With all the talk of competition coming to the electricindustry, the gas industry could be feeling like a stepchild.According to speakers last week at the fourth annual meeting of theGas Industry Standards Board (GISB) in San Antonio, gas unbundlingis anything but a done deal, and many questions remain.

After outlining New Hampshire’s advances in electricrestructuring – begun about four years ago – Public UtilitiesCommissioner Bruce Ellsworth noted his state has “looked at gasunbundling over the past years” and found interest only amongcommercial and industrial customers, which already enjoy unbundledservice.

“We found very little interest on the part of residential [gas]customers for any restructuring. So it will be interesting to seeas customers see the benefits and the risks from electricrestructuring as to how those thought processes and how thoserequests and requirements will be directed at us.”

Bill Boswell, Peoples Gas general counsel, said he thinks heknows why electric restructuring is sparking more attention. “Inmany respects gas came first for a very significant reason. If youlook at what has occurred since the 1980s and earlier than that insome cases, industrial and large customers, large commercialcustomers, had been able to transport gas for a long, long time, sothe kind of pressures that were brought there on the electricindustry where large customers did not have that luxury did notexist in the gas industry.

“Where are we going right now with respect to unbundling is to alarge extent self generating. It’s done to some extent by the statecommissions. It’s done to some extent by the marketers, and it’sdone to some extent by the utilities themselves. The reason impetusfor change in the gas arena is not as great, I submit to you, isprimarily because the large players have had that for a long, longtime and they did not need state legislation in most cases to getit as they did in the electric industry.”

At the Illinois Commerce Commission, Commissioner RuthKretschmer is asking some skeptical questions about unbundling’smerits. “The question I have is where are the savings going to comefrom. Now I know there are marketers here who say that there aregoing to be huge savings. I have urged our legislators not to makeany promises about huge savings, that they may not be there.

“If gas is being purchased at a market clearing price, at a goodprice-and we will continue to regulate the distribution system, sothat will be properly priced-it leads to the interesting question,where are these huge savings coming from. And do customers reallywant choice, or do they want lower costs, lower prices. .I think wecan spend an awful lot of time and energy and money unbundling anindustry without the results that customers are looking for. I havegreat concern that we are giving false hope to small customers, tocommercial customers and residential customers, and I think we needto be very careful not to mislead people.”

Nonetheless, Kretschmer said competition, real or just looming,has prompted utilities to take the credo of customers service toheart. They’re extending office hours, providing toll-free customerservice lines, as well as making and keeping service appointmentsin a manner unheard of in the past. “As customers have morealternatives available to them, customer loyalty will become veryimportant. If a utility hasn’t discovered that, it’s going to findout the hard way.”

Kretschmer was adamant in stating unbundling Illinois gasutilities will not have any stranded costs, and she questioned thewisdom of having utility affiliate marketers while forcingutilities out of the merchant function. “That’s where I find thefallacy of the argument being made. First of all, in Illinois wewill not have any stranded costs, and I think it’s just a farce tosay the utility can’t be a merchant. If you don’t allow the LDC toearn money on the commodity, hey, they’re going to be glad to getout of the merchant function, but their affiliate will do it. It’sperverse logic. I’ve had LDCs in Illinois say, ‘if you allow us toearn a profit on the commodity, you’ve made me the merchant.’ Sowe’re playing with semantics here.” Kretschmer said why not letLDCs stay in the merchant function and benefit from gas sales. Asfor any profits, they shouldn’t have to be shared with end users,she said.

According to Mary Jane McCartney, senior vice president of gasoperations at Consolidated Edison, there might not be much left forutilities to do otherwise. “Some marketers really want to own everyaspect of the customer relationship. They want to provide the bill.They want to own the meter. They want to read the meter. These areserious issues that require a lot of analysis. As we look down theroad to our one million gas customers eventually becoming alltransportation customers, when and if we totally exit the merchantfunction, who is our customer? Are our customers the 30 to 50 ESCOsout there? Or are they the one million people to whom they’redelivering gas?”

Joe Fisher, San Antonio

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