Pennsylvania Gas Legislation in Limbo
Pennsylvania may have blazed the trail for state electric
restructuring, but it's still floundering in the quagmire of
natural gas unbundling. A legislative effort started last year by
Rep. Frank Tulli, Sen. Jeffrey E. Piccola and several other state
lawmakers has stalled while stakeholders continue arguing over
details in workgroups at the state Public Utility Commission and
the governor grapples with a tough decision over the potential loss
of $120 million/year in gross receipts taxes.
Meanwhile, the fall legislative session ends in November and the
gubernatorial election campaign is heating up. Right now, the
future of Pennsylvania gas unbundling doesn't look too bright. But
a lot can happen in a few days, Tulli noted last week in an
interview with NGI.
"Well, in the assign-and-die session, it's possible," said
Tulli. "We can move things pretty quickly. We can assign them as a
major amendment to a bill that is germane. It can happen. I'm
Tulli has drawn up a new simplified version of his former gas
bill, which called for statewide unbundling on Jan. 1, 1999. As
it's currently worded, the new legislation would leave many of the
most contentious issues for the PUC to settle. But legislators and
a large group of industry stakeholders, including utilities, the
PUC, marketers, large consumers and small consumer advocates,
currently are working on resolving some the major unbundling
problems to flesh out the content of the bill.
"The collaborative is working," said Tulli. "But I think some of
them are waiting until the governor says something on the tax issue
and then they will move to do the final contentious issues. I think
that's like a two-day event."
The tax issue could be the weak link in the chain, however. If
everyone in the state decided to choose an alternative supplier,
the state would lose millions in tax revenue that comes out of
utility gas sales.
"It's my opinion that we ought to just let the gross receipts
tax go as it is, and as people leave their home utility and shop,
they don't pay the gross receipts tax then," said Tulli. "[The
state] would lose revenue gradually. I don't think it would be out
all at once. ...[T]he general assembly can work with the governor
and find other means to make the budget whole or reduce spending.
I'm hoping that the governor is going to say let's just not put
anything in the bill about taxes, and when people shop, they
leave." Offering to cut taxes usually is a good decision for a
governor to make in an election year, but it's one he hasn't
Even if the governor moves on the tax issue, however, there
still are some other difficult issues that could stand in the way
of legislation. Not all of the state's utilities are eager to exit
the merchant function. If that requirement is included in the bill,
it could hamper its passage.
"I think we'll probably let the utilities stay in the supply
business if they want to," Tulli said, reluctantly. "You know
philosophically I'm not there, but I'm a political realist. If they
can find somebody to take the supplier of last resort position,
then they could get out of the supply function, but there are some
who don't want to find another supplier of last resort. They want
to be it.
"I think we're going to come to some agreement before the bill
goes forward. We're not there yet," he said, indicating he still
may try to persuade the utilities to accept a phasing out of
regulated gas sales.
Also still to be resolved in collaborative sessions is the issue
of mandatory capacity assignment. Marketers are against it but may
soften their position if given other concessions.
Even if all the issue are resolved, however, some observers fear
lawmakers may want to wait until next year to push statewide
customer choice in order to first evaluate the success of electric
"This is not oblivious to what is happening on the electric
side," said Tim Merrill, of competitive energy strategies, which
represents energy marketers. "We are signing up people now until
Nov. 1 for choice under the electric program. We have anywhere from
one-third to two-thirds of all the people in the state that are
going to have a choice of electricity suppliers on Jan. 1, 1999.
This is the full caboose. So there is, I think, also an
appreciation of those that say 'well maybe we better see what
happens on electricity before we go charging into gas.' I would
think the legislators might be in that camp."
As one state government official noted, "Gas just doesn't have
the same push behind it that electric deregulation did," because
the largest customers already can choose their gas supplier and the
smallest customers don't see as wide a disparity in gas prices from
utility to utility as they do in electricity prices.
"If you added it all up, you can pretty much come to the
conclusion that it doesn't really seem likely that anything is
going to happen this fall," said Merrill. "I try to be optimistic,
but I have to be realistic as well."