04/15/24 - 66 New Stories - REAL Environmental & Conservation Leadership In PA: http://tinyurl.com/msuwtctm
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House Committee Considers Proposal To Eliminate Roadblocks To Natural Gas Competition
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The House Consumer Affairs Committee Thursday held an information meeting on a proposal by independent natural gas suppliers to improve competition and allow natural gas customers to see the benefits of Marcellus Shale gas much sooner in their gas bills.
Matt Sommer, Shipley Energy Company, and Bill Barkas, Dominion Retail, told Committee members the natural gas market in Pennsylvania has been open to competition for over 11 years, yet the number of consumers taking advantage of the lower gas prices is just 9 percent, compared to 35 or 40 percent of electric customers.
One of the reasons for this low participation rate is the way consumers see the price of natural gas on their monthly bills.
Unlike electric customers who have a single price to compare between competitive electric suppliers, natural gas customers have to juggle two separate prices for natural gas on their bill-- the price charged by their default gas provider and the separate, extra cost the utility charges to recover their cost of providing gas over the past year.
Under current law utilities adjust the recovery cost-- the difference between what they spend to provide natural gas and what they collect from customers-- once a year. That charge usually results in collecting more from customers plus 6 percent interest. Less often it results in a refund to customers plus 8 percent interest if utilities collect too much money from customers.
When a customer looking for a competitive gas supplier compares the utility's price to a competitor, inevitably the price is lower for the utility because it does not include the recovery cost charged by the utility.
As a result, fewer customers get to compare the real market price of natural gas when they are making decisions about whether to go with a competitive gas supplier.
Shipley, Dominion Retail and other independent natural gas suppliers are promoting legislation being drafted by Rep. John Payne (R-Dauphin) and Sen. Mike Brubaker (R-Lancaster) which will require utilities to "true-up" gas price recovery costs every month instead of once a year.
This simple change will allow customers to more easily compare the real cost of natural gas between competitive gas suppliers.
In addition to helping promote competition, the legislation will allow the average natural gas customer to get the benefits of Pennsylvania's expanding Marcellus Shale natural gas production more quickly than would otherwise be the case.
Independent gas providers like Shipley Energy and Dominion Retail buy gas from a variety of sources, including new suppliers offering Marcellus Shale gas to the market. This flexibility means customers will see the impact of Pennsylvania Marcellus production directly on their monthly bills.
Robert Powelson, Chair of the Public Utility Commission, offered his general support for a proposal to allow natural gas distribution companies to adjust their rates more frequently to better reflect the cost of gas to customers.
He cited a 2005 PUC report to the General Assembly that concluded that effective competition did not exist in Pennsylvania's retail natural gas market, noting only 9 percent of residential gas customers have switched to independent natural gas suppliers while 20 percent of small businesses and 57 percent of large industrial customers have switched.
Chairman Powelson said PUC Commissioners are not divided on the issue on letting rates reflect the cost of natural gas more accurately to customers, but they have differing views on whether adjustments should be made monthly or quarterly.
Terrance Fitzpatrick, Energy Association of Pennsylvania, said he does not support the proposal to true-up recovery costs monthly. He expressed a concern that monthly changes in price would result in "big swings" in the costs customers see on their bills.
Sonny Popowsky, PA Consumer Advocate, agreed that many parts of Pennsylvania do not benefit from historically low natural gas prices saying he would like to find ways to get extensions of natural gas service to those communities that do not have it now.
With respect to monthly reconciliation of recovery costs, he too expressed concern about the potential for price volatility for customers.
Rep. Robert Godshall (R-Montgomery) serves as Majority Chair of the Committee and Rep. Joeseph Preston (D-Allegheny) serves as Minority Chair.
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10/31/2011 |
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