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Dominion East Ohio Trades GCR Rate for SSO Rate Tied to Nymex

With the approval of the Public Utilities Commission of Ohio (PUCO), Dominion East Ohio said Wednesday it is moving forward with the elimination of gas cost recovery (GCR) rates in favor of a pricing plan that sets consumer rates based on a more market-based methodology. As part of a pilot program -- also known as Phase One of a two phase plan -- approved by the PUCO in May, the new Standard Service Offer (SSO) natural gas rate is for customers who have not selected another supplier under Ohio's Energy Choice program (see Daily GPI, May 31; Aug. 31).

The utility said that much like the old GCR rates, the SSO rate will change monthly, and Dominion East Ohio will continue to earn no profit on the gas it sells to customers; the purchase cost is passed dollar for dollar directly to customers. The company also will continue to deliver natural gas reliably to all customers regardless of which supplier they choose. Dominion East Ohio also will continue to handle emergency and other customer service calls.

The SSO rate reflects actual natural gas market conditions based on the New York Mercantile Exchange (Nymex). The monthly SOS rate will be calculated as the sum of the monthly Nymex settlement price plus a retail price adjustment of $1.44/Mcf. In the past, Dominion East Ohio's rate was based on market prices, but it also included a gas cost adjustment related to previous rates.

The price of natural gas for customers who buy directly from Dominion East Ohio from Nov. 10 through Dec. 12, 2006, will be $8.593/Mcf. The utility said this monthly SSO rate represents an increase from the previous month's SSO rate of $5.640/Mcf and is largely the result of a seasonal change in the market price of natural gas. The SSO may increase as the winter progresses because of the effect of winter heating demand on national market prices.

For its part, the Ohio Consumers' Counsel (OCC) -- which wasn't always sold on the change -- said last month that the switch to SSO would be a good thing for consumers. "This new monthly rate more closely follows the market price for natural gas," the Counsel said. "OCC estimates that based on historical GCR rates that Dominion customers will save approximately $100 per year under the Standard Service Offer."

On Wednesday, the OCC said it still believes the switch will be beneficial to consumers. "We had been very skeptical about the whole process with Dominion changing the way it purchases gas," said OCC spokeswoman Maureen Miller. "From our perspective now, we think the tide has turned a little with the prices Nymex is turning out and with the $1.44 adder that is going to be in place for 23 months. We are hoping that consumers will be able to save a little bit of money over the next few years."

Miller noted that Phase Two of Dominion East Ohio's plan is already under discussion. "The stakeholders group is getting together to discuss Phase Two, which goes into effect after 23 months when the pilot program is ended," the OCC spokeswoman said. "The second phase includes the possibility of Dominion totally getting out of the gas provision business and then we would go to an assigning of suppliers to customers [model]." She said the OCC expects Dominion East Ohio to file something with the PUCO over the next couple of months.

In addition to the SSO rate, Dominion East Ohio said it will continue to charge a monthly service charge and a delivery charge based on the amount of gas used, as it did under the GCR mechanism.

The utility said that customers in the Energy Choice program that are now considering returning to the SSO should have all the facts before making a decision. Because it takes 30-60 days to complete a change in suppliers, the current Dominion East Ohio SSO rate will not be in effect when customers who sign up now are billed. A new SSO rate will be in effect at that time. The utility also noted that only Energy Choice suppliers offer customers the ability to lock in a fixed-price for up to a year or longer.

"We want our customers to do what is best for them, no matter who they choose to supply their natural gas," said Jimmy Staton, Dominion East Ohio senior vice president of gas delivery. "While Dominion East Ohio's current rate may be lower than the price offered by others, that may change."

More information on the pilot program as well as on the options of customers is available at Dominion's website www.dom.com, the PUCO's website www.puco.ohio.gov, or through the OCC's website www.pickocc.org.

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