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Ohio Gas Retailer Ousted for Delivery Failure

Ohio Gas Retailer Ousted for Delivery Failure

Columbia Gas of Ohio said it had no other choice but to terminate Energy Max of Northeast Ohio from participation in its Customer Choice program after the gas supplier failed to deliver gas to Columbia for transportation to Energy Max's 8,000 Ohio Choice customers for the majority of August. As supplier of last resort, Columbia picked up the slack using its own natural gas supply.

"We regret taking this action, but we were obligated to do so in order to protect the integrity of the program and ensure the reliable delivery of gas to the customers," said Carol Fox, Columbia's director of marketer services. "We attempted unsuccessfully to work through this issue with Energy Max, and took action as soon as we became aware that this was going to be a continuing situation."

Columbia Gas of Ohio spokesman Stephen Jablonski added, "in the grand scheme of the whole program, I think it is going to turn out to be a relatively minor event. It certainly is unusual, and it is going to cause unfortunately some inconvenience for some customers, but I think what we are seeing is, the market is just shaking out."

Energy Max said it bought gas on the spot market while it tried to negotiate long term contracts and better pricing, but pricing never panned out. "We got caught in a tailspin," said Thomas Cox, head of Energy Max.

"We got caught up in the rising spiraling costs of the summer," said Cox. "We were looking to negotiate some long term contracts as normal operations in the summertime do, but prices kept exceeding the barriers that we had on long term contracts out with the customers. Basically we ran out of cash."

Columbia said Energy Max "violated a code of conduct" of the choice program by failing to deliver gas and forcing Columbia to act as the supplier of last resort. "While this is unfortunate, and an inconvenience for Energy Max customers, it also shows the Choice program works as intended," Fox said. Companies going in and out of business is all part of the evolution taking place with competition in the natural gas market, she added.

"You're now talking about natural gas in the retail market the same way you are other commodities. There are going to be these changes and evolution in the market. I would hope in a year or two from now this kind of thing is not even an issue," Jablonski said.

Columbia has mailed out letters notifying Energy Max's customers of the company's termination from the choice program. The displaced customers may immediately enroll with another supplier, or stay with Columbia as their supplier at the utility's gas cost. Energy Max will continue to serve its traditional large volume commercial customers on the Columbia transmission system, but the small commercial customers that were enrolled in the Choice program will be able to choose another supplier or return to Columbia's rate.

Columbia Gas of Ohio's Choice program boasts a half million customers spread among 29 different suppliers. Since the program's inception in 1997, customers have saved approximately $73 million over the utility's gas cost, about 10% on the average monthly residential bill.

Alex Steis

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