Deregulation not cause of high natural gas prices.

According to a study funded by AGL Resources:

“People attribute price increases to deregulation, but that’s not what caused it,” said Bryan Batson, senior vice president for AGL Resources, the company that funded the study.

AGL Resources is the parent of the state’s largest gas marketer, Georgia Natural Gas, and of Atlanta Gas Light, the company that owns the network of pipes distributing the fuel.

Prices weren’t routinely higher when compared to those available to residents of Georgia cities that sell their own gas separate from the commercial marketers doing business in the rest of the state.

Georgia’s deregulated market also offered choices that were higher than the neighboring regulated markets.

“The best we could say is they were not any worse off in Georgia” as a result of deregulation, said Robert Lann, author of the study and a member of the Community Policy and Research Services division of Georgia Tech’s Office of Economic Development and Technology Ventures.

However, Lann speculated that most consumers didn’t get the full benefit of deregulation by switching marketers frequently to whichever offered the lowest price at any moment.

“They’re not really taking advantage of the choices they have in this system,” he said.

Another issue for Georgia’s Democrats goes down the drain. However, we need further deregulation of the natural gas market rather than the partial deregulation we now have.

7 comments

  1. ColinATL says:

    Hmmm, could it be that a study saying that deregulation is good or neutral may be questionable when it is funded by the single biggest beneficiary of deregulation ?

  2. Bill Simon says:

    Funny…it was Atlanta Gas Light whose lobbyist wrote thebill to hand to Sonny to “deregulate” it. AGL was fed-up with collecting money from the end-users and just wanted to be in the gas supply business.

  3. The spot energy prices are higher, so in a sense deregulation can’t be blamed entirely for the increase in prices. What deregulation actually did though, was shift maintenance costs from interruptible industrial users to smaller businesses and residential ratepayers.

    In other words, the old bargain was that the Ford plant would get cheap gas, but they would also pay their fare share of supply maintenance costs and in return for the lower prices their supply could be “interupted” on a high demand day. Meanwhile granny and the ice cream shop can’t have their gas turned off, and for that “priviledge” their gas can never be shut off.

    What Sonny’s bill did is it shifted all of the costs of maintenance and new construction to the uninteruptible ratepayers. So now Granny and the ice cream shop subsidize the Ford plant. And guess what? The Ford plant never actually gets it’s gas turned off. So not only did the commodity cost go up, but us ordinary rate payers also got socked with maintenance costs that the big users used to share in.

    The whole story is actually a little trickier. Because of the old rate structure for maintenance, large corporate customers were bypassing AGL and getting their gas supply directly from suppliers (so they wouldn’t have to pay AGL’s line costs and other costs). AGL went to Sonny and said we could compete if we didn’t have to pass on these costs to our large corporate customers and Sonny said sure thing I’ll just sponsor a bill that puts it on the backs of residential rate payers.

    So really AGL does not want to go back to the old system where they “didn’t compete”. If anything, they “don’t compete” now, because the state has rigged the system so that for large corporate and industrial customers, it makes no sense not to use AGL. Meanwhile even if we’re savvy consumers and sign up for a good rate, we’re still paying a lot of fees and other recovery costs that we didn’t use to. Some deal for Georgians!

  4. atlantaman says:

    “the old bargain was that the Ford plant would get cheap gas”

    Apparently whatever kind of break they received wasn’t enough. This mindset of pitting rich against poor, employee against employer, and individual against industry is a dangerous one. As we’ve seen time and time again, when we try to shift more of the burden to corporations (through taxes, energy costs, unfunded mandates, etc..) it only ends up hurting us in the end.

    It makes for great rehtoric, “Let’s get those evil corporations and help the little guy”, but how does the little guy feel when he has to work at Wal-Mart because his former employer moved to Mexico to escape all the knee-jerk burdens our government places on business.

    Our economic policy doesn’t operate in a vacuum. If we want to add regulation, shift more of the tax burden, shift more energy infastructure costs, require more months of paid vacation, require more healthcare options – then it must be done with the understanding that in an increasingly worldwide market corporations have many relocation options.

  5. JP says:

    Atlantaman, that last paragraph is exactly why people like John Kerry suggested “fair trade” rather than “Free trade,” under which we’d make conditions more favorable to do business in countries in which labor standards similar to our own are enforced. It should be less favorable to do business in a country where the wages are under a dollar an hour, there is no healthcare, etc–because that creates an unfair playing field.

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