Pennsylvania may have blazed the trail for state electricrestructuring, but it’s still floundering in the quagmire ofnatural gas unbundling. A legislative effort started last year byRep. Frank Tulli, Sen. Jeffrey E. Piccola and several other statelawmakers has stalled while stakeholders continue arguing overdetails in workgroups at the state Public Utility Commission andthe governor grapples with a tough decision over the potential lossof $120 million/year in gross receipts taxes.

Meanwhile, the fall legislative session ends in November and thegubernatorial election campaign is heating up. Right now, thefuture of Pennsylvania gas unbundling doesn’t look too bright. Buta lot can happen in a few days, Tulli noted last week in aninterview with NGI.

“Well, in the assign-and-die session, it’s possible,” saidTulli. “We can move things pretty quickly. We can assign them as amajor amendment to a bill that is germane. It can happen. I’mhopeful.”

Tulli has drawn up a new simplified version of his former gasbill, which called for statewide unbundling on Jan. 1, 1999. Asit’s currently worded, the new legislation would leave many of themost contentious issues for the PUC to settle. But legislators anda large group of industry stakeholders, including utilities, thePUC, marketers, large consumers and small consumer advocates,currently are working on resolving some the major unbundlingproblems to flesh out the content of the bill.

“The collaborative is working,” said Tulli. “But I think some ofthem are waiting until the governor says something on the tax issueand then they will move to do the final contentious issues. I thinkthat’s like a two-day event.”

The tax issue could be the weak link in the chain, however. Ifeveryone in the state decided to choose an alternative supplier,the state would lose millions in tax revenue that comes out ofutility gas sales.

“It’s my opinion that we ought to just let the gross receiptstax go as it is, and as people leave their home utility and shop,they don’t pay the gross receipts tax then,” said Tulli. “[Thestate] would lose revenue gradually. I don’t think it would be outall at once. …[T]he general assembly can work with the governorand find other means to make the budget whole or reduce spending.I’m hoping that the governor is going to say let’s just not putanything in the bill about taxes, and when people shop, theyleave.” Offering to cut taxes usually is a good decision for agovernor to make in an election year, but it’s one he hasn’ttackled yet.

Even if the governor moves on the tax issue, however, therestill are some other difficult issues that could stand in the wayof legislation. Not all of the state’s utilities are eager to exitthe merchant function. If that requirement is included in the bill,it could hamper its passage.

“I think we’ll probably let the utilities stay in the supplybusiness if they want to,” Tulli said, reluctantly. “You knowphilosophically I’m not there, but I’m a political realist. If theycan find somebody to take the supplier of last resort position,then they could get out of the supply function, but there are somewho don’t want to find another supplier of last resort. They wantto be it.

“I think we’re going to come to some agreement before the billgoes forward. We’re not there yet,” he said, indicating he stillmay try to persuade the utilities to accept a phasing out ofregulated gas sales.

Also still to be resolved in collaborative sessions is the issueof mandatory capacity assignment. Marketers are against it but maysoften their position if given other concessions.

Even if all the issue are resolved, however, some observers fearlawmakers may want to wait until next year to push statewidecustomer choice in order to first evaluate the success of electricrestructuring.

“This is not oblivious to what is happening on the electricside,” said Tim Merrill, of competitive energy strategies, whichrepresents energy marketers. “We are signing up people now untilNov. 1 for choice under the electric program. We have anywhere fromone-third to two-thirds of all the people in the state that aregoing to have a choice of electricity suppliers on Jan. 1, 1999.This is the full caboose. So there is, I think, also anappreciation of those that say ‘well maybe we better see whathappens on electricity before we go charging into gas.’ I wouldthink the legislators might be in that camp.”

As one state government official noted, “Gas just doesn’t havethe same push behind it that electric deregulation did,” becausethe largest customers already can choose their gas supplier and thesmallest customers don’t see as wide a disparity in gas prices fromutility to utility as they do in electricity prices.

“If you added it all up, you can pretty much come to theconclusion that it doesn’t really seem likely that anything isgoing to happen this fall,” said Merrill. “I try to be optimistic,but I have to be realistic as well.”

Rocco Canonica

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