A record number of residential gas customers, about 4.2 million, bought gas from retail marketers rather than their regulated utilities last December, according to an update to the Energy Information Administration's (EIA) summary of natural gas residential choice programs nationwide. EIA said enrollment in customer choice programs rose 8% last year, with Ohio and New York showing the largest gains.

The agency said enrollment in choice programs rose last year for the first time since 2003, although the number of states allowing choice remained unchanged. Overall, about 12%, or 4.2 million, of the 35 million residential gas customers with access to choice were buying gas from marketers as of December 2006, up from the 3.9 million in 2005 and about 28,000 more than the record high in 2003.

Most of the gains were in Ohio, which is second only to Georgia in the size of its choice program with almost 45% of all households participating and enrollment levels of more than 1.3 million. Georgia has the most comprehensive choice program. All 1.4 million residential customers in Atlanta Gas Light Co.'s (AGL) service territory (which represents more than 80% of the state total) purchase gas directly from marketers. Together Georgia and Ohio accounted for two-thirds of the residential customer enrollment total in 2006.

In total, 21 states and the District of Columbia give small customers the ability to buy gas from marketers rather than regulated utilities. However, choice programs vary widely from state to state. Seven states and the District allow all residential consumers to choose their gas suppliers, but a lack of marketer participation has precluded the development of competitive retail markets in three of these states.

Six states are in the process of implementing choice statewide, with programs available to more than half their residential customers, and another eight states have pilot or partial unbundling programs in place or awaiting development. Two other states discontinued customer choice pilot programs several years ago. The remaining 27 states are not considering choice programs at this time. Large commercial and industrial consumers have had the option of purchasing gas from alternative suppliers for many years.

In 2006, the number of retail gas marketers offering gas to small customers remained about the same at 82 compared to 81 in 2005, EIA said. Ohio showed the largest increase -- to 14 from nine. New York has the largest number of retail marketers at 41.

"Many marketers have expanded their price offerings in attempts to attract customers and to manage the relatively high natural gas prices and increased price variability in recent years," EIA said in its report. "Besides month-to-month variable rates or fixed rates for longer terms, some marketers offer introductory rates, rebates, budget plans, or capped prices that let customers pay less if retail prices drop."

One of the most significant regulatory changes last year affecting retail choice was in Ohio, where Dominion East Ohio Gas, the second largest distributor in the state with 1.2 million gas customers, entered phase one of a restructuring program that will eventually phase out its gas sales service, similar to what AGL did in Georgia. From October 2006 through August 2008, Dominion will buy gas each month for its non-choice (sales) customers from six suppliers at the monthly gas futures settlement price on the New York Mercantile Exchange plus a $1.44/Mcf fee. The fee was determined through a state-monitored auction in which marketers bid to serve groups of customers. Under phase two of the restructuring, if approved by state regulators, remaining sales customers would either choose or be assigned to participating marketers on a pro rata basis, leaving Dominion as a distribution-only utility company, much like AGL. However, Dominion would continue to serve the role of gas supplier of last resort.

A state task force in Pennsylvania is considering a number of actions this year, including possible incentives that might result in gas utilities exiting the gas sales, or merchant, function. A report from the task force to state regulators is expected this month.

In New York in 2006, state regulators required retail marketers to begin posting real-time price information and contract terms on the New York State Public Service Commission's "Power to Choose" website.

No significant changes took place last year in states where there is minimal customer choice participation, EIA said. Massachusetts, New Mexico, California, Montana, South Dakota and West Virginia are among the states with very few customers enrolled in their active choice programs. For more on customer choice go to www.eia.doe.gov/oil_gas/natural_gas/restructure/state/us.html.

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