Retail Unbundling

Status: The state has approved two pilot unbundling programs for residential customers.

Overview: Two natural gas utilities (Chesapeake Utilities Corporation and Indiantown Gas Company) in Florida obtained approval in 2002 to convert their residential and commercial sales customers to transportation service and to exit the merchant function as part of experimental transitional pilot programs. In November 2002, the Florida Public Service Commission granted Chesapeake Utilities Corporation’s request to transfer its remaining sales customers (which accounted for only 4 percent of the company’s throughput volumes) to aggregated customer pools, administered by a qualified pool manager selected by the company. Chesapeake must maintain a contractual relationship with the pool manager throughout a 2-year transition period and see that customers have two pricing options: a monthly indexed price or a fixed price. Chesapeake will remain as the supplier of last resort and maintain the customer service function, customer account records, and billing and collection functions. The company must submit a report within 90 days after the completion of the program’s first year, and then again at the end of 2 years, to evaluate customer acceptance of the program and to determine whether to initiate Phase 2, in which customers would have a choice of at least two pool managers and a range of pricing options.

In December 2002, the PSC approved a similar request by Indiantown Gas Company to convert its remaining sales customers to transportation service and to exit the merchant function. The company claimed that the continuing migration of its customer base to transportation service has made it increasingly difficult to deliver gas at competitive prices, as the number of producers and/or marketers interested in providing gas supply for such a small usage level is limited. As with Chesapeake’s petition, the PSC approved a 2-year transitional pilot program that transfers customers to aggregated customer pools, administered by a pool manager. Reporting and program requirements are the same as for Chesapeake’s pilot.

EIA State Profile: In 2002, Florida had 603,690 residential and 53,794 commercial customers. They consumed 15 and 56 billion cubic feet of natural gas, respectively. The average prices paid for natural gas purchased from local distribution companies by residential and commercial customers were $13.61 and $8.17 per thousand cubic feet, respectively.

Customer Type	Total 2002	Eligible		Participating
Customer Type	Total 2002	Total	Percent of 2002 Total	Total	Percent of Eligible	Percent of 2002 Total
Residential	603,690	10,388	1.7	10,388	100	1.7
Commercial	53,794	941	1.7	941	100	1.7
Total	657,484	11,329	1.7	11,329	100	1.7

Sources: Total 2002: Energy Information Administration, Natural Gas Annual 2002 (January 2004).

Eligibility: Florida Public Service Commission. Participation: Estimated based on 2002 data reported on Form EIA-176, "Annual Report of Natural and Supplemental Gas Supply and Disposition," which is the primary data source for the Natural Gas Annual 2002.

Summary: In April 2000, the Florida Public Service Commission adopted rules that extend customer choice to all nonresidential users of natural gas in the state regardless of volume. This gives small businesses in Florida the same option that was previously available only to large industrial and commercial customers. The rules also specify that LDCs may offer transportation services to residential customers.

Regulatory Actions	06/02	Code of Conduct Rules Adopted for Natural Gas Marketing Affiliates. Under the new requirements, an LDC will apply the same transportation tariff provisions to all marketers regardless of affiliation. No preference shall be given over nonaffiliated marketers/customers in matters relating to gas transportation or curtailment priority. Nonshared employees are to be physically sepated from the LDC’s marketing affiliate.
	04/00	Transportation Service Approved for All Nonresidential Customers. Rules were adopted that extend customer choice to all nonresidential users of natural gas in the state regardless of volume. This gives small businesses the same options as large industrial and commercial customers. Rules also specify that LDCs may offer transportation services to residential customers.