NASHVILLE - State Attorney General Bob Cooper says natural gas companies' proposed overhaul of the rate regulatory process remains a bad deal for Tennessee consumers despite changes agreed to by the industry on a bill in the Legislature.
The gas companies' proposed annual rate review, which would allow companies to seek yearly increases, "continues to pose a serious threat to consumers' pocketbooks," Mr. Cooper warns in a recent letter to Tennessee Regulatory Chairman Eddie Roberson.
Mr. Cooper's letter also reiterates concerns about a "decoupling" provision in the bill. The attorney general says it "will overcompensate the natural gas companies at the expense of their customers."
The attorney general's office includes the Consumer Advocate and Protection Division, which is charged specifically by statute to represent the interests of regulated utility consumers.
Meanwhile, one of the bill's House co-sponsors is threatening to take his name off the bill unless he can be assured the bill does not harm consumers.
"There's a lot of misinformation out there about the bill, and I'm just trying to get to the bottom of it," said Rep. Mike Turner, D-Nashville. "If this hurts consumers, then I'm obviously not for the bill. But somebody said we need to do this because it'll bring down $100 million from the federal government on the stimulus package.
"We haven't got a clear answer on that," he said.
Dr. Roberson, TRA staff and representatives of Chattanooga Gas Co., Piedmont Natural Gas and Atmos Energy have been negotiating behind the scenes to resolve differences.
Dr. Roberson, who previously has expressed reservations about some bill provisions, said through an agency spokeswoman Friday that "all of our concerns are met other than the issue with the cap" on annual rate increases.
"Our concern with the cap is we don't want it to be based on (total) revenue. It it should be based on nongas revenue," TRA spokeswoman Jessica Johnson said.
The bill creates a process whereby natural gas companies can seek up to a 4 percent rate increase - the 4 percent being the "cap" - while avoiding the more rigorous standards of a regular rate hearing that among other things examines the "prudency" of a company's expenses, critics say.
Archie R. Hickerson, director of regulatory affairs for Chattanooga Gas, which is owned by AGL Resources, said he was not up to date on the latest negotiations after being called away last week on a personal matter.
But he said the annual rate review, which has been adopted in some states, does not amount to an automatic annual rate increase for the gas company.
"It could go in either direction, really, depending on what happened as far as your actual costs were," he said. "So it could be an increase or decrease."
The gas companies, according to Mr. Cooper, have agreed to a 3.5 percent cap on increases but still want the cap applied to total revenue including gas. Dr. Roberson recently told a House subcommittee that the cap should be applied only to nongas revenues. The stakes for consumers are huge, Dr. Roberson said.
One bill provision that would have required residential and business users to pay for a conservation plan, which would have paid gas companies a 15 percent bonus, has been dropped, according to Assistant Attorney General Joe Shirley. The issue now would be decided by the TRA.
But the attorney general's office also continues to challenge the gas companies' efforts to "decouple" gas charges. The companies currently recover money for fixed costs such as pipes through charges based on usage. Arguing this discourages conservation, the gas companies want to "decouple" or break the link between fixed-cost recovery and usage and move to a set charge.
Mr. Hickerson said that will enable the companies to push conservation measures without harming revenues.
But Rep. Turner said he remains concerned about claims Tennessee risks losing $102.4 million in federal stimulus funds to make low-income homes more energy efficient if the state does not enact the "decoupling" legislation.
"Nobody can give me a clear answer on that," he said.
Rep. Turner said Finance Commissioner Dave Goetz cited the provision at one point but later told him it was not the case. But Rep. Turner said he thought one of the gas company lobbyists made the claim to him. Efforts to reach the lobbyist by phone on Friday were unsuccessful.
Brian Gooch, energy policy director for the Tennessee Department of Economic and Community Development, said the federal stimulus bill, formally titled the American Recovery and Reinvestment Act, in no way mandates that states implement decoupling.
"The short answer is no, that is not required under the Recovery Act," Mr. Gooch said. "Where the confusion comes in, I think, is in the original House version of the bill, HR1, decoupling was expressly called out. What came out of the conference committee, it was removed."
In a Feb. 24 article in The New York Times, U.S. Rep. Ed Markey, D-Mass., chairman of the Energy and Environment Subcommittee of the U.S. House Energy and Commerce Committee said the final stimulus package's "language does not mandate decoupling. There are many ways to satisfy this requirement. It does not require states to implement decoupling."
The statement was confirmed by a committee aide.