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AGA Study Shows Customer Choice Trend

AGA Study Shows Customer Choice Trend

Customer choice in the United States is picking up steam, as evidenced in the American Gas Association's (AGA) Energy Analysis 2000 update released last month. The study follows natural gas purchasing trends for the industrial, electric utility, commercial and residential sectors.

In 1998 "more than 80% of the natural gas consumed in the United States could be purchased from sources other than the local distribution utility," i.e., customer choice. For that year, the most recent for which complete data is available, "61% of all gas consumed in the United States was bought under a customer choice option," the study said.

The paper states that, "the customer choice option is, or soon will be, available for about 69% of all commercial gas volumes, and 45% of all residential volumes." Customer choice is available for 99% of electric utility gas volumes, and 96% of industrial gas volumes.

Based on statistics received from the Department of Energy's Energy Information Administration, the AGA study shows that 87% of electric utilities and 91% of industrial customers purchased their gas from non-gas utility sources. Among smaller customers, 35% of commercial customers and 3% of residential customers bought gas elsewhere.

Residential choice programs began operation in 1996, and by 1998 there were only a limited number in operation. A report by the National Regulatory Research Institute shows that low participation rates during these programs' initial years are typical for industries undergoing restructuring.

The wide range of volume percentage results among sectors can be explained as a trend. Large customers such as industrial and electric utilities are more likely to take advantage of customer choice. Savings per unit of gas can be very small, and residential customers often disregard choice due to the hassle and lack of perceived return. Industrial and electric utility customers can experience a greater savings through the purchasing of larger quantities, where the small savings per unit add up.

The AGA study supports such a claim. Even among residential customers with different volume needs. The average residential customer who purchased gas conventionally was found to use 78 Mcf a year, an average residential customer that bought gas through a choice program tended to use about 108 Mcf a year. Likewise, an average industrial customer purchasing conventionally was found to use about 4,427 Mcf, but under choice, an average industrial customer would purchase 153,429 Mcf.

The study's 1998 regional analysis found that the West South Central Region which includes Arkansas, Louisiana, Oklahoma and Texas, had the highest percentage of choice customers, with 89% of its gas volume being bought through choice. Followed by the Pacific Region 60% (Alaska, California, Hawaii, Oregon and Washington), The East South Central Region 58% (Alabama, Kentucky, Mississippi and Tennessee) and the South Atlantic Region 56% (Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia).

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