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Utility to Shift Gas-Sale Method: Dominion East Ohio to Purchase Natural Gas at Auction for Customers Who Haven't Picked Another Supplier

Posted on: Saturday, 27 May 2006, 18:00 CDT

By Betty Lin-Fisher, The Akron Beacon Journal, Ohio

May 27--Dominion East Ohio got the go-ahead Friday to start a two-year pilot program to stop buying natural gas directly for customers who have not chosen another supplier.

About 70 percent of Dominion's 1.8 million customers participate in the Energy Choice Program, buying their gas directly from marketers. The other 30 percent pay the gas cost recovery rate, or GCR, which changes monthly, from Dominion.

By law, Dominion is not allowed to make a profit on the GCR. Dominion makes its money by delivering gas to all customers, regardless of their supplier.

Under the proposal approved by the Public Utilities Commission of Ohio, Dominion will continue to deliver gas, but will hold an auction to buy gas from suppliers for customers who do not choose a supplier.

The PUCO decision allows Dominion to go forward with phase one of the process. Dominion officials estimate the first auction price will replace the GCR by Oct. 1 or Nov. 1.

"For us, we make the same amount of money whether we sell the gas or someone else does," said Jeff Murphy, Dominion director of pricing and regulatory affairs.

"The market has been good for customers as a whole. More competition in our minds means better prices."

Eventually, Dominion would like to stop buying gas, making all customers choose a supplier. But that won't happen until after the two-year first phase is over and Dominion submits a new proposal.

The PUCO could have asked for measures that would have protected consumers more, said Ohio Consumers' Counsel Janine Migden-Ostrander.

The state's advocate for residential utility customers had recommended a company-sponsored energy-efficiency program and a more competitive bidding process for the auction.

Migden-Ostrander said her office will keep a close eye on Dominion to make sure it does not exceed its budget of $14 million for educating the public about the new process; that would cost consumers more.

Murphy said that when the change takes effect, customers will not notice much difference because Dominion will still be listed as the supplier on their bill.

Murphy said the auction prices from suppliers will be market prices, but customers may want to shop for more competitive prices.

Over the last winter heating season, Energy Choice customers saved between $15 million and $20 million compared with GCR customers, Murphy said.

Dominion officials said one of the biggest changes for consumers will be less confusion about delivery charges. Currently, customers who buy directly from Dominion or switched to a supplier less than a year ago pay an unrecovered gas cost. That's compensation allowed by law in case Dominion overpays or underpays when it goes out to buy gas.

When the auction prices take effect, delivery charges will be the same for everyone -- regardless of whether they buy directly from Dominion or from another supplier.

The unrecovered gas costs are on a three-month lag. To make the transition the least complicated and cheapest for everyone, Dominion will take the balance at the time of the switch and spread that cost among all 1.8 million customers over two years instead of one.

Migden-Ostrander said simplicity is always better, but it is unfair for customers who have been with another supplier for a while and have not been paying the unrecovered gas cost to have to pay it.

Dominion expects the charge to be small because it will be spread over a larger group and because the fees will continue to be collected from GCR customers until the switch.

Murphy also said it's possible it will be a credit rather than a charge.

Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@thebeaconjournal.com

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Copyright (c) 2006, The Akron Beacon Journal, Ohio

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Source: Akron Beacon Journal (Akron, Ohio)

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