Small Marketers Exiting Retail

The current natural gas market is proving a minefield for small retail marketers, as evidenced by the drop-out rate. Western Natural Gas, a Dallas-based marketing company, announced last week it was phasing out its retail marketing business in the face of increasing natural gas prices and the capital requirements necessary to obtain supplies.

At the same time, Columbia Gas of Ohio has lost two marketers from its retail choice program in the last two weeks. The current market "is accelerating the evolution of the marketplace," said Columbia spokesman Steve Jablonski. "We're seeing a shake-out in one winter that otherwise might have taken years."

Western Natural Gas, which had a number of commercial and small industrial customers in the Denver area, explained the situation in a press release. "Escalating prices "have placed constraints on the ability of private companies to obtain operating capital needed to provide quality natural gas service." The statement was issued Wednesday after an article appeared in the Rocky Mountain News. "We have determined that continuing to service the retail market is not feasible and are in the process of phasing out of that arena. During this transition period, Western continues to explore options that will satisfy our existing retail customer base. We would like to stress that Western Natural Gas is still flowing gas to all of our customers --- and will continue to do so."

Lori Vining, Western's president, said the company is looking for a new supplier for its customers as a group. "We are not leaving them high and dry." Vining said the problems her company are facing are "no different than those facing others at these high price levels." She declined to say how many customers or how much gas, but confirmed they include some Denver school districts.

An industry source said he had been told there were about 100 customers and the volumes totaled between 15 and 20 MMcf/d.

Vining confirmed that the customers had the option of returning to service from Xcel Energy's distribution subsidiary, Public Service of Colorado. A spokesman there confirmed the distribution rates for commercial customers currently are $5.85 per MMBtu, but are expected to go up to $8.60 an MMBtu when the latest rate hike is approved by the state public utility commission.

John Talley, president of Proliance Energy in Indianapolis, denied a published report that it would buy out the retail business of Western Natural. Proliance "had some brief discussions in mid-December, but they were not successful. There was no agreement."

In the future, Western Natural said its focus will be on production and producer services, gathering, upstream technology and wholesale marketing.

The Ohio marketers, Summit Natural Gas and Power Solutions and Nicole Energy Services, were dropped because they failed to deliver gas to the Columbia of Ohio system to serve their customers. Columbia has continued to deliver to the customers, who will now go back on tariff rates. One other marketer has defaulted since the program started. Energy Max was terminated last Aug. 30.

"We tried to work with all three," Jablonski said, but were unsuccessful. Columbia's Ohio choice program currently has about 500,000 customers, out of 1.3 million Columbia customers. Nicole had about 300 mostly small commercial customers and Summit had 3,800. Columbia of Ohio's current tariff rates are $7.30 an Mcf. The company has made a gas cost recovery filing to raise the rate to $8.60 in February.

Ellen Beswick

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