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

“Electric is much, much different than gas in its structure, inthe degree to which currently on the books costs probably are notwarranted or useful given today’s technology and the alternativeways that resources could be used. That’s called stranded costs.andit comes to hundreds of millions of dollars.,” said Henry Einhorn,senior utility analyst for the Massachusetts Department of PublicUtilities, last week at Gas Daily’s Houston conference on LDCrestructuring.

“We simply do not approach any of those problems in the gasindustry. The gas industry is not vertically integrated bycorporate structure. Our LDCs are not contiguous to each other andinterrelated in the supply of the energy in many cases. LDCs, forbetter or worse, have not cooperated with each other as formally asthe electric companies have on a whole host of regulated andunregulated issues. To me, as far as restructuring and itsinevitability, those two industries are substantively different inmany, many important respects.”

Einhorn said he fears the differences between the two industriesmay not be evaluated and appreciated when LDC restructuring iscontemplated around the country. “I think it’s in a sense veryunfortunate that electric restructuring has preceded gas unbundlingbecause a lot of the mindset may very well be in place.I don’t meanto underestimate the importance of unbundling, the advantages ofunbundling, but I do think it’s not inevitable.”

Where LDC unbundling is occurring, it’s happening in the form ofpilots that don’t go far enough or fast enough, speakers at theconference said. In the battle between marketers and LDCs,commercial customers are being overlooked, according to KathleenMagruder, vice president of rates and tariffs for Enron EnergyServices (EES). “I had a regulator. say to me, ‘Well, ‘I’ve neverheard a commercial customer say they really want some choice.’ Sothe next meeting I brought in 15 commercial customers. He was realunhappy.

“Joe from Joe’s Bar and Grill can’t come to a regulatory hearingthat goes on for five days. Joe has to cook lunch every day. Mostfolks cannot afford the regulatory process. It is an extremelyexpensive process. And I submit that only a utility with a ratebase and captive customers who can pick up those expenses reallycan afford to be in these regulatory proceedings year after yearafter year.” Magruder noted Houston-based airline Continental ismaking a bundle flying people such as herself from Houston toplaces such as Boston; Columbus, OH; San Francisco; etc. “It is anexpensive process to participate.”

And even after a market opens up, such as the Californiaelectricity market, fair competition is not a sure thing, Magrudersaid. “We made a corporate decision that some of you may have heardabout that we’re not going to give away gas and electricity if therules don’t make it economic to sell gas and electricity tocustomers and be able to make a profit for ourselves.” Magruder haslobbied for competition around the country for three and a halfyears, she noted. “What I’ve found is while we may have lip servicein many places to the notion of customer choice, when you sit downand read the tariffs and when you look at the rates and when youlook at the terms and conditions that are put on the service, it’scustomer choice in name only. There’s really no meaningful choicefor many customers in many of these programs.”

Joe Fisher, Houston

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