Participation in natural gas customer-choice programs has slowed considerably over the years, even though buyers of gas from marketers paid less than local distribution company (LDC) customers in most months between 2002 and 2005, the Energy Information Administration (EIA) said in a new report.

On an annual basis between 2002 and 2005, the average price savings per Mcf for residential and commercial gas customers, respectively, were: Maryland, $1.44 and $2.38; Ohio, 78 cents and $1.29; New York, 66 cents and $1.38; and Pennsylvania, 36 cents and $1.84, the EIA said in its latest report, “Natural Gas Marketer Prices and Sales to Residential and Commercial Customers: 2002-2005.”

However, the agency believes this trend reversed itself in 2006. “Preliminary data for 2006…suggest that the price trend that was witnessed during the majority of 2002 to 2005, where marketer prices are below those of LDC prices, begins to change. Marketer residential price data for 2006 in New York, Ohio and Pennsylvania tightly track LDC pricing, at times exceeding the prices paid by LDC customers. In the Maryland residential sector, this trend appears to be even more pronounced, with preliminary marketer prices exceeding LDC prices by more than $1 per Mcf for most of the year,” it said.

The report reviewed customer-choice programs in four states, including Maryland, New York, Ohio and Pennsylvania. The EIA excluded Georgia from its analysis because most natural gas customers in the state are required to purchase their natural gas from marketers.

“Despite actions taken by public utility commissions to promote natural gas customer choice in each of the states, factors such as natural gas volatility and lack of customer participation have slowed or reversed the growth of marketer participation,” the EIA said. “From 2002 to 2005, Ohio had the greatest level of sales by marketers with an average of 35% of residential customers and 39% of commercial customers accepting third-party supply for the four-year period. New York had the lowest residential participation average at 7%, and Pennsylvania had the fewest commercial customers participating, with an average 10% participation rate.”

In Maryland, nearly all of the state’s residential and commercial customers were eligible to join a gas choice program by 1999. But “despite this increase in eligibility, the percentage of residential and commercial customers opting to purchase natural gas from marketers and the percentage of natural gas sales by marketers have stayed relatively static in both sectors,” the agency said. It estimated that slightly more than 10% of Maryland’s residential customers were served by marketers in 2005.

“Natural gas sales [volumes] by marketers in the commercial sector remained around 70% during the period of 2002 through 2005, [while] the percentage of commercial customers purchasing natural gas from marketers remained around 20%, indicating that larger commercial customers accounted for the majority of natural gas sales in that sector,” the EIA said.

It reported that the number of marketers serving Maryland residential and commercial customers decreased each year from 2002 through 2005. There were more than 10 marketers catering to the state’s residential customers in 2002, while the number fell to about 7-8 in 2005. Twenty marketers served Maryland commercial customers in 2002, with the number falling to below 15 in 2005.

The high gas prices seen in Ohio in the winter of 2000-2001 “exposed the weakness that some of the competitive suppliers had in competing in the commodity markets,” the EIA said. “Sharp price increases caused some suppliers to break their contracts with customers by leaving the natural gas choice program entirely, or by unilaterally changing the terms of their customer contracts. As a result some customers lost confidence in the program. Many marketers decided to scale back or freeze the acquisition of new customers, which resulted in limited choice for customers. The number of active marketers in the state continued to decline through 2005.”

But despite the drop in marketers in Ohio, “there was an increase in commercial customers opting for third-party natural gas supply from 2002 to 2005…The residential sector witnessed a similar increase in third-party supply customers from 2002 to 2004, but experienced a slight decline in 2005,” the agency noted. It estimated that 35% of Ohio’s residential customers bought their gas from marketers during the 2002-2005 period. In the commercial sector, the volume of natural gas sold by marketers accounted for more than 60%, while 39% of the state’s commercial customers were served by marketers, the EIA said.

In October 2005, the Pennsylvania General Assembly concluded that “there was no effective competition in the state of Pennsylvania and listed seven failings that contributed to the lack of competition. These included a lack of participation by suppliers and buyers, a lack of awareness of consumers of the commodity price of natural gas, barriers of entry for natural gas suppliers, and a lack of timely and accurate price signals in the marketplace,” the agency noted.

“These failings are apparent in the stagnation of the number of marketer customers…in the 2002-2005 period for both the commercial and residential sectors” in Pennsylvania, according to the EIA. “Despite the lack of growth in residential customers participating in the natural gas choice program, there was an increase in active marketers serving the residential sector. This is in stark contract to the commercial sector which continued to experience a decline in active markets, while showing a slight increase in customers taking third-party supply.”

In 2005, the EIA estimated that less than 10% of Pennsylvania’s residential gas customers participated in a customer choice program. The percentage was about the same for commercial customers, with sales volumes by marketers to commercial customers accounting for 40% of commercial gas sales.

In New York, “while approximately 14% of commercial customers…purchased natural gas from marketers, the volumes purchased by those customers accounted for about half of commercial natural gas sales” during the 2002-2005 period, the EIA said. “The residential customers purchasing natural gas from marketers are part of aggregation pools of not less than 5,000 Dth/year.” The agency estimated residential purchases from marketers totaled approximately 7% in 2005.

©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.