After emerging from what might be called the winter of discontent because of record high gas prices and demand, Bay State Gas Co. said it has decided to protect itself and its firm customers from any unexpected gas use next winter by cutting off service to interruptible (IT) customers from December 2004 through March 2005. However, some IT customers say it’s a ploy to get them to sign up for more expensive firm delivery service.
In a letter sent out Aug. 10, the NiSource utility subsidiary warned its 70 interruptible customers in Massachusetts, Maine and New Hampshire that they will face a complete shut-off during the upcoming winter to guard against unauthorized gas use and to protect firm delivery service.
“As you may know, this past winter provided utilities throughout New England, including Bay State Gas Co., with a challenging test to our obligation to provide reliable natural gas service to our firm customers at the lowest possible price,” Bay State Gas President Stephen H. Bryant said in the letter. “Even our distribution system was challenged during the prolonged cold snap that January 2004 brought to the region.
“This notice provides you with adequate time to secure alternative fuel sources for your heating and/or production needs consistent with your agreement with us for interruptible service,” he said. “I also want to inform you that in order to ensure that no natural gas is consumed by interruptible customers during the curtailment period specified above, Bay State Gas Co. will manually shut off the natural gas service that is connected to the meter associated with your account.”
Bay State along with many other LDCs in the Northeast were hit with record high spot gas prices during last January’s deep freeze. For example, prices at Tennessee Zone 6, which serves New England, spiked to $49.78 on Jan. 14, 2004. That same day, prices at Algonquin Citygate hit $64.22. Daily spot prices at Tennessee Zone 6 averaged $6.81 in December 2003 and jumped to an average of $12.97 in January 2004. And daily spot into Algonquin Citygate averaged $7.08 in December and $13.48 in January.
In an interview with NGI last week, Bryant explained that Bay State does not estimate winter deliveries interruptible customers in its supply planning and facilities planning process, so any gas used unexpectedly by IT customers eats into what the utility provides to its regular firm customers. On peak days, this can create reliability concerns. “This decision [to cut IT is] just to be sure that the company can serve its firm customers throughout the winter,” he said.
“The concept of interruptible service is really opportunity sales, typically made during the summer and fall periods, although in the past we’ve made interruptible sales during periods throughout the winter,” he said. “But the company currently has no ability to directly monitor these customers so we cannot determine on a real-time basis if unauthorized gas consumption is taking place. In addition, some of these customers are quite large and if unauthorized gas consumption took place it could represent a disruption to the delivery of firm service to customers.”
Bryant said the technology exists to provide meter monitoring, but the ability to remotely terminate service is not economically feasible — “although the company is looking into that. We’re courting comments from customers, and based on those comments we’ll develop a strategy that has the least impact on those interruptible customers while still fulfilling our obligations to firm customers.”
Curt Freedman, president of CMF Engineering and a small Bay State IT customer, said he plans to fight the decision at Massachusetts Department of Telecommunications and Energy (DTE).
He said that any problem the utility experienced in the past from unauthorized gas use by IT customers was largely exacerbated by its own decision to discontinue the use of telemetering, which allows the utility to electronically determine whether a customer used gas on a given day.
“The gas company has really lost control of its own system,” Freedman told NGI. “Last January, prices went from $6 to $60/MMBtu and the gas company had no idea when people were using their gas. Bay State had to go back and ask customers to voluntarily disclose when they used gas. That’s archaic. What kind of meter system is that?”
Freedman also believes that this decision is really designed to force IT customers to pay up for more expensive firm service. “I know that because I had clients who were approached in past years and were promised ample stipends to become firm customers. They refused because their overall cost of service would be more, significantly more.”
Now, however, they will be forced to pay thousands of dollars to retrofit gas-fired boilers with electric igniters because they will not even have the small amount of gas required for a pilot light to start up their equipment. “It’s ridiculous. The amount of gas that a pilot uses to ignite an oil burner is absolutely de minimus,” said Freedman.
“If a customer elects to use emergency gas during a curtailment period, they pay dearly for that use of fuel. But what the gas company here is doing is something that’s not right, and we’re not going to allow the proposed changes that Bay State Gas is seeking,” he said. “We’re going to be objecting very loud and clear.”
Bryant said the decision to cut IT service was made without regard to a complaint proceeding started at the Massachusetts DTE by IT customers in Springfield, MA.
On Christmas Eve 2003, Bay State ordered a curtailment period and later outraged some IT customers by sending out a notice informing them that the January “unauthorized use of gas rate” for interruptibles who had emergencies and needed to switch from oil back to gas during a curtailment period had been set at $31.71/therm ($317.10/MMBtu) (see NGI, Feb. 2, 2004).
Bay State later acknowledged that it did not have authority to charge what Freedman said were “the highest penalties ever communicated to any natural gas end user in this country’s history.” Bay State subsequently rolled back the penalties to $15/MMBtu for the 2003-2004 winter heating season.
The penalty question is unlikely to surface next winter, however. There will be no “unauthorized use” of natural gas on the Bay State system because all IT meters will be manually turned off.
“The region is on the verge of what I feel is an imminent energy crisis this winter. We need a stable dual-fuel program,” said Freedman, adding that fuel switching can have a significant downward impact on energy prices. “Bay State Gas needs to stop pursuing just what is in its own particular interest and as a public service corporation understand the need for the interruptible gas customer to benefit this industry as a whole.”
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