Working into the early hours of Thursday morning, thePennsylvania General Assembly finally pushed through a statewidegas restructuring bill in the last session before the assemblybroke for summer vacation. Under the Natural Gas Choice andCompetition Act, gas will become a price-deregulated commodity forresidential and small commercial customers on Nov. 1. Governor TomRidge, who has already voiced his support for the bill, has 10 daysto sign it into law.

“We’ve already seen the dramatic savings Pennsylvanians areenjoying through electric choice, which could approach $1 billionas Pennsylvanians ‘shop for power,'” Ridge said. “Now we can givenatural gas customers the ability to choose their natural gassuppliers and enjoy the benefits of competition.”

House Bill 1331 passed the House 141 to 58 and passed the Senate43 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 isenacted until Jan. 1, 2001. It requires mandatory capacityassignment until July 2002. LDC affiliates are allowed to market intheir parent company’s service area, but the bill requires PUC tocreate and enforce a strict LDC affiliate code of conduct. The billallows, but does not mandate, LDCs to exit the merchant function.

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

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

“…Today, there are about 2 million Pennsylvanians who rely onnatural gas to heat their homes. And they’re paying taxes on thatessential commodity. That’s an unfair tax. And now it’s gone.”

The bill was forged from the results of a statewidecollaborative made up of all interested marketers, labor parties,LDCs and regulators. The collaborative’s leader, PUC CommissionerJohn Quain, received nearly universal praise from all sides for hisobjectivity and fairness. “Chairman Quain did a good job ofbalancing all of the interests represented during the collaborativeprocess that led to the passage of [the act],” Dave Smith, seniorvice president of National Fuel Gas said.

National Fuel Gas, an LDC for 195,444 customers in the state, hadbeen one of the bill’s staunchest detractors (See Daily GPI, March 22). Throughout thelegislative hearings, the company had argued that the bill does notaddress reliability or stranded cost issues well enough. Smith,however, said the company has grown more comfortable with the bill’srequirements. “Surely no one party expected to get everything theysought for during this process, but the legislation, as presented lastnight, does balance the interests of all parties while maintaining theintended 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 createthe perfect situation, the company is eager to increase itspresence in the state.

“Quain did a good job of listening to everybody,” said MarthaDuggan, Statoil vice president of regulatory and governmentaffairs. “Although the mandatory capacity assignment requirement istough to swallow, it does provide a structure to the unbundlingprocess, which we believe is a good thing. The attitude we’retaking is that capacity assignment won’t last forever. The billalso leaves the deregulation of metering and billing to the PUC. Wewould have liked to have seen that included in the legislation, butagain, it won’t stay regulated forever.”

Like many other LDCs, Columbia Gas of Pennsylvania (CPA) alreadyhas a restructuring plan in mind. “This is what we’ve been gettingready for since we first offered choice as a pilot program in1996,” said John Quinn, manager of regulatory policy. CPA serves382,000 customers.

Many utilities will just extend their pilot programs toincorporate all their customers, said National Fuel Gasspokesperson Julie Coppola. “Our program is all ready to go, and Ithink the other utilities will have no problem getting their plansapproved.”

HB 1331, however, did not have an easy road to approval. Thrownin with a host of other issues and legislation, the bill was notapproved until the very last second. “The vote was clear, but italmost didn’t get done,” said Terry Murphy, CPA’s senior vicepresident. “It was first passed as a Senate bill. After Senateapproval, the House added a bundle of amendments that didn’t havemuch to do with gas restructuring. When it left the House earlierthis week, the Senate cleaned it up, but had to send it back to theHouse for approval. All this passing back and forth had some peopleworried it wouldn’t get done before they left for their break.”

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