ATLANTA, April 28, 2005 (BUSINESS WIRE) — Atlanta Gas Light, a wholly owned subsidiary of AGL Resources, is evaluating the decision by the Georgia Public Service Commission (GPSC) that would reduce the company’s revenue.
“Our preliminary review suggests the decision is unsupported by the facts presented in this case,” said Kevin P. Madden, Executive Vice President for Distribution and Pipeline Operations. “It also appears to be fundamentally flawed from both a legal and public policy standpoint. It is our hope that these flaws will be rebutted appropriately on reconsideration and be reversed.”
The company’s initial view is that the 3-2 vote by the GPSC, if allowed to stand, would result in a potential annual revenue reduction of up to $25 million. The Commission is expected to issue a written order Friday, April 29.
“At that time, Atlanta Gas Light will fully assess the potential impact on the company and its customers,” Madden said.
The company will seek in the coming days to clarify the impact of the decision, but will consider all available options to modify the decision. This will include filing for reconsideration, filing a new rate case and appealing to Fulton Superior Court.
Atlanta Gas Light, a 149-year-old company, supplies natural gas to 1.6 million homes and businesses in 237 Georgia communities. The company has not had a rate increase in 12 years and three years ago agreed to reduce rates by a total of $30 million over three years.
The company is seeking a $25.6 million rate increase that would work out to about $1.39 per month for the average residential customer, well below the inflation rate. AGL is also seeking to continue a performance-based sharing mechanism.
The Commission’s decision appears to abandon after just three years an innovation in the performance-based rate plan that featured sharing of revenues with Georgia customers. The plan set an earnings band of 10 to 12 percent with three-quarters of any earnings above 12 percent shared with Georgia customers and one-quarter retained by AGL.
Instead, the recommendations adopted by the Commission would set a return on equity of 10.375 percent, well below the average for natural gas distribution companies across the country and an 11.25 percent rate of return on equity the commission approved for Georgia Power Co. in December 2004.
“Atlanta Gas Light has instituted a series of efficiencies since the Commission’s last approved rate plan for the utility three years ago,” Madden noted. “This has allowed the company to mitigate rising business costs and maintain lower costs for customers.
“At the same time, Atlanta Gas Light has brought excellence to customer service, provided additional peaking resources for colder weather and added more than $108 million in capital additions,” Madden added.
“The recommendations adopted by the Commission would penalize a growing company for efficiencies and benefits to customers from recent acquisitions by AGL Resources that have brought new jobs to Georgia,” Madden said. “It also ignores the fact that there are certain costs over which AGL has little control. To assume that costs such as employee health care and other expenses will not go up is unrealistic,” he said. “Such reductions would force substantial budget reductions and would not be in the public interest.”
About AGL Resources [ www.aglresources.com ]
AGL Resources, an Atlanta-based energy services holding company, serves 2.3 million customers in six states through its utility subsidiaries – Atlanta Gas Light, Elizabethtown Gas in New Jersey, Virginia Natural Gas, Florida City Gas, Chattanooga Gas, and Elkton Gas in Maryland. A Fortune 1000 company that ranks number 46 in the Fortune gas and electric utilities sector, AGL Resources reported 2004 revenue of $1.8 billion and net income of $153 million. The company also owns Houston-based Sequent Energy Management, an asset manager serving natural gas wholesale customers throughout the East and Midwest.
As a 70 percent owner in the SouthStar partnership, AGL Resources markets natural gas to consumers in Georgia under the Georgia Natural Gas brand. AGL Networks, the company’s telecommunications subsidiary, owns and operates fiber optic networks in Atlanta and Phoenix. The company also owns and operates Jefferson Island Storage & Hub, a high-deliverability natural gas storage facility near the Henry Hub in Louisiana.
There also may be other factors that could cause results to differ significantly from our expectations. Forward-looking statements are only as of the date they are made, and we do not undertake any obligation to update these statements to reflect subsequent changes.
Company management evaluates segment financial performance based on earnings before interest and taxes (EBIT), which includes the effects of corporate expense allocations. EBIT is a non-GAAP (accounting principles generally accepted in the United States of America) financial measure. Items that are not included in EBIT are financing costs, including debt and interest expense, income taxes and the cumulative effect of changes in accounting principles. The company evaluates each of these items on a consolidated level and believes EBIT is a useful measurement of our performance because it provides information that can be used to evaluate the effectiveness of our businesses from an operational perspective, exclusive of the costs to finance those activities and exclusive of income taxes, neither of which is directly relevant to the efficiency of those operations.
Operating margin is a non-GAAP measure calculated as revenues minus cost of gas, excluding operation and maintenance expense, depreciation and amortization, and taxes other than income taxes. These items are included in the company’s calculation of operating income. The company believes operating margin is a better indicator than operating revenues of the contribution resulting from customer growth, since cost of gas is generally passed directly through to customers.
EBIT and operating margin should not be considered as alternatives to, or more meaningful indicators of, the company’s operating performance than operating income or net income as determined in accordance with GAAP. In addition, the company’s EBIT or operating margin may not be comparable to similarly titled measures of another company.
Any required reconciliation of non-GAAP financial measures referenced in this press release and otherwise in the earnings conference call and webcast is attached to this press release and is available on the company’s website at www.aglresources.com under the “investor information” section.