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Columbia Gas of Ohio Calls OCC Rate Auction Request Premature

Citing the recent "success" of the Dominion East Ohio rate auction in August, the Office of the Ohio Consumers' Counsel (OCC) said Wednesday it has recommended that the Public Utilities Commission of Ohio (PUCO) implement a wholesale auction in spring 2007 to achieve lower natural gas rates for customers of Columbia Gas of Ohio. For its part, Columbia Gas of Ohio said it is nowhere near sold on the idea.

In a hearing scheduled for Friday, the OCC plans to present evidence that an auction, similar to the one that was held for Dominion East Ohio (see Daily GPI, Aug. 31), could potentially provide lower rates for Columbia customers who have not chosen an alternative natural gas supplier and continue to pay the gas cost recovery (GCR) rate.

"We strongly believe based on the success of the Dominion auction that consumers would benefit from lower rates if Columbia were to determine its monthly rates through an auction as well," said the OCC's Janine Migden-Ostrander. "The OCC would like to see Columbia customers have the same opportunity as Dominion customers to save on their monthly bills."

In response to the OCC's request, Columbia Gas of Ohio said it feels the move is premature. "We are watching the Dominion process very closely and while the early results of that process are promising, we think it is way too early to draw any conclusions about whether that system is going to yield better results for consumers on an ongoing basis than the GCR process, which has been in place in Ohio many years," said Ken Stammen, a spokesman for Columbia Gas of Ohio.

"What they are proposing is a very complex process that is going to involve a lot of stakeholders beyond just the OCC and Columbia Gas of Ohio. It could have ramifications for service reliability, for the retail marketers who are in our choice program and for the choice program itself," he added. "We think [Migden-Ostrander] is over-simplifying things just a bit in the announcement Wednesday. We are certainly willing to look at that situation and we are certainly looking to study and consider it, but we just think it is way too early to make any kind of commitments at this point."

The residential utility consumer advocate first brought this recommendation to the PUCO in testimony filed last week in relation to a recent audit of Columbia's natural gas purchasing practices. Every two years natural gas companies are required to have an audit performed that reviews the prior years' purchasing practices to ensure they resulted in fair, just and reasonable rates for consumers. Based on that review, the OCC has concluded that an auction could reduce rates for Columbia customers who have not chosen an alternative supplier.

If the auction is approved, natural gas suppliers would be allowed to bid on portions of a natural gas company's customer base and determine a fee that would be added to market prices to produce a rate at which they would sell natural gas to Columbia. The new rate would be comprised of the monthly natural gas market rate plus the fee determined by the auction. Although rates would change monthly depending on market conditions, the fee determined by the auction would remain the same every month. Columbia would continue to be responsible for the distribution of natural gas as well as billing, reading meters and maintaining pipelines.

Deemed successful by all participating stakeholders including the OCC, PUCO, Dominion and suppliers, the Dominion East Ohio auction resulted in a fee of $1.44 that would be added to natural gas market prices to determine monthly rates for consumers. Bids were entertained from 12 wholesale suppliers based on fixed adjustments to the New York Mercantile Exchange settlement price. This new rate is consistently less than customers had been paying under the GCR, which typically ran $2.37 over monthly market prices. The OCC determined that Columbia's GCR was on average $2.60 over the monthly market price.

Based in Columbus, Columbia Gas of Ohio is the largest natural gas utility in the state, serving approximately 1.4 million customers in 64 of Ohio's 88 counties.

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