Michigan Customer Choice Faltering
High natural gas market prices, combined with lower fixed
commodity prices for gas sold by local distributors, have stalled
residential and business customer choice programs in Michigan at
current levels and could even cause a reversal on some systems if
customers are allowed to return to the LDCs at low fixed prices.
"I don't know anyone who is adding customers now," one marketer
commented, explaining that all three distributors participating in
the choice program, Consumers Energy, MCN Energy's Michigan
Consolidated Gas, and Semco Energy Gas, have gas commodity rates
for sales customers frozen for the duration of the program at
between $2.84/Mcf and $2.99/Mcf. "No one selling gas today can
compete with those rates."
"We're continuing deliveries to our current customers, but we're
not signing up any new ones," another marketer said.
The number of customers signing on for the pilot programs run by
the three companies peaked at about 255,000 in October 1999,
according to the Michigan Public Service Commission (PSC) and has
declined to about 217,000 last month. Michael Kidd, director of the
gas division in charge of the choice program, said the decline was
due to a combination of attrition from customers changing locations
(contracts do not transfer to new locations) and the fact there are
few new sign-ups in the current market. He also noted that two
marketers had folded operations and turned their customers back to
The PSC will be looking at the LDC fixed commodity cost, among
other issues, over the next month in a series of public conferences
set to explore the results of the pilot programs and institute a
new program going forward. While the three-year terms of the
MichCon and Semco pilots run until March 31, 2002, that of
Consumers Energy, which was initiated a year earlier, expires next
April 1. The conferences will determine what kind of new program to
put in place for Consumers, Kidd said, and also could consider
changes in the others. He noted the PSC already has received
comments from two representatives of residential customers
advocating keeping the fixed rates in place.
The rules for customers returning to LDC service vary on the
three systems. While rates of residential sales customers who
stayed on Consumers Energy are $2.84/Mcf through the end of the
program, those who moved to another supplier and then returned have
to pay the current commodity cost of gas.
On MichCon, however, customers whose contracts with outside
suppliers have expired or whose suppliers have dropped service can
return at the same fixed rate of $2.95/Mcf paid by MichCon sales
customers for the duration of the program. Semco customers also can
return at that company's fixed sales rate of $2.99/Mcf. Because of
the large amount of gas it has already put in storage, MichCon said
it would have no trouble supplying sales customers at the stated
rate. The company, however, is in litigation with a marketer, the
Michigan Gas Exchange, which turned back customers, to recover
costs associated with serving those customers.
The PSC has scheduled customer choice meetings starting last
Thursday and continuing on consecutive Thursdays through Sept. 7.
The discussion will include: "continuing natural gas customer
choice on a permanent and expanding basis; rates charged by local
distribution companies; program features that affect marketers'
participation in gas customer choice and program features that
affect customer participation in gas customer choice programs."