Columbia Gas of Ohio and the Public Utilities Commission of Ohio(PUCO) announced a renewed rate freeze yesterday that Columbia saidwill pave the way for its popular customer choice program tocontinue until 2004. The agreement, which the company said modifiedand extended a five-year deal struck in 1994, was negotiated byColumbia, the Ohio Consumer’s Counsel (OCC), natural gas marketersand a coalition of Columbia customer groups.

“The transition capacity cost issue has been the single mostsignificant roadblock to the long term survival and success of [ourchoice program],” said Robert C. Skaggs Jr., Columbia Gas of Ohiopresident. “This agreement resolves that issue and helps ensure thecontinued viability of a program that has already saved Ohioconsumers tens of millions of dollars in energy costs. It alsomeans that Columbia’s base rate will not have increased for atleast a decade.”

Under the agreement, Columbia would assume total financial riskfor mitigation of the transition capacity costs at no additionalcost to customers. The company would have the opportunity toutilize non-traditional revenue sources as a means of offsettingthe costs. Steve Jablonski, a spokesman for the utility, saidColumbia would attempt to recover the costs through capacityrelease (selling its unneeded capacity to others) or off-systemsales (selling the actual commodity to others).

The rapid growth of Columbia’s retail customer choice programhas resulted in transition capacity costs that are greater thanColumbia anticipated. Depending on customer participation, theprogram’s transition capacity costs could eventually range as highas $800 million, the company said.

The stranded cost recovery deal included in this most recentagreement is significantly different than the deal forged betweenPUCO and Columbia in 1998 over the same issue. The old deal createda pool of funds, which helped spread the stranded cost burden overa wide spectrum of participants, including customers. In this newdeal, Columbia is 100% responsible for recovering the strandedcosts.

“Although its more risky, there also is an upside to being 100%responsible,” Jablonski said. “It gives us the chance to go aboveand beyond the transition costs in terms of revenue. We want to notonly recover the costs through off-system sales and capacityrelease, we want to make it a profitable operation.”

Columbia’s choice program has been one of the most successful inthe nation. It was launched in the Toledo area in 1997 and expandedto all Columbia customers in 1998. Since then, it has enrollednearly a half million customers, or about 37% of all Columbiacustomers. Consumers have received savings of more than $34million, or from six to 12%off the average monthly bill. More than30 natural gas suppliers are participating in the program.

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