Wisconsin Gas to Terminate Gas Choice Pilot After 5 Years

Throwing in the towel on its natural gas choice pilot program after five years of service, Wisconsin Gas Co. (WGC) notified a total of 3,485 customers who were participating in the program that beginning Oct. 31 they would once again have to purchase their gas supply from their utility, WGC.

In a letter submitted to the Public Service Commission of Wisconsin (PSCW), WGC stated that the pilot program, known as GasAdvantage was costing the company $800,000 to $1.6 million on an annual basis. One of the reasons the company decided to end the pilot is because pilot participants ended up being subsidized by WGC's other customers. Pilot customers did not have to pay the monthly transportation fee that the utility's other customers were required to.

"The pilot provided us with valuable information on how customers respond to choice in the natural gas market," said Bob Puissant, vice president of customer analysis and planning for WGC. "This was a subsidized program. The full costs of administering the program were not included in the costs customers were paying. Had these costs been passed on to customers, their bills would have been significantly higher than those paid by Wisconsin Gas customers."

The letter sent to customers cited the "actual cost to administer the program" along with a "decrease in marketer participation" and customer interest as reasons that the pilot program would not be renewed. The number of marketers doing business in the company's service area also has declined due to mergers and/or acquisitions, making the competitive market that was envisioned at the pilot's inception not possible, the utility said.

"The program was very beneficial," said WGC spokeswoman Megan McCarthy. "However, if we were to continue that program we would have to pass the costs that were not realized by customers of the pilot on to them." Of the four marketers remaining in the program, WPS Energy, was the only marketer that wanted the program stay open, she said. "A majority of our marketers told us that they really did not have any interest in continuing in the program." She said the customers were pleased with the pilot service, but the residential side was under-subscribed every year, and was not even opened for new enrollment in the fifth year.

As for the future of gas regulation in the state, McCarthy said, "Right now the legislature and the Public Service Commission of Wisconsin are not going in the direction of deregulation, it is not even on the radar screen. Right now we are focusing in the state on reliability and service. I think five years ago we were moving in that [deregulation] direction faster."

"The biggest thing here is that when the company originally did it, they thought that this was indeed the direction the market was going," said Dan Sage, an assistant administrator with PSCW's natural gas division. "Wisconsin's current concerns and focus right now is on reliability. That is where our attention has been placed over the past several years and I think that is what your seeing. Does that mean it takes longer to get to deregulation, or we don't get to deregulation, I can't say."

Sage said the commission would get to the WGC proposal to end its GasAdvantage program probably sometime in the next two weeks, but he said he did not know if the commission would have the authority to reject the proposal, because the WGC voluntarily started the program in 1996. "I leave that one to the lawyers," Sage said.

The WGC pilot was originally offered to a residential and commercial customers in a select region in 1996 as a two-year program, but was renewed on a yearly basis after that.

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