Residential Retail Unbundling for Wisconsin

Status: The state's one pilot choice program for residential customers was discontinued as of October 31, 2001.

Overview: In April 2001, Wisconsin Gas Company, the largest local distribution company (LDC) in the state with 34 percent of the residential market, decided not to continue its pilot program beyond October 31, 2001, because of declining marketer and customer participation. Only two suppliers were serving residential customers and four were serving commercial customers. The program began in November 1996 in the West Bend area and was later expanded to include customers in three more municipalities. In the last year of the program (November 2000 - October 2001), 1,838 residential customers were enrolled (7 percent of those eligible) and 1,647 commercial customers (5 percent of those eligible). In 1999, the next two largest LDCs, Wisconsin Public Service and Wisconsin Electric, were directed to include proposals for unbundled service in their next tariff filings. A smaller utility, Madison Gas & Electric, has a tariff service allowing more than 500 medium-sized commercial customers to become transportation customers. These customers are not required to have telemetering equipment. According to the Wisconsin Public Utility Commission, instead of choice, some Wisconsin utilities are offering customers alternative services. For example, one utility offers a fixed price service and another offers an annual fixed bill option.

EIA State Data: In 2001, Wisconsin had 1,484,536 residential and 144,282 commercial customers who consumed 125 and 76 billion cubic feet of natural gas, respectively. In 1998, under the pilot program, 135 million cubic feet of residential gas was transported. The average prices paid for natural gas purchased from LDCs by residential and commercial customers were $8.76 and $7.54 per thousand cubic feet, respectively. The average city gate price in the state was $5.90 per thousand cubic feet.

Summary: In 1992, the Public Service Commission (PSC) of Wisconsin formed a workgroup to identify and investigate state regulatory options in light of the restructuring of the interstate natural gas industry. Based on the workgroup report and a staff study, the PSC endorsed unbundling of the state's gas industry when and as customer classes gain "effective market choice"and opened a docket in December 1995 to begin the process. Standards of conduct were developed to govern relationships between local distribution companies (LDCs) and affiliates, and new cost categories were established for rate case cost-of-service studies. In 1997, the PSC approved a case-by-case "workable competition" approach to assess whether effective competition exists in a particular market. It determined that consumer protection and reliable service policy issues would need to be addressed before deregulation could begin and ordered formation of six workgroups to consider (1) capacity policy, (2) marketer certification, (3) legislation issues, (4) price reporting, (5) market-based pricing for large-volume customers, and (6) consumer protection and essential service measures.

Regulatory Actions	4/99	GasAdvantage Approved for Fourth Year. The PSC approved continuation of Wisconsin Gas Company's customer choice program for a fourth year, from 11/1/99 to 10/31/00. Residential customers in West Bend, Slinger, Hartford, and Jackson are eligible (before only West Bend) with enrollment running from 7/1/99 to 9/30/99. The number of eligible commercial customers will be expanded to include all in the ANR-served territory, and available capacity will increase from 11,300 Dekatherms (Dth) to 22,000 Dth peak-day service.
	6/98	GasAdvantage Approved for Third Year. The PSC approved continuation of Wisconsin Gas Company's customer choice program for a third year for customers in certain zip codes in West Bend. Marketers provide billing and gas supply services while Wisconsin Gas handles delivery and related services. Currently enrolled customers may stay with their current marketer or choose a new one. Once enrolled in the program, customers may not return to Wisconsin Gas for supply service from 11/1/98 to 4/16/99.
	10/97	Consumer Protection and Service Policy Issues. The PSC ordered formation of six workgroups to consider (1) capacity policy, (2) marketer certification, (3) legislation issues, (4) price reporting, (5) market-based pricing for large-volume customers, and (6) consumer protection and essential service measures.
	6/97	Competitive Market Standards, PSC Order 05-GI-108, Phase III. In Phase III of the restructuring docket, the PSC focused on how to determine whether a market is sufficiently competitive to reduce or eliminate regulation and to determine what barriers there are to effective competition. The PSC approved a "workable competition" standard to be used in assessing whether effective competition exists in a particular market. The standard would be applied on a case-by-case basis and would be based on a reasonable number of suppliers (Herfindahl-Hirschman Index of 2,000 to 2,500), low barriers to competition, sufficient capacity, informed consumers, and "responsive" suppliers.
	1/97	Standards of Conduct Re Opportunity Sales, PSC Order 05-GI-108, Phase II. Standards were developed to ensure that all opportunity sales are made on a nondiscriminatory basis. Gas utilities must make monthly filings to the PSC of all opportunity sales and indicate to the PSC and all interested parties the guidelines used by the LDC when making long-term and short-term opportunity sales. Standards were also developed to govern relations between utilities and their affiliates to ensure that utilities not disclose any customer-specific information and to prevent any cross subsidies.
	12/95	Restructuring Docket Opened, PSC Order 05-GI-108, Phase I. The PSC ordered that LDCs must separate gas supply and capacity assets to make both regulated and deregulated sales. LDCs can serve the deregulated market only through a separate affiliate that has separate books, assets, and personnel. LDCs can sell unutilized assets ("opportunity sales") to mitigate total costs. Standards of conduct will be developed to govern these sales.
	4/94	Staff Study of Regulatory Reform. The PSC staff presented four market models for restructuring the retail gas industry: (A) deregulate both gas commodity and interstate capacity; (B) deregulate only gas commodity; (C) retain regulation, but place increased reliance on market forces; or (D) deregulate gas commodity and/or capacity as customers gain effective market choice. The PSC selected Model D and those portions of Model C that would unbundle regulated utility services.
	9/93	Workgroup Report on Natural Gas Regulation. In March 1992, the PSC established a workgroup of utility personnel and PSC staff to identify and evaluate issues related to regulatory reform in the state. The workgroup presented its report to the PSC in September 1993 that presented three regulatory options: a market-based strategy, a problem-solving strategy, and a planning strategy. The PSC adopted the problem-solving strategy and formed a staff study group to address restructuring issues raised in the report.