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PA Tries Again for Gas Deregulation

PA Tries Again for Gas Deregulation

The usual suspects are at it again, as Pennsylvania Rep. Frank Tulli (R-106) and Sen. Frank Piccola (R-15) are re-introducing a gas deregulation bill for small commercial and residential customers. Tulli said the bill will be proposed to the legislature early this week. The representative hopes to have the legislation passed through both houses by June 30.

The previous attempt to deregulate service failed to pass in Pennsylvania's legislature last fall. Unlike the last try, however, this legislation is supported by a natural gas gross receipts tax (GRT) cut proposal from Gov. Tom Ridge. Supporters believe this tax cut will enable the bill to jump a large hurdle it was unable to overcome last time around (See Daily GPI, Feb. 1).

"Over two million Pennsylvania families spend $1,100 a year on natural gas to heat their homes, heat their water, and cook their food," said Piccola. " If we eliminate the natural gas tax, we can save these families an average of $55 a year, which for many folks equals a single month's bill." Currently, the GRT is a 5% state tax added to monthly bills of customers whose suppliers are public utilities. The state's $200-$300 million revenue surplus helped pave the way for the proposed tax cut. Sen. Piccola's office warned that the tax cut is a separate piece of legislation which will be attached to budgetary proposals later this year.

"The tax cut proposal helped considerably," said Tim Merrill, a consultant at Competitive Energy Strategies. "I don't know if its going to pass because there is still so much politics involved. The last attempt didn't go anywhere because it wasn't a cohesive effort formed with everyone's input. This new proposal is the product of a year and a half of all the parties involved coming to a compromise."

Rep. Tulli said compromise is a big advantage to the bill. "The last bill was a basically a collection of my best thoughts on the subject. In this new collaborative effort, we all had to give up cherished ideas in favor of a plan that has the best chance of moving quickly."

On the issue of LDCs remaining in the market function, the bill allows LDC affiliates to remain in the market but implements the code of conduct that exists in state pilot programs. This gives the Pennsylvania Public Utilities Commission (PUC) authority to monitor the affiliates' behavior. "This has been pretty constant," Merrill said. "The stakeholders who drafted the legislation had it very clear in their minds controls were necessary to ensure no one entity gained a market power advantage. Codes of conduct allow for this control."

Although the bill requires mandatory capacity assignment through July, 2002, marketers can enter into other contracts for new and renewed capacity. For marketers to do that, however, the contract must meet the reliability criteria of the LDC, which will be determined in a collaborative process between the PUC, LDCs and marketers. After the 2002 date, marketers can appeal to the PUC to enter into their own contracts.

The legislation allows LDCs to avoid the responsibility of being supplier of last resort if they choose and if they can find another supplier to take the function, Tulli said. The bill leaves the issue of related services, such as metering and billing, for the PUC to decide on a case-by-case basis.

The bill is already meeting some resistance. National Fuel Gas (NFG), a gas utility serving 730,000 customers in New York and Pennsylvania, has said it is against the bill. "Right now, we're opposed to the legislation," said an NFG spokesperson. "But because we are still in the collaborative and discussing how to make the bill better, we don't want to give our specific disputes."

When it is introduced, the bill will go to the Consumer Affairs Committee of the General Assembly and the and the Senate Consumer Protection and Professional Licensure Committee.

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