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Gas and Electric Restructuring Are Headed Down Different Paths

Gas and Electric Restructuring Are Headed Down Different Paths

Electric restructuring is inevitable, but restructuring of the gas industry is not necessarily a certainty across the country, according to one utility analyst.

"Electric is much, much different than gas in its structure, in the degree to which currently on the books costs probably are not warranted or useful given today's technology and the alternative ways that resources could be used. That's called stranded costs.and it comes to hundreds of millions of dollars.," said Henry Einhorn, senior utility analyst for the Massachusetts Department of Public Utilities, last week at Gas Daily's Houston conference on LDC restructuring.

"We simply do not approach any of those problems in the gas industry. The gas industry is not vertically integrated by corporate structure. Our LDCs are not contiguous to each other and interrelated in the supply of the energy in many cases. LDCs, for better or worse, have not cooperated with each other as formally as the electric companies have on a whole host of regulated and unregulated issues. To me, as far as restructuring and its inevitability, those two industries are substantively different in many, many important respects."

Einhorn said he fears the differences between the two industries may not be evaluated and appreciated when LDC restructuring is contemplated around the country. "I think it's in a sense very unfortunate that electric restructuring has preceded gas unbundling because a lot of the mindset may very well be in place.I don't mean to underestimate the importance of unbundling, the advantages of unbundling, but I do think it's not inevitable."

Where LDC unbundling is occurring, it's happening in the form of pilots that don't go far enough or fast enough, speakers at the conference said. In the battle between marketers and LDCs, commercial customers are being overlooked, according to Kathleen Magruder, vice president of rates and tariffs for Enron Energy Services (EES). "I had a regulator. say to me, 'Well, 'I've never heard a commercial customer say they really want some choice.' So the next meeting I brought in 15 commercial customers. He was real unhappy.

"Joe from Joe's Bar and Grill can't come to a regulatory hearing that goes on for five days. Joe has to cook lunch every day. Most folks cannot afford the regulatory process. It is an extremely expensive process. And I submit that only a utility with a rate base and captive customers who can pick up those expenses really can afford to be in these regulatory proceedings year after year after year." Magruder noted Houston-based airline Continental is making a bundle flying people such as herself from Houston to places such as Boston; Columbus, OH; San Francisco; etc. "It is an expensive process to participate."

And even after a market opens up, such as the California electricity market, fair competition is not a sure thing, Magruder said. "We made a corporate decision that some of you may have heard about that we're not going to give away gas and electricity if the rules don't make it economic to sell gas and electricity to customers and be able to make a profit for ourselves." Magruder has lobbied for competition around the country for three and a half years, she noted. "What I've found is while we may have lip service in many places to the notion of customer choice, when you sit down and read the tariffs and when you look at the rates and when you look at the terms and conditions that are put on the service, it's customer choice in name only. There's really no meaningful choice for many customers in many of these programs."

Joe Fisher, Houston

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