural gas competitors scrap over ratepayer fund

Atlanta Gas Light, Georgia’s dominant natural gas supplier, wants to take $10 million from a special ratepayer fund to fuel the vehicles of tomorrow. But that isn’t sitting well with potential competitors who are also betting compressed natural gas will emerge as a cleaner-burning, lower-cost alternative to $3-a-gallon gasoline.

State utility regulators, who are being wooed by AGL and its potential competitors, will eventually decide whether AGL can tap the fund. The company will finalize its request to regulators next month.

Billed as a way to put Georgia on the alternative energy map, the AGL proposal has turned into a tug of war between it and potential competitors, who say the pipeline utility wants to use the fund and its monopoly status to grab a top-dog role in a new and competitive business.

AGL and its top competitor, a California company founded by billionaire T. Boone Pickens, are negotiating with each other and wooing regulators with competing plans: The wooing included a series of workshops held by AGL and a paid trip to California from the Pickens company for two state Public Service Commissioners.

The company wants to use $10 million from what’s called the universal service fund to buy and install equipment for five to eight compressed natural gas fueling stations in metro Atlanta, which could produce a concentrated gaseous fuel for CNG-equipped cars and trucks.

The utility would choose vendors to run the fuel stations. The vendors would pay AGL to use the equipment, with the profits used to build more stations and to develop a leasing business for equipment to fuel CNG cars at home.

The Pickens company, Clean Energy Fuels, wants to spread the money from the service fund over a larger number of vendors, and require those vendors to pay 60 percent of the cost of the equipment themselves.

It also wants a mechanism for buying out AGL’s ownership interest: “I think it’s inappropriate to have AGL dominate the market with what I think is ratepayer money,” Clean Energy President Warren Mitchell said.

AGL counters that it’s Clean Energy that wants to lock up the market. The utility said the high private investment requirement Clean Energy is pushing would benefit one well-capitalized company — Clean Energy.

“If all the business is going to Clean Energy, all we’re doing is creating an unregulated monopoly in addition to a regulated monopoly,” said David Weaver, AGL’s director of regulatory affairs.

“We want multiple players in the market.”

The competing proposals have divided the commission, with some PSC members favoring the Pickens suggestions, others leaning toward AGL and at least one questioning whether the universal service fund should be used for the project at all: “Sometimes I wonder if it’s best to just get out of the way and let private industry do what it does best,” said Commissioner Chuck Eaton.

The proposal has also raised some eyebrows at the Legislature, where lawmakers are struggling with the state budget.

“I do not support using the [universal service fund] to build natural gas stations that are in turn gifted to private companies,” said Sen. David Shafer, R-Duluth, chairman of the state Senate’s regulated utilities commission.

Fueling alternatives

Atlanta Gas Light’s CNG proposal is part of a two-pronged push by its parent, AGL Resources, into the natural gas vehicle business.

AGL is also getting into the liquefied natural gas fueling business — now also dominated by the Pickens company. Unlike the gaseous CNG, LNG is liquid, frozen to 600 degrees below zero. CNG is considered a good fuel for appropriately equipped cars and light trucks. And in California, Clean Energy is selling LNG fuel to long-haul trucks, which allows them to carry more fuel in less space.

In July, AGL announced a privately-funded joint venture with pipeline giant El Paso Corp. The partnership wants to truck liquefied natural gas off El Paso’s Elba Island LNG terminal to as-yet nonexistent LNG fueling stations across the Southeast: Its proposed truck route through downtown Savannah has created an uproar of its own, as local residents have raised safety concerns.

Atlanta Gas Light’s interest in CNG became public knowledge a day after its LNG announcement, when Commissioner Doug Everett read a prepared statement urging the utility to come up with a plan.

Saying it had been asked to do so by a regulator, AGL presented its plan about a month later.

Advocates of natural gas fuel say it addresses a number of problems with traditional fuels.

It burns more cleanly than gasoline or diesel. It doesn’t have to be imported. Government incentives exist for using it, including money and perks: New Georgia Public Service Commissioner Tim Echols bought a CNG-fueled car and tells anyone who will listen that he can now legally use HOV lanes by himself.

And CNG is also now cheaper than gasoline, due to vast supply reserves found in shale rock across the United States. Last week, gasoline commanded between $2.72 and $3.39 at stations across metro Atlanta. Compressed natural gas was going for between $2.14 and $2.36 at the two stations that sell it.

Adoption of CNG vehicles has been slow so far.

Atlanta-based UPS, for example, began adding them to its fleet more than two decades ago. But the proportion remains small. Out of 100,069 vehicles, UPS has 1,076 in the United States and 71 elsewhere that are fueled by compressed natural gas and 11 long-haul trucks fueled by an LNG station in California, said spokesman Michael French.

“We look for areas with substantial infrastructure to support the fueling.” French said.

More fueling stations “obviously, would be an incentive.”

Atlanta Gas Light says its proposal would solve a chicken-and-egg problem: Buyers don’t want natural-gas vehicles until they see more fueling stations and investors won’t build the fueling stations until they see more vehicles.

But Clean Energy says that problem was already solving itself.

The country’s biggest natural-gas fuel player, Clean Energy Fuels, has built 225 natural gas stations across the country and has national contracts with Flying J truck stops and AT&T, among others.

Public money is a part of its game plan: The company has a grant writing department.

But it has also invested $200 million of its own.

Clean Energy entered the tiny Atlanta CNG market a little more than a year ago, building a station in College Park.

‘Whose money is it?’

The fund AGL wants to tap for its CNG project is set up by state law and intended to help AGL pay to extend its infrastructure.

It’s controlled by the PSC, which must sign off on its use. AGL typically taps the fund for about 5 percent of its infrastructure spending in a year, usually for new pipelines in its monopoly territory. The CNG plan would also expand its infrastructure, although in a new way.

The law says the money can also be used for emergency home heating relief for the poor or – if it tops $3 million – for refunding money to all ratepayers.

The fund stood at $37 million when AGL put in its CNG proposal, largely because the demand for new pipelines to new subdivisions dried up.

Most ratepayers don’t fund the universal service fund directly. The fund gets 95 percent of the revenues AGL receives from industrial customers. An unregulated affiliate in Houston also contributes.

Because of that, AGL and the PSC’s Everett say it isn’t ratepayer money: “It’s a stretch to call it ratepayer money,” said Everett. “If we took the $10 million out of it, they would never miss it. Their bills would not be changed.”

Follow the money, though, and the fund is indirectly supported by all ratepayers. Their rates make up for the industrial revenue that flows to the fund instead of AGL. And the Houston affiliate contributes a share of its profits because the PSC requires it: The company makes its money using assets paid for by Atlanta Gas Light ratepayers.

The claim that the money isn’t ratepayers’ annoys PSC member Eaton.

“If it’s not ratepayer money, then whose money is it?” he said.