Retail Unbundling

Overview: In January 2000, the Kentucky Public Service Commission (PSC) approved a pilot customer choice program for residential and small-volume commercial customers of Columbia Gas of Kentucky. The program, "Columbia Customer Choice," began on September 2000 and is available to all Columbia customers who consume less than 25 million cubic feet of natural gas per year. Columbia continues as the supplier of last resort and remains in the merchant business, both selling and transporting natural gas to consumers. In June 2003, Columbia stated that choice participants were not saving money and asked that the pilot be discontinued 7 months before its scheduled termination date of October 31, 2004. Interstate Gas Supply (IGS), which supplies gas to most of Columbia's choice participants, disputed the claim, as did many other parties. Subsequently, the PSC determined that Columbia had used an inaccurate accounting procedure to evaluate the program. Instead, the PSC found that program participants, in the aggregate, have saved on their gas bills and ordered Columbia to extend the pilot through March 31, 2005. The PSC also directed Columbia to hire an external consultant before the end of the 2003-2004 heating season to evaluate the customer choice program. As of June 2003, about 41,000 of the company’s 126,000 residential customers were participating, down from about 45,600 in June 2002.

On January 13, 2002, the PSC approved an agreement wherein marketers participating in Columbia’s choice program will “take assignment of minimum levels of the utility’s storage and transportation capacity and undergo a prospective capacity audit.” If a marketer does not meet its capacity requirements, the utility may assign capacity to meet the shortfall. According to Columbia’s most recent report (June 2003), three marketers were participating in the pilot program, with one marketer serving about 80 percent of the choice participants. As of December 2003, only two marketers were actively adding new customers. Larger volume customers throughout the state have had access to unbundled service since the 1980s.

EIA State Data: In 2002, Kentucky had 756,185 residential and 82,753 commercial customers. They consumed 59 and 36 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 $7.52 and $7.02 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	756,185	128,241	17.0	41,095	32.0	5.4
Commercial	82,753	14,732	17.8	5,000	34.0	6.0
Total	838,938	142,973	17.0	46,095	32.2	5.5

Sources: Total 2002: Energy Information Administration, Natural Gas Annual 2002 (January 2004). Eligibility Rate: Based on customer totals for Columbia Gas of Kentucky 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 Rates: Kentucky Public Service Commission.