California’s energy crisis and the record high gas prices last winter have stalled energy deregulation and competition in retail natural gas markets, according to the latest statistics from the Energy Information Administration (EIA). In contrast to predictions made one year ago by the American Gas Association (AGA) that nearly 50% of the residential gas customers in the nation were, or soon would be able to choose from competing retail suppliers, only about 27% are able to do so today and just 6% are actively participating, according to the EIA data.

In a report released in December 2000, the AGA said 26 million (49%) of the 54 million U.S. households with natural gas service were eligible or soon would be able to buy their natural gas from a non-utility supplier. In December 2001, however, only 16.2 million of 59.5 million residential gas customers are eligible and only 3.3 million are actively participating. Furthermore, state regulators and legislators are beginning turn their backs on retail competition.

“State regulators and lawmakers, who are responsible for designing and implementing retail restructuring programs, have moved more slowly in implementing choice programs for residential and small-volume commercial customers, traditionally known as ‘core’ consumers, until they could ensure reliable service,” EIA said in its latest report on the subject.

Some states have chosen not to expand pilot programs or have deferred legislative action until new questions concerning reliability and costs can be resolved, EIA said. Twenty states and the District of Columbia still have programs underway that allow residential consumers and other small-volume gas users to purchase gas from someone other than their traditional utility company. However, the availability, characteristics, and participation rates of these “customer choice” programs vary widely across states.

Five states and the District of Columbia allow all residential consumers to choose their natural gas suppliers, but a lack of marketer participation has precluded the development of competitive retail markets in two of these states. Seven other states have begun to implement statewide programs, and eight states have pilot or partial unbundling programs in place. An additional 10 states are considering action on customer choice, while 18 states have thus far taken no action and two states have discontinued their pilot programs, EIA said.

Five states and the District of Columbia have changed their unbundling status in the past 18 months. Pennsylvania has allowed customer choice statewide since July 2000, and the District gave approval for a full-scale choice program in February 2001. Michigan and Virginia are in the process of implementing statewide choice programs after conducting pilot programs for several years. In contrast, Delaware and Wisconsin discontinued their pilot programs on Oct. 31, 2001.

Consumer reaction to these choice programs has been mixed. In some states, such as Nebraska and Wyoming, all of the eligible residential and commercial customers are electing to choose suppliers, while in other states, such as New Mexico and West Virginia, virtually no one is participating, EIA noted. Georgia remains the largest open retail gas market, where all residential customers in the Atlanta Gas Light Company (AGL) service territory (more than 80% of the residential gas customers in the state) purchase their natural gas directly from marketers.

There are 3.3 million residential customers participating in choice programs out of 16.2 million customers who are eligible. About 1.4 million of the participating customers are located in Georgia. Next in line with the most participating customers is Ohio with 825,148 or 30% of those eligible, followed by Pennsylvania with 253,734 or 10% of eligible customers, and then New York with 244,823 or 6% of those eligible.

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