Georgia Utility Update – October 2015


By: Bobby Baker
$7.9 Million Pipeline Project Will Take Almost 300 Years to Break Even

          It will take close to 300 years to recover the $7,890,000 that it will cost to build a 57,500 foot six inch high pressure steel pipeline based on projected annual revenues of $27,800 between 2015 and 2019, while the pipeline’s useful life is 60 years.  The project’s total cost, including financing is $10,433,269, and the cost- benefit ratio was calculated at 0.0176.  According to Atlanta Gas Light Company’s application the pipeline will be built in Appling County which “is expected to experience growth of approximately six households per year between 2015 and 2019,” and there is no guarantee that any of the households will use natural gas.

          The application to build the pipeline in Appling County is part of Atlanta Gas Light Company’s strategic corridor program, and was filed May 29, 2015.  It was considered at the July 2, 2015, Energy Committee meeting at 10:00 and was approved by a unanimous vote at a Special Administrative Session held that same day at 10:23.

          Two other recent pipeline projects in Banks and Dodge Counties have cost- benefit ratios of 0.0069 and 0.0023.  The Banks County pipeline cost $7,644,452 with annual estimated revenue of $10,601, a cost benefit- ratio of 0.0069 and a 690 year payback.  The Dodge County pipeline cost $1,019,525 with estimated annual revenue of $468, a cost- benefit ratio of 0.0023 and a 2,000 year payback.

PSC Approves 27% Rate Increase for Gainesville and Columbus Gas Customers

          With no prior hearing or discussion during the September 15 Administrative Session, the PSC unanimously approved a 27% rate increase for residential customers of Liberty Utilities for their pipeline replacement program.  A residential customer will now pay $120.72 per year for the pipeline replacement surcharge.  Commercial and industrial customers saw smaller rate increases of only 3.4%.  The residential monthly pipeline replacement fee increased from $7.93 to $10.06, while commercial customers saw their monthly charges go from $29.19 to $30.19, and industrial charges went from $243.28 to $251.61 a month.

Since 2010 the residential, commercial and industrial monthly pipeline replacement charges have increased approximately 250%.  The new rates went into effect on October 1, 2015.  This is the fourteenth year of the pipe replacement program which began in 2001 to replace all the cast iron and bare steel natural gas pipeline located in Columbus and Gainesville, Georgia.

Liberty Utilities Pipeline Replacement Program Monthly Charges

                  2010                2011                2012                2013                2014             2015
Residential $4.00               $5.49               $6.85               $8.18               $7.93             $10.06
Commercial $11.99             $16.47             $20.54             $24.54             $29.19           $30.19
Industrial     $99.91             $137.25           $171.19           $204.50           $243.28         $251.61
La Capra Associates Report Questions Financial Viability of Marine Base Solar Project

          A report from La Capra Associates commissioned by the Public Service Commission raised some serious questions about the financial viability of Georgia Power Company’s proposed development of a 46 megawatt solar facility at the Marine Corps Logistics Base in Albany, Georgia.  This is the fifth solar project Georgia Power is proposing to develop on military bases in Georgia.

          The key elements of this solar project are: (1) Georgia Power is entering a 35 year contract; (2) “Georgia Power has represented that the Navy will grant the Company a lease at zero cost for 35-years” (Section 3.2); (3) the Company claims “the project will be substantially complete by the beginning of December 2016” (Section 4.3); (4) Georgia Power “retains all power and renewable attributes generated by the project: (Section 10.2), and; (5) “. . .the Company’s ratepayers assume the risk that actual production levels differ from the forecasts included in the economic analysis” (Section 8.1).  The Marine base gets no electricity, no renewable energy credits (“RECs”), no rent, no access to power in an emergency, and ratepayers are liable for any revenue shortfall.  The same conditions apply to the other solar projects located on military installations in Georgia.

          The financial viability of this project is heavily dependent upon Georgia Power qualifying for the 30% federal Investment Tax Credit which ends December 31, 2016.  Sections 10.5 and 10.6 of the report outline the risk areas to ratepayers, but a memo dated July 13, 2015, to the PSC Staff states, “There is an 11 percent margin for error in the assumptions used in the economic analysis in order for this project to provide economic benefit to ratepayers.  There is a material risk that the project will ultimately prove to be in excess of avoided costs.”