GA, OH Speak on Gas Choice Pitfalls, Successes

Inefficient customer education, inadequate marketer certification and poorly developed information systems for consumers led to many of the early problems associated with Georgia's 1998 natural gas deregulation efforts, according to Paula G. Rosput, CEO of AGL Resources.

Rosput spoke on gas deregulation at the National Association of Regulatory Commissioners (NARUC) Winter Meeting in Washington with Robert S. Tongren of the Ohio Consumers Council (OCC). Tongren noted Ohio's move to gas deregulation was handled far differently than in Georgia. He pointed out that Georgia forced customers to choose a new supplier, while Ohio allowed customers to stay with the utility if they chose to under Ohio's voluntary program.

"It has not been a dramatic change [in Ohio], it has been a gradual change, it has been a gradual educational process," said Tongren. "I think to a certain extent it lends itself to a sense of comfort - when bills are not so high - for our participating customers."

Ohio's three choice programs currently have about 2.9 million eligible consumers and 878,000 are participating. Tongren said the Columbia Gas and Dominion East Ohio programs are the most successful, while Cincinnati Gas & Electric's program continues to have trouble.

One of the biggest problems with the Georgia model, Rosput said, was the decision to leave billing to the marketers rather than the utility. "The biggest story out of the Georgia framework has been the number of erroneous bills that have been sent out, or the number of bills that were not sent out for long periods of time, which is a direct outgrowth of taking a bundled business and unbundling it in a very short period of time."

Georgia deregulation's billing woes have been highlighted in the past, especially regarding billing provider Utilipro and the bankruptcy of marketer Peachtree Natural Gas (see NGI, Sept. 25, 2000). Peachtree's $50 million lawsuit against Utilipro is still pending.

Both Rosput and Tongren continually pointed toward customer education as a major key to the successful implementation of any choice program. Rosput highlighted Virginia Natural Gas' (VNG) efforts. VNG plans to spend $30 million over a five-year span to educate a population of 6.8 million people for gas and electric choice, while Ohio spent $16 million over two years to educate a population of 11.2 million customers. Atlanta Gas Light Co. only allotted $5 million over one year to inform 7.8 million people.

"I think if we had it to do over again, we probably would have had a longer prefatory time in which more information was disseminated, because there was a bit of a trial by fire quality due to the nature of how customers learn about the experiment," said Rosput.

"Education, education, education, we can't say it enough," said Tongren. "It is the key to making a program work and despite the significant efforts by the utilities, the Ohio Public Utilities Commission (PUCO) as well as my office... there can never be enough education with respect to programs like these."

Rosput also said certification for marketers was insufficient. Many of Georgia's marketers were small and underqualified, with too little capital on-hand when price spikes hit and times got rough. Certification should ensure that marketers have sufficient gas supply, capacity management and retailing expertise, along with deep enough pockets to be able to weather volatile periods.

Georgia saw its original 19 gas marketers thinned to nine. Rosput believes the shakeout is over, with four marketers currently controlling a 92% share of the 1.5 million gas customers in the state. Complaints are declining from the highs reported last August and September, she stated, and customer satisfaction with the utility is averaging around 76% in recent months, compared to about 70% for the same time period of 1999.

Ohio has also seen its fair share of marketer shakeout, which is still underway. Over the last year, marketers Energy Max, Summit Natural Gas and The Energy Cooperative all have defaulted (see NGI, Oct. 30, 2000; Feb. 12).

To try to clear up some of the issues revolving around Ohio's choice programs, the Ohio House passed Bill 9 earlier this week. The bill would allow PUCO to certify marketers instead of leaving it to utilities. The bill also would clarify PUCO and OCC jurisdiction, and set forth a process for complaints. In late January, the OCC requested that PUCO begin an investigation into the current state of the natural gas choice programs in Ohio.

Alex Steis

©Copyright 2001 Intelligence Press, Inc. All rights reserved. The preceding news report may not be republished or redistributed in whole or in part without prior written consent of Intelligence Press, Inc.