Retail Unbundling

Retail Unbundling - Virginia
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Status: The State has begun the process of implementing comprehensive unbundling programs for its residential gas customers.

Overview: Since July 1, 2000, Virginia law has allowed utilities to offer statewide customer choice programs if approved by the State Corporation Commission (SCC). Effective April 1, 2001, Washington Gas Light Company (WGL) became the first utility with authorization to permit all of its customers in the State to buy natural gas directly from a certified, retail energy supplier. The program was phased in during a 1-year period, with choice available at first to 150,000 residential customers and then to the rest of the company's residential customers in the State in January 2002. As of January 1, 2008, about 47,120 residential customers (11 percent of eligible) in WGL’s service territory were enrolled (which includes customers of Shenandoah Gas Company, a division of WGL), down from 49,315 residential customers in January 2007 and 53,195 (13 percent) in January 2006. Columbia Gas of Virginia also has had a choice program in place for all customers in its service area since October 1, 2002, with about 6,354 residential customers and 1,976 nonresidential customers enrolled as of August 1, 2007. Similar to WGL's program, residential customer enrollment in Columbia Gas of Virginia's program has decreased in the past few years. The company had conducted a pilot program from 1997 to 2002 in selected areas of Northern Virginia, with about 9,600 residential customers enrolled as of July 2002.

As of August 2007, six marketers were serving residential natural gas customers in the State: four in WGL’s service area and two in Columbia Gas of Virginia’s. In its most recent annual report (September 2007) on the status of retail access and competition, the SCC noted that about 85 percent of choice customers (residential and nonresidential) in WGL’s service area buy gas from WGL’s affiliate Washington Gas Energy Services. In Columbia Gas of Virginia’s area, choice service accounts represent about 4 percent of all customers, with two non-regulated affiliates serving the greatest number of customers.

The SCC adopted permanent rules for energy choice in 2001. These rules require that local distribution companies provide marketers with names and addresses of eligible customers and their monthly energy consumption for the previous 12 months, if customers choose to have the information released. All bills must use standard terms and include a customer's monthly energy consumption for the past 12 months and a description of all applicable charges and rate changes. Marketers must be licensed by the SCC and demonstrate the financial and technical ability to deliver services to Virginia utility customers.

EIA State Data: In 2006, Virginia had 1,085,509 residential and 91,481 commercial customers who consumed 72 and 62 billion cubic feet of natural gas, respectively. The average prices paid for natural gas purchased from local distribution companies and marketers by residential and commercial customers were $16.20 and $12.46 per thousand cubic feet, respectively.

Eligibility and Participation in Retail Choice Programs

Eligibility and Participation by Customer Class, December 2007

Customer Type	2006 Customer Total	Eligible December 2007		Participating December 2007
Customer Type	2006 Customer Total	Total	Percent of 2006 Customer Total	Total	Percent of Eligible	Percent of 2006 Customer Total
Residential	1,085,509	641,924	59.1	53,474	8.3	4.9
Commercial/Industrial*	92,737	47,490	51.2	10,006	21.1	10.8
Total	1,178,246	689,414	58.5	63,480	9.2	5.4
Virginia had 91,481 commercial and 1,256 industrial customers in 2006. Sources: 2006 Customer Total: Energy Information Administration, Natural Gas Annual 2006* (October 2007). Eligibility: Based on customer totals for Washington Gas Light Company, Shenandoah Gas Company, and Columbia Gas of Virginia reported on Form EIA-176, "Annual Report of Natural and Supplemental Gas Supply and Disposition," which is the primary data source for EIA's Natural Gas Annual. Participation: Virginia State Corporation Commission and Washington Gas Light Web Site (www.washgas.com) (December 2007).

Legislative and Regulatory Actions on Retail Unbundling

Summary: The Virginia General Assembly enacted legislation on July 1, 1999, that allowed all natural gas utilities in the State to offer retail supply choice to its customers as of July 2000. All retail choice plans must first be approved by the State Corporation Commission. The legislation was reenacted and modified in 2000 and included provisions for a natural gas consumption tax that would be added to customers' bills. The General Assembly also passed legislation (enacted July 1999) that opened the retail electricity market to competition during a phase-in period from January 1, 2002, to January 1, 2004. However, new legislation enacted in July 2007 will re-establish rate regulation for most electricity customers in Virginia on January 1, 2009. Still, the legislation continued the policy to allow retail customers of the State's two largest gas companies, Columbia Gas of Virginia and Washington Gas Light, to select other companies to provide their gas supply service. Competitive suppliers participating in natural gas choice programs must apply for a permanent license and operate under rules adopted by the SCC that became effective on August 1, 2001. In order to become licensed, a provider must demonstrate the financial and technical ability to deliver services to Virginia utility customers.

Regulatory and Legislative Actions

Legislation	07/07	Electric Re-Regulation Legislation Enacted. The General Assembly passed legislation (Senate Bill 1416 and House Bill 3068) re-establishing retail rate regulation for most electricity customers in Virginia on January 1, 2009. However, the legislation continued the policy to allow retail customers of the State's two largest gas companies, Columbia Gas of Virginia and Washington Gas Light, to select other companies to provide their gas supply service.
	03/00	Modifications to Retail Choice Legislation, HB 279 and SB 185. Legislation approved (enacted July 2000) that authorizes gas suppliers, pipeline distribution companies, and gas utilities to file a retail supply choice plan that includes provisions to implement the program, methodology to recover stranded costs, proposed unbundled rates and terms, and provisions to insure that one class of customer does not subsidize another class. The bill would also create a natural gas consumption tax, which would be added to the consumer's bill.
	03/99	Statewide Retail Choice Approved, Senate Bill 1105. Legislation was approved (enacted July 1999) that authorizes all natural gas local distribution companies to offer supply choice to their customers. Such plans are to be approved by the SCC and would not start before July 2000. The law also calls for a study of gas utility taxation issues before the 2000 legislative session. The legislation will expire on July 1, 2000, unless reenacted by the General Assembly.
Regulatory Actions	09/07	Annual Report on Status of Competition. Report to the Governor focuses on electric power competition but also provides a brief summary of gas retail access programs. As of August 1, 2007, Washington Gas Light Company's (WGL) program had 4 active marketers serving about 47,000 residential customers and 11 marketers serving about 8,000 non-residential customers. Columbia Gas of Virginia's program had two marketers serving 6,354 residential customers and three marketers serving 1,976 non-residential customers. Cumulatively, choice customers account for about 12 percent of gas consumers in WGL's service area and 4 percent of those in Columbia Gas of Virginia's area.
	09/06	Annual Report on Status of Competition. Report to the Governor focuses on electric power competition but also provides a brief summary of gas retail access programs. As of August 1, 2006, Washington Gas Light Company's (WGL) program had 4 active marketers serving about 51,000 residential customers and 12 marketers serving about 7,600 non-residential customers. Columbia Gas of Virginia's program had two marketers providing service to 6,837 residential customers and three marketers serving 2,257 non-residential customers. Cumulatively, choice customers account for about 13.1 percent of gas consumers in WGL's service area and 4.0 percent of those in Columbia Gas of Virginia's area.
	09/05	Annual Report on Status of Competition. WGL's program has four active marketers serving about 56,000 residential customers and 12 marketers serving 6,977 non-residential customers. Columbia Gas of Virginia's program has four marketers providing service to 7,370 residential customers and 1,988 non-residential customers. Cumulatively, choice customers account for about 14.6 percent of gas consumers in WGL's service area and 4.2 percent of those in Columbia Gas of Virginia's area.
	09/04	Annual Report on Status of Competition. Report appendix provides a summary of gas retail access programs. WGL's program has four active marketers serving 65,840 residential customers and 12 marketers serving 7,155 nonresidential customers. Columbia Gas of Virginia's program also has four marketers providing service to 8,818 residential customers and 1,212 non-residential customers.
	08/03	2003 Report to the Governor on Status of Competition. Report provides details on development of competitive retail energy markets, with emphasis on electric power markets. Appendix notes that marketer activity has been better in the natural gas program than in electric programs but actual level of competition may be distorted because of the high level of affiliate concentration.
	06/02	Columbia Gas Authorized to Extend Choice to All Customers. The SCC authorized Columbia Gas of Virginia to extend its customer choice program to all its customers in the State. The company serves about 200,000 customers in central Virginia, portions of the Shenandoah Valley, portions of Northern Virginia, and part of the Hampton Roads region, including Suffolk and Portsmouth. The company plans to implement its choice plan in time for the 2002-2003 heating season.
	04/01	Washington Gas Authorized to Extend Choice to All Customers. The program is being phased in during a one-year period, with choice available at first to 150,000 residential customers and then to the rest of the company's residential customers in the State in January 2002.
	06/01	Permanent Retail Choice Rules Adopted (effective August 2001). These rules require that local distribution companies give marketers the names, addresses, and monthly energy consumption for the year (previous 12 months) of eligible customers, if customers' choose to have the information released. All bills must use standard terminology for distribution service, competitive transition charge, natural gas supply service, and taxes. Bills must include a customer's monthly energy consumption for the past 12 months and a description of all applicable charges and rate changes. Marketers must be licensed by the SCC and demonstrate the financial and technical ability to deliver services to Virginia utility customers
	02/00	Retail Access Pilot Program Rules, Order Inviting Comments, Case PUE980812. The SCC revised proposed standards governing retail access pilot programs presented in the hearing examiner's August 1999 report. The rules cover the relationship between LDCs and competitive service providers, their responsibilities to retail customers, and licensing requirements for competitive service providers. The revised rules are more detailed than in the hearing examiner's report and include a definitions section and a section on requirements for aggregators. Written comments are due by 2/24/2000.
	12/99	Consumer Education Program Plan, SCC Report to Legislature. The SCC recommends a 5-year education program to inform consumers about energy choice in Virginia. The program would require mass media marketing and advertising and would be funded through the SCC's special revenue tax assessed on regulated utilities. The report will be considered by the Legislative Transition Task Force, which was established to monitor the State's energy restructuring effort.
	08/99	Columbia Gas Pilot Extended, Case PUE990245. The SCC approved continuance of Columbia's customer choice program (formerly Commonwealth Choice) until October 1, 2000, provided that the company file an interim balancing study by the end of August 1999 and a final balancing report at the end of the pilot. Originally the pilot was approved for the 2-year period from October 1997 to October 1999. About 25 percent (6,500) of eligible customers are participating.
	08/99	Retail Access Pilot Program Rules, Hearing Examiner Report, Case PUE980812. The examiner recommended that the task force's proposed rules be adopted with limited modifications and clarifications. Marketing materials must include clear pricing terms and residential monthly bill estimates based on 7.5 thousand cubic foot consumption. Customers have a 3-day rescission period. Deposits required by marketers cannot exceed the equivalent of a customer's estimated liability for 2 months of service. Marketers must have sufficient gas delivery capability to serve their firm customers; if not, LDCs can impose penalties. A utility may not give its affiliates any preference in providing regulated services; may not tie regulated service to any other product; and may not disclose any customer-specific information (unless requested by customer). Utilities and affiliates must maintain separate books and records. All aggregators and competitive service providers must be licensed by the Commonwealth. License applications must identify geographic area of proposed service, name of LDC certified to serve the area, and include sufficient information to indicate "financial fitness" for providing proposed services.
	03/99	Standards of Conduct: Task Force Report. Report proposes standards of conduct governing issues common to both retail gas unbundling programs and retail access pilot programs for electric utilities. The rules address conduct standards for competitive service providers, LDCs and their affiliates, and licensing and filing requirements. Formal hearings are scheduled to allow comment by all interested parties, with a hearing examiner assigned to conduct all further proceedings.
	12/98	Number of Commercial/Industrial Customers in WGL Pilot Increased, Case PUE971024. The SCC approved Washington Gas Light's (WGL) request to expand the number of eligible commercial and industrial customers to include all applications received by 12/9/98, which is the last date to apply for service beginning 1/1/99. The original program covered 10 percent, and WGL has received applications from about 16 percent of the customer class.
	06/98	Approval of WGL Pilot Program, Case PUE971024. The SCC approved a 2-year pilot program that would allow Washington Gas Light to provide delivery-only service to 10 percent (20 percent the second year) of eligible firm bundled service customers. Balancing service would be offered to suppliers on an annual basis the first year and monthly the second year. Qualifying suppliers must aggregate at least 100 dekatherms of average daily contract quantities.
	03/98	Special Rate Guidelines, Case PUE970695. The SCC adopted guidelines for utility applications for special rates for particular customers or customer classes. Utilities must show the effect of such rates on total company revenues, total company expenses, and the return on rate base (if applicable), as well as the rate impact on other customers. Applications will be reviewed on a case-by-case basis.
	09/97	Approval of Commonwealth Gas Service Pilot Program, Case PUE970455. The SCC approved a 2-year pilot choice program for residential and small commercial customers in the Gainesville area. The program will begin October 1, 1997, and continue until October 1, 1999. Enrollment will be open rather than limited to a particular period, aggregation service agreements are to be included in the tariff as well as provisions that participating marketers must respond to SCC data requests, and the company is to conduct a balancing study "using daily load sampling in conjunction with the pilot to gather information about customer gas consumption in comparison with load profiles used by marketers." The SCC also directed that a task force be established to develop a code of conduct to govern retail gas unbundling.