Retail Unbundling

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

Overview: Two local distribution companies (LDCs) in Montana, serving about 72 percent of the state's residential customers, have initiated customer choice pilot programs. Montana Power Company (d/b/as Northwestern Corporation, 3-02) began its program in November 1998 and offered natural gas supplier choice to approximately 11,000 of its residential and small commercial customers. Energy West Resources began its program in October 1999, which is open to all of its residential and small commercial customers.

Although the Montana Public Service Commission does not collect specific information on participation levels, it estimates that only 0.5 percent (about 1,200) of residential and small commercial customers have signed up for alternative suppliers. The Natural Gas Restructuring and Customers Choice Act was passed in 1997. Under this act, gas utilities may voluntarily offer their customers a choice of supplier. Customers served by LDCs that have implemented customer choice programs were to choose a nonutility gas supplier by 2002, but the date has been extended to mid-2007. Currently, there are four marketers licensed as gas suppliers in the state.

EIA State Data: In 2002, Montana had 229,051 residential and 30,613 commercial customers who consumed 22 and 15 billion cubic feet of natural gas, respectively. The average prices paid for natural gas purchased from LDCs by residential and commercial customers were $5.30 and $5.37 per thousand cubic feet, respectively.

Summary: The Natural Gas Restructuring and Customers Choice Act was passed in 1997, which allows gas utilities voluntarily to offer their customers a choice of supplier and provide open access to their transmission, storage, or distribution facilities. All utilities providing customer choice must unbundle services and remove natural gas production and gathering from the rate base. The Montana Public Service Commission has adopted several rules to implement the legislation and guide the transition to a competitive retail natural gas market.

Legislation	5/97	Natural Gas Utility Restructuring and Customer Choice Act, SB396. The 1997 Montana Legislature enacted the "Natural Gas Utility Restructuring and Customer Choice Act," which became effective 5/22/97 (Ch. 506, L. 1997). The law allows competition for the supply of natural gas and electric service and permits regulated utilities to file restructuring plans. The Montana Public Service Commission (PSC) is to adopt rules to implement the new laws.
Regulatory Action	6/99	Rules Adopted re Customer Information and Protection. Suppliers must obtain written authorization from consumers and provide a contract specifying service terms before switching suppliers. All contracts must have a "uniform information label" to allow consumers to compare price and contract terms. Other rules cover service disconnections, complaint procedures, billing, and supplier of last resort provisions.
	12/98	Approval of Great Falls Gas Co. (now doing business as Energy West Montana) Restructuring, Docket D98.3.68, Order 6064b, Final Order. The PSC approved open access and customer choice on Great Falls' system. Full choice for residential and small commercial customers is set to begin on 10/1/99, with open season starting 5/1/99. By the end of the second year of choice, Great Falls is to file a plan for assigning customers who have not chosen a supplier.
	9/98	Hearing on Great Falls Gas Co. Proposed Choice Program. In March 1998, Great Falls Gas Co. filed a restructuring plan that would unbundle services for its residential and small commercial customers. Customers would have until October 1999 to choose a new gas supplier or continue traditional service with the supplier selected by Great Falls Gas. Great Falls would stop selling gas in October 1999 and offer only distribution and transportation services. Stranded costs would be assigned to its affiliate Energy West, which would provide management services for 5 years.
	8/98	Approval of Montana Power Company's (MPC) Pilot Program Application, Docket D98.2.28, Order 6061a. The PSC approved MPC's plans for a pilot choice program as specified in PSC's final order on 10/97.The program will begin November 1998 and offer natural gas supplier choice to approximately 11,000 residential and small commercial customers (up to 0.5 billion cubic feet of MPC's annual load). All MPC customers are to choose gas suppliers by July 1, 2002.
	6/98	Natural Gas Restructuring Rules. The PSC adopted rules to implement the Natural Gas Utility Restructuring and Customer Choice Act. The rules cover utility restructuring, provider conduct, supplier licensing, and universal system benefits programs. Gas suppliers must be licensed by the PSC, maintain an electronic registration with the PSC, and submit annual reports on services provided, quality and reliability of service, and company organizational structure (affiliates, etc).
	10/97	Approval of Montana Power Company's (MPC) Restructuring, Docket D96.2.22, Order 5898d, Final Order. The PSC approved a settlement agreement between MPC, the Consumer Counsel, and other parties, which phases in customer choice for MPC customers. The minimum threshold for transportation service is reduced from 60,000 to 5,000 dekatherms/year. Residential rates will be frozen for 2 years and MPC can recover about $60 million of stranded costs in the next 15 years. The company is to submit plans (within 90 days) for a pilot choice program for residential and small commercial customers for PSC approval. Six months prior to the end of the 5-year transition period ending 7-1-02, MPC is to file a plan with the PSC proposing a method of assigning customers who have not chosen gas suppliers. The PSC will then determine whether MPC's distribution entity should continue its merchant function of providing supply for small commercial and residential customers based on the development of competition for these customers.
	12/96	Proceedings Suspended on MPC Restructuring. The PSC suspended proceedings on MPC's comprehensive case until action is completed on proposed restructuring legislation and to allow settlement negotiations to continue. Several stipulations were subsequently presented to the PSC as a result of settlement conferences.
	7/96	MPC Restructuring Plan. MPC filed a restructuring plan that would reduce the threshold to qualify for gas transportation service, include pilot choice programs for residential and commercial customers, remove the company's production assets from the rate base, and provide a mechanism for recovering stranded costs. Several parties intervened, including the Montana Consumer Counsel, the Montana Large Customer Group, certain Montana marketers, the Montana Department of Environmental Quality, the Northern Montana Oil and Gas Association, and others. The MPC filing also included a revenue increase request and a gas tracker update.
	2/96	"Order Initiating Proceeding." (Order No. 5898) directed Montana Power Company to file a comprehensive case to resolve cost of service and rate design issues and further unbundle its system.