Gas company seeks relief from advocacy 'witch hunt'

PDF: Tennessee Regulatory Authority Electronic Docket Number 0700224

NASHVILLE -- Chattanooga Gas Co. customers may be hooked for nearly $700,000 in legal fees racked up during what a company lawyer calls a two-year "witch hunt" by the state attorney general's Consumer Advocate and Protection Division.

The company's request to recover its legal fees is pending before the Tennessee Regulatory Authority, which oversees utilities.

Regulatory authority directors this summer settled the underlying case, which involved complex issues of gas supply and storage capacity the agency previously had not addressed.

Authority directors are considering how much or even whether Chattanooga Gas, a subsidiary of AGL Resources Inc., should be reimbursed for its legal expenses in a case not related to setting rates. In ratemaking cases, regulated utilities can seek compensation for expenses including attorneys' fees.

Chattanooga Manufacturers Association President Ray Childers said it's not fair for local ratepayers to be forced to foot the bill.

"I don't know what happened at the TRA, but if the gas company has a problem with the state attorney general's office, that's between the gas company and the state," Mr. Childers said. "Our members should not have to pay higher gas rates because of a problem that others have caused."

Bryan Batson, AGL Resources vice president of government and regulatory affairs, said the company doesn't plan to seek a rate increase to pay its legal costs.

He said Chattanooga Gas officials believe federal regulators will grant its 60,000 customers a $1.4 million credit as a result of overcharges by a pipeline company that supplies the utility.

The company envisions asking TRA directors to use part of the refund over three to five years to recover the company's $700,000 in legal costs, Mr. Batson said.

The matter is not related to the company's request for a $2.6 million rate increase that was filed in November. If granted, the average customer's bill would rise $2.84 a month, according to the company.

EXPLORING NEW GROUND

The consumer advocate's office represents ratepayers' interests before the regulatory authority.

State attorneys have argued that Chattanooga Gas should be allowed to recover no more than half its costs. If it is allowed to collect the full $700,000, "a dangerous precedent would be set for future nonratemaking cases," state attorneys argued in documents filed in the case.

The attorneys said they "had not found any authority to support an award of costs outside of a rate case proceeding before the authority."

Still, they noted, "given the unique history" of the case and "extensive discovery" filed by the state, "the consumer advocate understands that some recovery of costs may be appropriate."

Chattanooga Gas attorney J.W. Luna had another name for the consumer advocate's requests during the case.

"They had worked us to death chasing down one wild-goose theory after the next, one witch hunt after the next," Mr. Luna told TRA commissioners in Nov. 9 oral arguments, according to a transcript.

Mr. Luna noted that a proposed settlement earlier had included letting the company recover up to $500,000 in legal expenses.

Sharon Curtis-Flair, a spokeswoman for Attorney General Bob Cooper, dismissed assertions the consumer advocate's office overreached.

"One person's witch hunt is another person's investigation," she said. "We have been engaged in a very complicated, multifaceted investigation of complex issues."

This case was a "little unique," Mr. Batson said, in that the state consumer advocate's office was exploring a new practice by utilities over the last decade to make better use of their natural gas pipeline and distribution systems.

Chattanooga Gas has contracted since 2002 with Sequent Energy Management, another AGL Resources company, to help it sell excess pipeline and distribution capacity. The contract has allowed Chattanooga Gas to put $15.9 million toward reducing the costs of the natural gas it purchased since 2002.

In its Dec. 27, 2007, petition to intervene, the consumer advocate's office said it was "concerned" about the potential that assets could be sold for less than their fair market value, possibly depriving customers of money that should be used to lower gas charges.

Moreover, Ms. Curtis-Flair said, "Our main goal in this case was to ensure independent expert review of the gas supply plan for Chattanooga, and we are pleased the TRA agreed with our position and ordered the review. This was in the best interest of ratepayers."

The review will be every three years, officials said.