AGA: Gas Choice Up in Commercial, Industrial Sectors

Despite exorbitant price spikes in natural gas and deregulation setbacks in various markets around the country, a new study released by the American Gas Association (AGA) revealed that an increasing number of small businesses and other commercial customers are purchasing their natural gas supplies from someone other than the local utility, continuing the evolution of competition in the natural gas industry.

The study, Growth in Customer Choice Natural Gas Volumes, found that more than 80% of the total volume of natural gas consumed in the United States in 1999 could be purchased from sources other than the local gas company under current or proposed choice programs.

"Between 1998 and 1999, the number of commercial customers who bought natural gas from non-utility suppliers jumped by 60%. But because the actual volume of gas used by customers who buy gas supplies from a non-utility rose only slightly, we've concluded that an increasing number of small businesses now take advantage of the natural gas customer choice option," said Bruce McDowell, AGA director of policy analysis.

The study reported that almost all of the gas consumed by electric utilities (99%) and industrial facilities (95%) can be purchased from multiple suppliers. Furthermore, most of the natural gas consumed by electric utilities (89%) and industrial customers (90%) in 1999 was actually bought from a non-utility supplier. The often minuscule cost savings per unit of gas proved significant, given the large volumes purchased, the AGA said.

"During the last 10 years, the volume of natural gas that's being purchased from unregulated suppliers has doubled -- which shows that natural gas customers are becoming increasingly comfortable with the concept of purchasing their gas from someone other than the local utility," McDowell said.

The commercial sector also showed increases. Almost 72% of all gas used in commercial facilities in 1999 was available for purchase from multiple suppliers (up from 69% in 1998). Roughly 35% of the commercial gas purchased in 1999 was actually bought from a non-utility supplier, the AGA said.

As for residential customers, the number of residential gas customers with a "choice" option in 1999 increased by one million to 26 million (out of the nation's estimated 57 million households with natural gas service). To date, the AGA said about one in five of those eligible actually switched suppliers. However, participation remains at relatively low levels. The report indicated that the amount of residential gas volumes under a customer choice option remained "fairly small, at 5% of total residential volumes in 1999." According to the AGA, participation in choice programs at the residential level remains lackluster due to:

  • Most customers are satisfied with the service and price offered by their local utility; and
  • Customers are typically hesitant to take advantage of new options in a restructured industry, according to research by the National Regulatory Research Institute.

For information on the report, visit the AGA's web site at www.aga.org.

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