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Study Calls Gas Unbundling a 'Minimal Success'

Study Calls Gas Unbundling a 'Minimal Success'

Given the "slim to non-existent gross margins" for marketers, retail gas unbundling at the state level has been a "minimal success" at best so far, according to the results of a study of more than 100 LDCs released recently.

The report, which was conducted by Bentek Energy Research of Lakewood, CO, found that the transportation rate structures of most utilities do not provide an opportunity for residential, commercial and even industrial customers to capture significant savings from marketers or other non-utility suppliers. Among the commercial and residential classes especially, it said several LDCs included administrative charges in their rates that were as high as 87 times the similar charge for the corresponding sales service.

Of the 100 LDCs surveyed, Bentek said that only 5% offered savings of at least 10% to residential customers, only 25% provided 10% savings to commercials, and 50% offered similar savings to industrial customers.

"High charges [by LDCs] obviously discourage all but the larger consumers from economically utilizing transportation services," said Porter Bennett, president of Bentek. "Moreover, these charges impinge upon the marketer's ability to profit from selling to end-use customers."

The study, "Retail Gas Markets - How Open Are They?," raises a significant question. "If customers cannot save money, and thus have no incentive to switch away from the utility, and marketers cannot make money and thus sustain their investments in the retail business, how will unbundling succeed?" Bennett asked. State commissions need to take a close look at how these small-volume transportation rates are affecting unbundling, he said.

The top ten ranking utilities offering the highest savings to customers include National Fuel Gas Distribution, Columbia Gas of Ohio, Colonial Gas of Massachusetts, and Bay State Gas, according to the report. The study also included Equitable Gas Co. on this list when it ranked the companies last January, but it noted that since then Equitable has made changes to its rate structure that lead it now to believe that the LDC's savings were "significantly overstated."

Susan Parker

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ISSN © 2577-9877 | ISSN © 1532-1266
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