The Public Utility Commission this week initiated an action plan to increase effective competition in the retail market for natural gas supply.

The Commission voted unanimously to release a report documenting the work of the Stakeholders Exploring Avenues for Removing Competition Hurdles working group and begin the action plan saying that efforts to increase effective competition in the retail natural gas market should "be concentrated on changing the market structure and its operation to reduce or eliminate barriers to supplier entry and participation."

The action plan will be implemented in two phases and is to be completed within two years. The first phase will address items that the PUC can implement immediately to facilitate the development of a competitive market such as:

· Creating an Office of Competitive Market Oversight with the Commission;

· Expanding purchase of receivables programs; and

· Pursuing legislative changes regarding capacity assignment/release.

A copy of the final order and action plan is available online.

Phase two will include three rulemakings to address issues for natural gas distribution companies; natural gas suppliers and business practices. NGDC issues include price to compare; reconciliation and quarterly adjustments; purchase of receivable programs; mandatory capacity release and non-discrimination; and cost recovery of competition-related activities.

NGS issues include creditworthiness of suppliers and reasonable security requirements. Business practice issues include standardization of NGDC system operating rules; specific operation rules regarding nomination and delivery requirements, tolerance bands, cash out/penalties and standardization of electronic bulletin boards.

The 1999 Natural Gas Choice and Competition Law allows customers to purchase gas from independent suppliers, while still having their gas physically delivered by PUC-regulated distribution companies. The law directed the PUC to investigate the level of competition five years after the law went into effect and to report its findings to the General Assembly.

In October 2005, the Commission determined that "effective competition" did not exist in the retail natural gas supply market statewide based on the lack of participation of an adequate number of natural gas suppliers and customers in the retail natural gas market, and the identification of substantial barriers in the market structure and operation that prevented the participation of these groups in the market. The PUC then convened the stakeholders in the natural gas industry to examine avenues to increase competition.

The PUC will complete a formal milestone review in five years to evaluate the progress in development of more competition in the retail natural gas market.

The report and additional information is available on the Commission's website.

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9/12/2008