When the Natural Gas Choice and Competition Act was signed byGov. Tom Ridge earlier this week, the foundation was laid forPennsylvania’s gas customers to have gas supplier choice for theupcoming winter. The question now is will other northeastern statesfollow Pennsylvania’s lead.

Ken Malloy, a consultant with PHB Hagler Bailley, said theoverall shift to natural gas deregulation has not happened asquickly as many thought it would. “The giddy enthusiasm that waspresent throughout the industry two or three years ago, when thederegulation effort was new and exciting, has been replaced by thegrinding reality of the situation. Unbundling has been slower, morecumbersome and more expensive than most people anticipated.”

Malloy said Pennsylvania was on the right track because italready had a deregulated electricity market and integrated gasunbundling into the plan. “The best way to provide those dramaticcustomer benefits people first imagined when they talked aboutderegulation is to integrate as many services into an unbundlingplan as possible. I know it sounds crazy, but a region withunbundled electric, gas and telecommunications services will havethe most to offer its consumers.”

Like Pennsylvania, New Jersey also passed a deregulation bill forboth its electric and gas customers. Unlike the Keystone state, bothindustry’s unbundling plans were outlined in the same bill, which wasenacted last quarter (See Daily GPI,Jan. 29). The legislation set August 1 as the deadline forelectric unbundling and Dec. 31 as the deadline for gas unbundling. Itdid not address major deregulation issues, such as stranded costrecovery, utility affiliate codes of conduct, metering and billingunbundling, and an appropriate rate structure. Instead, it empoweredthe state’s Board of Public Utilities (BPU) to make and enforce therules for New Jersey’s deregulation environment. The BPU has yet toannounce what its rules will be.

New York was the first Northeast state to offer customer choiceto the residential sector. The New York State Public ServiceCommission approved plans to allow residential, small business,commercial, and industrial customers the option to start buyingtheir own natural gas supply from sources other than thetraditional utility companies in 1996. For most of the state’s 11utilities, New York’s open access program began on May 1, 1996.Reports have shown that marketers are concentrating their effortson small commercial and industrial customers where the margins aregreater.

The only other region in the Northeast with full customer choiceis the District of Columbia. In late April, The Public ServiceCommission of the District of Columbia granted a Washington Gasrequest and expanded the LDC’s pilot program tenfold from 13,000residential participants to 130,000, which encompasses the entireresidential market. A total of four marketers are available. Thedecision by the District’s commission to open the residentialprogram to all customers was made, in part, to attract more naturalgas suppliers.

Massachusetts formed a collaborative last February to come upwith a plan to deregulate the state’s gas industry, but the grouphas not produced anything as of yet. Because of its concerns aboutreliability, the Department of Telecommunications and Energy (DTE)required any plan recommended by the collaborative to includemandatory capacity assignment. The group told the commission itsgoal was to issue a proposal by this November. “As far as I know,its still their goal,” said George Yianko, a DTE spokesperson. “Butthey have had trouble setting up the electronic transfer ofinformation between marketers and LDCs, which has slowed them upconsiderably.” Currently, Bay State Gas Co. is the only LDC in thestate offering a customer choice pilot program. At last count, over25,000 customers were being supplied by a third party.

Many other Northeast states are far behind the leaders in thederegulation process. Connecticut, Maine, New Hampshire and RhodeIsland, for example, have neither the supply nor the marketers tomake gas deregulation a worthwhile endeavor.

“Its not in the immediate future by any stretch of theimagination,” said a spokesperson for the Connecticut Department ofUtility Control. “We are doing a cost-of-service study right now, andif the results are positive we might move on to the next phase. Butaccess to pipeline capacity is such a problem up here and most peopleuse oil to heat their homes anyway.” Two of the state’s threeutilities, Southern Connecticut Gas and Yankee Gas, are involved inpotential mergers (See Daily GPI, April26 and June 16). “Everything is influx now and nobody is willing to do anything major until the dustsettles.”

The prospects for statewide gas deregulation in Virginia aremuch more optimistic. The state legislature passed a bill last yearcalling for total customer choice by July 1, 2000. The bill has areenactment clause, meaning next year’s legislature will need tovote on the bill again. “It’s not set in stone,” said Ken Schrad,Virginia State Corporate Commission spokesman. “The reenactmentclause basically means that there are a host of decisions that needto be hammered out. If they don’t, the legislature can remove thebill entirely.” The state currently has two pilot programs running.Columbia Gas of Virginia, a Columbia Energy Group subsidiary, isnow attempting to extend its two-year program. In the two yearssince the program started, 7,750 or 29% of eligible participantshave switched to one of nine suppliers. The program is available toa total of 26,500 customers residing in Manassas, Manassas Park andCulpeper, Fairfax, Greene, Loudon, Louisa, Madison, Orange andPrince William counties. Washington Gas is in the first year of itsVirginia pilot. So far, 17,400 people have switched from aneligible pool of 30,000 customers.

Both Washington Gas and Columbia Energy also have active pilotprograms in Maryland. Washington Gas’ program allows 100,000 oftheir 320,000 customers to choose a marketer. Columbia Gas ofMaryland’s program allows for 2,500 customers to choose. Thelargest LDC in the state, BG&E, recently opened its entireservice area of 520,000 customers to customer choice. “There is nomandate from the state or the Commission,” said a spokesman fromthe Maryland Public Service Commission. “We just continue to expandon our own. It is evolving at its own pace, and nobody has decidedit needs to be pushed any faster so far.”

In Delaware, Conectiv, one of the state’s two LDCs, announcedthe start of a pilot program last May. It enables 15,000residential and 1,500 small commercial customers to choose theirgas supplier as early as July 1. The program will last for twoyears, and will determine if the freedom to choose a suppliershould be offered to all of Conectiv’s gas customers in the state,a Delaware Public Service Commission spokesperson said.

West Virginia’s Public Service Commission has been investigatinggas unbundling since 1996, without result.

(Look for other regional updates in upcoming issues.)

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