More than 70% of gas consumed could be bought from suppliersother than local distribution companies under current and proposedLDC transportation programs, according to the American GasAssociation (AGA). But the choice option still is heavily weightedtoward large customers.

AGA said customer choice is available for 97% of electricutility gas volumes and 92% of industrial volumes. In 1996, 89% ofall gas consumed by electric utilities was purchased under thisoption, as compared with 87% for all industrial gas consumed. Thecustomer choice option is available for about 57% of commercial gasvolumes and 31% of residential volumes. Roughly 23% of commercialgas bought in 1996 was under the customer choice option. Comparabledata are not available for the residential sector for 1996.

The report is “heartening because the progress is in the rightdirection, but you know the key here is the use of the word’could,'” said Tim Merrill, president of Competitive EnergyStrategies Co., a Pittsburgh, PA-based consultant to marketers andindustrial consumers. “The key word is ‘could be purchased.’ Thoseof us in the business aren’t convinced that residential and smallcommercial programs are really providing effective choice. Choiceis being provided, but is it effective choice?”

Issues standing in the way of effective customer choice inMerrill’s view are the utility’s obligation to serve, LDC pipelinecapacity and assignment, and provider of last resort. “Effectivecustomer choice can’t really occur until the utility knows it isn’tgoing to be on the hook as the supplier of last resort.”

Issues surrounding reliability of service are the main reasonno program has dealt with supplier of last resort and trulyprovided effective customer choice at the residential level,Merrill said. “It’s also tied very much into the upstream pipelinecapacity the utilities have and must hold in order to maintain thatsupplier of last resort function. And they won’t start giving upthose contracts until they’re sure those marketers are going to bethere.”

Merrill pointed to the Columbia Gas of Ohio and East Ohio Gascustomer choice programs as examples. Columbia of Ohio in Toledohas been effective, Merrill said, because it allows marketers touse their own pipeline capacity. The East Ohio program specifiesmandatory capacity assignment from the LDC.

“Each state has to deal with it. It’s a state matter, whetherit’s a regulatory or a legislative matter. We need to redesign theregulatory compact.”

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