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Some Observers Seek to Preserve Merchant Role of LDCs
State regulators shouldn’t force utilities to relinquish theirmerchant role in a competitive natural gas market, industry expertsagreed last week. Why bother? Given enough time, the market will dothat job for regulators, an energy supplier remarked.
“…I really think that forcing LDCs out of the merchantfunction is a dumb idea. I have confidence that themarketplace…will cause LDCs to say it makes no sense to be in themerchant function. And sooner or later the marketplace will be thedriver,” said Tim Merrill, president of Competitive EnergyStrategies.
“It’s going to be very difficult for [LDCs] to keep one foot inthe regulated merchant camp and the other foot in the increasinglyunregulated buying camp. Those economic pressures are ultimatelygoing to drive [them] out of the regulated merchant” role,” he tolda panel discussion at the National Utility Regulatory UtilityCommissioners’ Winter Meetings in Washington D.C. last Monday.
At the very least, utilities shouldn’t be regulated out of themerchant function until three major issues are dealt with andresolved-the supplier of last resort, assignment of upstreamcapacity and reliability of service, Merrill said. Until then, “Idon’t think it is feasible, let alone practical, to let a utilityout of the merchant function.”
Citing the recent spate of consolidations within the gasmarketing industry, the latest being Texas Utilities’ interest inthe Energy Group, Mike German of New York Electric and Gas(NYE&G) came out strongly in favor of utilities keeping theirsales role, if for no other reason than to provide a “competitivebackstop” to marketers.
“A large number of customers…have written the [New York PublicService Commission] requesting that the utility remain in themerchant service just because having that additional localcompetition was regarded as good in maintaining competition andsome level of assurance of fair pricing,” he countered. “Thecustomers should be able to decide who the winners and losers are.It really shouldn’t be decided by regulators.”
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