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Natural gas utility districts approved to merge [Crossville Chronicle, Tenn.]
[November 03, 2014]

Natural gas utility districts approved to merge [Crossville Chronicle, Tenn.]


(Crossville Chronicle (TN) Via Acquire Media NewsEdge) Oct. 30--Following public hearings held last Thursday, a motion to merge the Middle Tennessee Natural Gas Utility District and the Upper Cumberland Natural Gas Utility District has been approved by Cumberland County Mayor Kenneth Carey, Jr. The orders to merge took effect immediately upon Carey's signature; however, the applicable laws governing the merger allow 60 days for the transition to be completed. James Hodges, CEO of Middle Tennessee Utility District, indicated their intention is to take over immediately, which could result in a 30 percent rate reduction as early as the next billing cycle for former UC Gas customers.



"There are a number of benefits for the customers of both parties," said Hodges. "The largest benefit, in most people's opinion, is rates. Middle Tennessee Natural Gas Utility District has one set of standard rates throughout our entire service area. Those rates are considerably lower than the current rates of Upper Cumberland Utility District. Approximately 30 percent is the percentage of that differential but it's a little different depending on what class, whether you are industrial or residential [customers]. The largest advantage would be the Upper Cumberland customers would experience reduced rates within 60 days. It says in the petition our hope and desire would be that we would be able to implement those immediately, and they would see those on their next billing, but we would definitely implement those as fast as possible." Steve Stone, commissioner of UC Gas, concurred, citing the rate reduction as one of the key factors in his decision to go through with the merger.

"The rate that they can charge for gas is substantially less than what Upper Cumberland can charge for gas, given that they have somewhere north of 80,000 customers and we have around 2,500 customers," said Stone. "In addition to that, Upper Cumberland Gas, we've been researching ways to bring more gas into our service area because last winter we came really close to being at capacity a time or two. We were looking at an alternate route for bringing gas down from our tap in southern Fentress County. As we look more and more at this project, the millions and millions and millions began to add up to a point where I personally felt that it was going to be overwhelming for the debt load that we're going to have to pick up to add this additional capacity to keep supplying gas and to let the users grow. In my mind there's just a preponderance of evidence that would say this is the right thing to do." In addition to lower rates, MTNG will offer merchandising, appliance installation and service work. According to Hodges, the UC Gas office in Fairfield Glade will remain open and will be turned into a showroom for appliances.


"Customers north of I-40 would have available to them installation and service work that they currently do not have," said Hodges.

The third advantage for customers in the former UC Gas service area is the opportunity for expanded service on a much faster timeline.

"There are a number of areas north of the interstate that would seem to want service, to expand the existing network of service," said Hodges. "Middle Tennessee is in the service business and has the resources to do that a little more quickly than Upper Cumberland would be able to do it. Some of those people would see service sooner under the merged entity than most likely they would see if we did not do the merger." Stone agreed.

"I think the opportunity for other people who don't currently have gas service grows exponentially with Middle Tennessee Gas taking over the service area," he said.

Carey's approval of the merger was reliant upon certain conditions being met. He submitted three questions for the official record.

"First, if this merger goes forward are you going to retain the employees of Upper Cumberland Gas?" asked Carey.

"We do intend to retain those [employees]; that knowledge and that skill set will be helpful to us in our work over there," answered Hodges.

"Second question, the office located in Fairfield Glade -- will that office remain open?" asked Carey.

"Yes, it is our intention to continue utilizing that office as a service center and to expand it's use by stocking appliances and having a showroom there," answered Hodges.

"And my last question," said Carey, "has there been a mechanism put in place for us to move forward to attempt to get the legislature to put a representative from Cumberland County on the Middle Tennessee Natural Gas Utility Board?" "Yes sir," affirmed Hodges, "yesterday the board of Middle Tennessee Utility District passed a resolution supporting the idea of adding an eighth commissioner to our board and that commissioner be a representative from Cumberland County, and to support an effort to accomplish that through the state legislature," said Hodges.

Middle Tennessee Natural Gas provides service to 22 counties, including Bledsoe, Cannon, Coffee, Cumberland, Dekalb, Franklin, Grundy, Hamilton, Jackson, Marion, McMinn, Meigs, Overton, Putnam, Rhea, Rutherford, Smith, Van Buren, Warren, White and Wilson counties. With the merger agreement, Middle Tennessee will also pick up Fentress county. According to Carey, the residents and businesses of Cumberland County account for the largest share of their services. However, because of language in the original charter, MTNG is only allowed by law to have seven commissioners from the original counties. Adding a commissioner from Cumberland County will require new legislation to be passed.

All-in-all, the merger would appear to be a win-win situation for everyone involved, as even existing MTNG customers benefit, according to Hodges.

"One of the things that Middle Tennessee brings to the table is that we have an internal engineering staff, we have an internal IT department, we have an internal gas purchasing group, and those entities would all benefit the combined entity," said Hodges. "To some extent, those are fixed costs to us, so the better we are at expanding our customer base, the better we will be at keeping our rates low or lowering our rates. So, the added number of customers help all the customers in spreading our various fixed costs over a wider customer base.

"An additional benefit, is that Upper Cumberland has a pipeline tap north of the interstate and Middle Tennessee's pipeline taps are a little further west, so having another pipeline tap to serve both sides of the interstate with would be a definite advantage to all customers of Middle Tennessee Natural Gas," he continued.

MTNG has plans to tie these two systems together very early on in the transition process.

"This is beneficial to both sides. If there's some kind of a failure or a regulator issue on either side, it allows us to move gas from the other entity and improve the security of supply," said Hodges. "Middle Tennessee also has a large expansion project planned to bring more gas into Cumberland County, and once that is completed we will need a way to move it across the interstate so a certain amount of that supply can go to current Upper Cumberland customers as well. We definitely need to tie the two systems together early on in the process." The merger agreement was executed by both the UC Gas and MTNG boards. County mayors present were Tim Stribling, of Dekalb County, presiding; Kenneth Carey Jr., of Cumberland County; Mike Gannon, of Cannon County; and J. Michael Cross, of Fentress County.

Notifications were made to all newspapers in the affected areas.

Clinton Gill may be reached at [email protected] ___ (c)2014 the Crossville Chronicle (Crossville, Tenn.) Visit the Crossville Chronicle (Crossville, Tenn.) at crossville-chronicle.com/ Distributed by MCT Information Services

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