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Posted: April 26, 2009 12:00 a.m.

City rejects Atlanta Gas Light purchase offer

Officials: Gas system likely worth much more

The Covington City Council agreed on Tuesday to reject an offer from Atlanta Gas Light Company to purchase the city’s gas system for $10 million. City Utility Director Bill Meecham said he did not have an official estimate, but his personal guess was that the system was worth at least $40 million to $50 million.

"Much of the value lies in the system's potential for growth and the value of its industrial base," Meecham said. "As noted in projections from the (Regional Development Center), Newton County will grow tremendously in the coming years. We still have much undeveloped service territory as well as area that's now served that will become more densely populated. The potential to add more industrial load is also there."

City Manager Steve Horton said the deal made no sense for the city and he recommended that the city turn down AGL’s offer. Horton said that AGL said the system was worth $1,200 per customer to them, which comes to just more than $10 million. Mayor Kim Carter said she couldn’t believe the system was worth so little.

According to the current budget, the city made $630,694 in fiscal year 2008, but lost $1,204,607 in FY 2007. Meecham said that the city didn’t have final estimates for the FY 2009 budget, but he said gross revenue will be down, because the cost to buy natural gas from the producers has declined. Meecham said Covington has approximately 8,400 gas customers.

"This isn't bad news, however," Meecham said. "It means that customers are paying less than in the recent "high" years."

In April, based on average customer use estimates provided by the Georgia Public Service Commission, Covington gas customers paid $55.28, while the cheapest price offered on the AGL system was $59.39, offered by Walton Electric Membership Corporation, Meecham said.

Horton said the rate the city charges its gas customers has not increased for the past couple of years, because the supply price of gas was already so high after Hurricane Katrina up until the beginning of last year’s recession. Therefore, the city has pretty much been charging a break-even price to keep costs down for customers.

"If we were running a gas authority, we would have seen rate increases, but our politicians see what is happening and see that a rate increase would have been unbearable for the customers," Horton said. "But we have gotten to the point where it makes sense to explore some increases."

Meecham said the city’s gas service area was Newton County east of the Yellow River, excluding Porterdale and a small area near Social Circle, and an area of Walton County south of Walnut Grove.

In related news the city created a new Countywide Natural Gas Safety Plan. Meecham said the plan is a formal commitment to work with the public safety agencies and other gas providers to provide clarity as to who owns which gas mains and who serves which customers. He said it mandates periodic meetings to keep the information current. Meecham said this is the first county-wide gas plan that has been formally written, although individual gas system safety plans included similar information.

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