Provider Competition
A final situation to consider is where several Providers of necessary infrastructure or commodities can serve a site (“Provider Competition”), e.g. two or more electric or natural gas providers. In many states, there is competition or limited competition for energy supply, which can present a major upfront cost for infrastructure development and significant ongoing operational costs. In Georgia, there is limited competition for both electric and natural gas services, which naturally leads to competitive incentives for attractive development. In Georgia, there are (a) 52 local governments, 38 electric membership corporations and one investor owned utility that provide electric services in various areas and more than 80 local governments and two investor owned utilities (one regulated and the other deregulated with twelve natural gas marketers) that provide natural gas services in various areas. The types of Providers, service areas and regulatory structures for these services can lead to confusion, but for those that are informed this competition can present significant opportunity for incentives.
Electric Service in Georgia
In Georgia, electric Providers have exclusive service territories that have been assigned to them by the Georgia Public Service Commission (“GPSC”) pursuant to the Georgia Territorial Electric Service Act of 1973 (O.C.G.A. Section 46-3-1, et seq.) There are, however, two frequently used exceptions to exclusive service rights whereby the customer may choose among multiple Providers in most cases when service is initially rendered:
(1) Corridor Rights: when more than one electric Provider has a line (with rights) within a short distance; and
(2) Large Load Customer: when, in many cases, a customer’s facility will, at the time of initial full operation, have a connected load of 900 kilowatts or greater (excluding redundant equipment).
There are multiple nuances to both of these exceptions, but the important point for an economic development professional is that there is a one-time choice for each new “premises” in some circumstances, and if you think your project may qualify, contact a Georgia energy professional or the potential electric Providers and pursue the option before permanent service is extended to the project.
It is also important to note that The Georgia Cogeneration and Distributed Generation Act of 2001 (O.C.G.A. Section 46-3-50, et seq.) provides that customers that generate their own electricity may use that electricity free from most GPSC regulation and provides for the process by which customer generators may sell certain alternative electricity back to an electric Provider.
Additionally, the types of incentives available differ among the electric Provider. For example, the investor owned electric utility (Georgia Power) is subject to the general regulatory authority of the GPSC and electric membership company and local government electric Provider are not. This is an important distinction as the investor owned electric utility cannot be as flexible as to the rates, service terms and incentives it can offer (all of those being subject to GPSC oversight). A highly sought after customer also has significant potential negotiating leverage, both initially and over time, over an electric membership company or local government as it may be one of its largest customers. Finally, a local government electric supplier may find a potential customer more attractive than other suppliers as it must also take its general government role into account, e.g., taxation, employment and other utility services.
Natural Gas Service in Georgia
In Georgia, there are no GPSC assigned retail natural gas service territories similar to the regulatory scheme for retail electric service. Generally, the two investor owned natural gas utilities are subject to general GPSC regulation and must be “certificated” before extending their systems into a new county. Local government gas Provider are not subject to general GPSC regulation except in very limited circumstances. Liberty Utilities, which is subject to general GPSC regulation and is by far the smaller of the two investor owned natural gas utilities, and the local government gas Provider, which are not subject to general GPSC regulation, own distribution facilities (the “pipes”) and supply natural gas to retail customers. In Atlanta Gas Light Company’s (AGLC’s) service areas, natural gas service is “de-regulated” pursuant to the Natural Gas Competition and Deregulation Act of 1997 (O.C.G.A. Section 46-4-150, et seq.), which basically means that AGLC now only owns the distribution facilities or pipes and that customers may purchase natural gas (the commodity) from any of twelve natural gas marketers.
Similar dynamics to the electric Provider discussion above apply respecting the relative negotiating leverage and flexibility of large utilities vs small utilities. However, advantages and disadvantages of access to multiple gas marketers must also be taken into account in assessing natural gas options. One must also account for the potential to develop natural gas service access via a direct connection to the interstate pipelines in Georgia and issue that is irrelevant in the electric service context due to the Integrated Electric Transmission System in Georgia.
Incentives
Infrastructure
Whether infrastructure and commodity service is provided by a regulated investor owned supplier, a local government supplier or in a deregulated area, the first issue to overcome is the cost of facilities for extending service from the gas supplier’s existing system. In certain cases, Providers may develop those facilities at their own cost, charge all or a portion of the cost or charge a set tap or facilities charge. Some Providers, also, have access to grants as well as incentive financing options, which can be passed along, in whole or in part, to customers. See the summaries respecting (a) tax-exempt finance for governmental facilities and commodities, (b) tax increment or TAD finance and (c) exempt (private use) facility finance as local government, which are also utilities, can pass all or a portion of the benefits of such financing on to one or more customers.
Commodity
Once the infrastructure issue is resolved, there are still opportunities for incentives with respect to the price and other service terms of the commodity (e.g., electric, gas, water and data) element. There are typically publically available rates and service terms for various classes of customers. However, unique contracts or rate classes (for example, as class that only has one eligible customer initially) are frequently made available.
In Georgia, O.C.G.A. Section 36-30-3(d) provides express authorization for municipalities enter into contracts specifying the rates, fees, or other charges which will be charged and collected by the municipality for electric, natural gas, or water utility services to be provided by the municipal corporation to one or more of its utility customers subject to the following conditions and limitations:
(1) No such contract shall be for a term in excess of ten years;
(2) Any such contract which is for a term in excess of two years shall include commercially reasonable provisions under which the rates, fees, or other charges shall be adjusted with respect to inflationary or deflationary factors affecting the provision of the utility service in question; and
(3) Any such contract shall include commercially reasonable provisions relieving the municipality from its obligations under the contract in the event that the municipality’s ability to comply with the contract is impaired by war, natural disaster, catastrophe, or any other emergency creating conditions under which the municipality’s compliance with the contract would become impossible or create a substantial financial burden upon the municipality or its taxpayers.