The Public Utilities Commission of Ohio (PUCO) on Wednesday approved the results of the Dominion East Ohio auction on Tuesday, and the Ohio Consumers’ Counsel (OCC) said the winning bid “most likely will benefit consumers over the next 23 months.”
Dominion said it will commence Phase One of its commodity restructuring plan and replace its gas cost recovery mechanism with standard service offer effective October 2006 through Sept. 1, 2008. The result of the auction was a retail price adjustment of $1.44/Mcf. The monthly standard service offer price will be calculated as the sum of the monthly New York Mercantile Exchange (Nymex) settlement price plus a retail price adjustment of $1.44/Mcf.
PUCO said the names of the winner or winners will not be provided for a period of 60 days — or until agreements with pipelines are completed for the incremental capacity necessary to meet the obligations of standard service offer suppliers.
“We are pleased that the auction was a success, both with the number of participating bidders and the resulting Retail Price Adjustment,” PUCO Chairman Alan R. Schriber stated. “This successful auction demonstrates that the natural gas market is capable of providing a more competitive price offering for Dominion’s customers than the gas cost recovery mechanism currently provides.”
EnergyGateway, the auction manager retained by Dominion, conducted a descending clock auction on Tuesday. Bids were entertained from 12 wholesale suppliers based on fixed adjustments to the Nymex settlement price. Dominion, PUCO staff, the OCC, and CRA International, the consultant for PUCO staff, jointly monitored the auction.
The commission agreed with PUCO staff’s post-auction conclusions that a range of $2.196 to $2.504 per Mcf above the monthly Nymex settlement price for natural gas futures was a reasonable benchmark by which to evaluate the auction results. PUCO said it was also satisfied with CRA’s conclusions that the auction was conducted in a fair and impartial manner and was free of any apparent collusion or other anomalies.
As the residential utility consumer advocate, the OCC stated it believes that the winning bid produced during the Dominion East Ohio rate auction is acceptable and most likely will benefit consumers.
“This is good news for residential customers. We are pleased that so many natural gas suppliers stepped up and participated in this successful auction,” said Janine Migden-Ostrander of OCC. “By securing a bid of $1.44, Dominion customers who have not chosen an alternative natural gas supplier will likely see rates that are lower than what they would have been through the current Gas Cost Recovery rate system.”
On April 8, 2005, Dominion filed an application to eliminate its gas cost recovery rate and obtain and price its natural gas supplies through a more market based rate methodology. The commission approved Dominion’s application on May 26, 2006 (see Daily GPI, May 31).
Phase One of Dominion’s plan will serve as a pilot program to test the ability of the market-based methodology to expand competition among suppliers and reduce natural gas rates over the long term. Dominion will continue to provide commodity service to its retail sales customers during Phase One. Dominion’s customers will have a choice of receiving natural gas service from a competitive supplier or Dominion’s retail sales service. Dominion will also remain the provider of last resort during Phase One.
PUCO said it will monitor the Phase One process and reserves the right to terminate the pilot program and return Dominion’s commodity sales customers to the gas cost recovery pricing methodology at any time.
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