GA, OH Speak on Gas Choice Pitfalls, Successes
Inefficient customer education, inadequate marketer
certification and poorly developed information systems for
consumers led to many of the early problems associated with
Georgia's 1998 natural gas deregulation efforts, according to Paula
G. Rosput, CEO of AGL Resources.
Rosput spoke on gas deregulation at the National Association of
Regulatory Commissioners (NARUC) Winter Meeting in Washington with
Robert S. Tongren of the Ohio Consumers Council (OCC). Tongren
noted Ohio's move to gas deregulation was handled far differently
than in Georgia. He pointed out that Georgia forced customers to
choose a new supplier, while Ohio allowed customers to stay with
the utility if they chose to under Ohio's voluntary program.
"It has not been a dramatic change [in Ohio], it has been a
gradual change, it has been a gradual educational process," said
Tongren. "I think to a certain extent it lends itself to a sense of
comfort - when bills are not so high - for our participating
Ohio's three choice programs currently have about 2.9 million
eligible consumers and 878,000 are participating. Tongren said the
Columbia Gas and Dominion East Ohio programs are the most
successful, while Cincinnati Gas & Electric's program continues
to have trouble.
One of the biggest problems with the Georgia model, Rosput said,
was the decision to leave billing to the marketers rather than the
utility. "The biggest story out of the Georgia framework has been
the number of erroneous bills that have been sent out, or the
number of bills that were not sent out for long periods of time,
which is a direct outgrowth of taking a bundled business and
unbundling it in a very short period of time."
Georgia deregulation's billing woes have been highlighted in the
past, especially regarding billing provider Utilipro and the
bankruptcy of marketer Peachtree Natural Gas (see NGI, Sept. 25,
2000). Peachtree's $50 million lawsuit against Utilipro is still
Both Rosput and Tongren continually pointed toward customer
education as a major key to the successful implementation of any
choice program. Rosput highlighted Virginia Natural Gas' (VNG)
efforts. VNG plans to spend $30 million over a five-year span to
educate a population of 6.8 million people for gas and electric
choice, while Ohio spent $16 million over two years to educate a
population of 11.2 million customers. Atlanta Gas Light Co. only
allotted $5 million over one year to inform 7.8 million people.
"I think if we had it to do over again, we probably would have
had a longer prefatory time in which more information was
disseminated, because there was a bit of a trial by fire quality
due to the nature of how customers learn about the experiment,"
"Education, education, education, we can't say it enough," said
Tongren. "It is the key to making a program work and despite the
significant efforts by the utilities, the Ohio Public Utilities
Commission (PUCO) as well as my office... there can never be enough
education with respect to programs like these."
Rosput also said certification for marketers was insufficient.
Many of Georgia's marketers were small and underqualified, with too
little capital on-hand when price spikes hit and times got rough.
Certification should ensure that marketers have sufficient gas
supply, capacity management and retailing expertise, along with
deep enough pockets to be able to weather volatile periods.
Georgia saw its original 19 gas marketers thinned to nine.
Rosput believes the shakeout is over, with four marketers currently
controlling a 92% share of the 1.5 million gas customers in the
state. Complaints are declining from the highs reported last August
and September, she stated, and customer satisfaction with the
utility is averaging around 76% in recent months, compared to about
70% for the same time period of 1999.
Ohio has also seen its fair share of marketer shakeout, which is
still underway. Over the last year, marketers Energy Max, Summit
Natural Gas and The Energy Cooperative all have defaulted (see NGI,
Oct. 30, 2000; Feb. 12).
To try to clear up some of the issues revolving around Ohio's
choice programs, the Ohio House passed Bill 9 earlier this week.
The bill would allow PUCO to certify marketers instead of leaving
it to utilities. The bill also would clarify PUCO and OCC
jurisdiction, and set forth a process for complaints. In late
January, the OCC requested that PUCO begin an investigation into
the current state of the natural gas choice programs in Ohio.