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Friday May 29th, 2015 12:26PM

AGL wants $275M from its customers for pipeline replacement

By The Associated Press
ATLANTA (AP) -- A utility wants to charge its customers a total of $275 million to replace aging natural gas plastic pipes across the state to improve reliability, although a former regulator says the cost burden falls unfairly on the residential side.

AGL Resources has asked Georgia's Public Service Commission to approve its plan to start replacing 3,320 miles of plastic pipeline installed from the mid-1960s until 1983, the distribution company said in regulatory filings. For starters, the company wants to spend $275 million to replace about 756 miles of the oldest plastic pipelines in its system. Natural gas customers would finance the effort by paying $1.35 per month.

Since Georgia deregulated its natural gas market, AGL Resources serves as the monopoly that owns the distribution pipelines. Companies that sell gas over the system bill their customers for the cost of using AGL's pipelines. AGL is on the cusp of finishing a program to replace early bare steel and cast iron pipes throughout its network, some of which were decades old and decayed while buried in the moist ground.

Now the company is looking to replace old plastic pipeline that regulators say has shown a tendency to become brittle and crack. AGL officials say the replacement program makes financial sense. The utility gets cheaper prices when it pays its contractors to replace large amounts of pipeline at once rather than doing it piece by piece, said David Weaver, vice president of regulatory affairs for AGL Resources. He said fixing pipelines gradually is cheaper than doing rush jobs when a pipe completely fails.

"We can save our customers money in the process as well as eliminate the risk that may come in the future from this older pipe," Weaver said. "I'd rather do it right and do it systematically rather than have an emergency."

As a monopoly, AGL earns a guaranteed return for every dollar it invests in its distribution system. Weaver said he could not immediately answer how much the company would make in profits as part of the replacement program.

Former utility regulator Robert Baker has criticized AGL Resources for charging every customer a flat fee to pay for the program rather than billing customers based on how much natural gas they consume. The result is that residential users will shoulder a higher burden than large industrial customers. AGL officials say all its customers have an equal interest in making sure the distribution system works.

PSC staffers said in regulatory filings that their calculations showed AGL Resources will collect more money from customers in the first year of the program than it spends.

"One of the questions I have is, `Are you getting an interest-free loan from the ratepayers?'" Baker said.

Utility regulators are expected to hear testimony on the issue next month. A final vote has not been scheduled.
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