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Legislators Burn Midnight Oil to Pass PA Gas Bill

Legislators Burn Midnight Oil to Pass PA Gas Bill

Working into the early hours of Thursday morning, the Pennsylvania General Assembly finally pushed through a statewide gas restructuring bill in the last session before the assembly broke for summer vacation. Under the Natural Gas Choice and Competition Act, gas will become a price-deregulated commodity for residential and small commercial customers on Nov. 1. Governor Tom Ridge, who has already voiced his support for the bill, has 10 days to sign it into law.

"We've already seen the dramatic savings Pennsylvanians are enjoying through electric choice, which could approach $1 billion as Pennsylvanians 'shop for power,'" Ridge said. "Now we can give natural gas customers the ability to choose their natural gas suppliers and enjoy the benefits of competition."

House Bill 1331 passed the House 141 to 58 and passed the Senate 43 to seven. The final vote was held after 2 a.m. Thursday morning.

Once signed, the bill will freeze LDC rates from the time it is enacted until Jan. 1, 2001. It requires mandatory capacity assignment until July 2002. LDC affiliates are allowed to market in their parent company's service area, but the bill requires PUC to create and enforce a strict LDC affiliate code of conduct. The bill allows, but does not mandate, LDCs to exit the merchant function.

Also added on as a late amendment, management of Philadelphia Gas Works will be transferred from the Gas Commission, a panel of city government-elected officials, to the PUC. By switching the leadership of Philadelphia's gas distributor, the legislature hopes the ineffective and economically-troubled company can turn around (See Daily GPI, June 10).

A central component of the bill was the inclusion of the elimination of the Gross Receipts Tax (GRT), a separate piece of legislation proposed by Ridge which had previously been approved by the legislature (See Daily GPI Feb.1). With the elimination of the GRT, Ridge's camp estimates 2 million families will save $82 million next year. The repeal goes into effect Jan 1, 2000.

"...Today, there are about 2 million Pennsylvanians who rely on natural gas to heat their homes. And they're paying taxes on that essential commodity. That's an unfair tax. And now it's gone."

The bill was forged from the results of a statewide collaborative made up of all interested marketers, labor parties, LDCs and regulators. The collaborative's leader, PUC Commissioner John Quain, received nearly universal praise from all sides for his objectivity and fairness. "Chairman Quain did a good job of balancing all of the interests represented during the collaborative process that led to the passage of [the act]," Dave Smith, senior vice president of National Fuel Gas said.

National Fuel Gas, an LDC for 195,444 customers in the state, had been one of the bill's staunchest detractors (See Daily GPI, March 22). Throughout the legislative hearings, the company had argued that the bill does not address reliability or stranded cost issues well enough. Smith, however, said the company has grown more comfortable with the bill's requirements. "Surely no one party expected to get everything they sought for during this process, but the legislation, as presented last night, does balance the interests of all parties while maintaining the intended purpose of bringing choice to all customers in Pennsylvania."

Statoil Energy has been active in many of the Pennsylvania LDCs' pilot programs as a marketer, and although the bill does not create the perfect situation, the company is eager to increase its presence in the state.

"Quain did a good job of listening to everybody," said Martha Duggan, Statoil vice president of regulatory and government affairs. "Although the mandatory capacity assignment requirement is tough to swallow, it does provide a structure to the unbundling process, which we believe is a good thing. The attitude we're taking is that capacity assignment won't last forever. The bill also leaves the deregulation of metering and billing to the PUC. We would have liked to have seen that included in the legislation, but again, it won't stay regulated forever."

Like many other LDCs, Columbia Gas of Pennsylvania (CPA) already has a restructuring plan in mind. "This is what we've been getting ready for since we first offered choice as a pilot program in 1996," said John Quinn, manager of regulatory policy. CPA serves 382,000 customers.

Many utilities will just extend their pilot programs to incorporate all their customers, said National Fuel Gas spokesperson Julie Coppola. "Our program is all ready to go, and I think the other utilities will have no problem getting their plans approved."

HB 1331, however, did not have an easy road to approval. Thrown in with a host of other issues and legislation, the bill was not approved until the very last second. "The vote was clear, but it almost didn't get done," said Terry Murphy, CPA's senior vice president. "It was first passed as a Senate bill. After Senate approval, the House added a bundle of amendments that didn't have much to do with gas restructuring. When it left the House earlier this week, the Senate cleaned it up, but had to send it back to the House for approval. All this passing back and forth had some people worried it wouldn't get done before they left for their break."

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