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Pennsylvania Regulators Look to Foster Retail Gas Competition

Looking to stoke the fires of competition in the Pennsylvania retail natural gas market, the Pennsylvania Public Utility Commission (PUC) has begun the process of making regulatory changes to promote the leveling of the market playing field.

The commission last week voted 5-0 to issue a proposed rulemaking for comment that is designed to make it easier for consumers to compare natural gas prices offered by natural gas distribution companies (NGDC) and natural gas suppliers (NGS). The goal of the rulemaking is to foster a competitive retail marketplace for natural gas service.

Commission Chairman James H. Cawley said the proposed rulemaking should better foster even competition, noting that the regulatory changes advance some relatively broad provisions with regard to capacity release. However, he noted that because of the broadness of the provisions, the regulations may not be sufficiently specific to address every alleged inequity in the allocation of upstream transportation and storage capacity and the costs of this capacity assigned to NGSs that assume the firm service obligations of their retail customers.

"For this reason, I strongly encourage NGSs that regard existing release capacity provisions in NGDC tariffs as a barrier to retail natural gas competition (1) to provide specific examples of these barriers in the Pennsylvania retail market; and (2) to suggest alternative regulatory language...that would resolve these barriers within the bounds of existing legislation, and that would reasonably accommodate the operational constraints of NGDCs," Cawley said.

The proposed rulemaking will:

Commission Vice Chairman Tyrone J. Christy voiced some concerns with the proposed rulemaking's effect on the Price to Compare. "I have some specific concerns with certain aspects of this proposed rulemaking that I request parties to consider addressing in their comments, which are due within 45 days of publication in the Pennsylvania Bulletin," Christy said. "First, with regard to the Price to Compare, the proposed rulemaking intends to remove natural gas procurement related costs from NGDC base rates and include them within the Price to Compare. The amount of these embedded gas procurement costs would be determined in individual NGDC proceedings held in conjunction with the first purchased gas cost proceeding after the regulations become final. At this time, the commission is not attempting to identify every individual gas cost that should be removed from base rates. These costs likely will vary from NGDC to NGDC and it may be difficult to reach consensus on this issue.

Among other things, Christy also disagreed with the proposed requirement to implement monthly NGDC pricing, wondering whether it is sound public policy to make supplier of last resort service "volatile" or "ugly" simply to encourage fixed price offers from competitive natural gas suppliers. "I believe that the existing quarterly adjustment process represents a fair compromise between annual and monthly adjustments and should be retained. This allows natural gas consumers to have some period of stability in their gas costs," he said.

"Because of my disagreement with the proposed monthly adjustments, I will concur in the result only of this proceeding for the purpose of seeking comments from interested parties," Tyrone concluded.

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