Retail Unbundling

Status: The state has one pilot unbundling program for residential gas customers.

Overview: Almost all of the residential and commercial customers in Kinder Morgan’s Nebraska service areas are participating in the state's only customer choice pilot program. Kinder Morgan (KM), which serves about 16 percent of the state's residential and commercial customers, initiated its Nebraska Choice Gas Program in April 1998 as a proactive step to unbundling natural gas services in the state. In the sixth year of KM's program, residential and small commercial customers in 176 of the 180 communities served by KM were eligible to choose among four suppliers for their natural gas, one of which is Kinder Morgan. The other participating suppliers are: Kinder Morgan Choice Gas Supply, ONEOK Gas Marketing, and Public Alliance for Community Energy (formerly PACE and now known as ACE), a municipally owned, not-for-profit organization. Customers were required to make their natural gas supplier selection by May 1, 2003, for service from June 1, 2003, through May 31, 2004. Most customers in the program (69 percent) chose to purchase gas from Kinder Morgan’s gas marketing division, Kinder Morgan Choice Gas Supply. Until passage of the State Natural Gas Regulation Act in May 2003, Nebraska had a somewhat unique situation in which individual communities and municipalities, rather than a statewide regulatory body, regulated retail natural gas service.

EIA State Data: In 2002, Nebraska had 487,332 residential and 56,560 commercial customers. They consumed 44 and 28 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 $6.18 and $5.11 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	487,332	73,842	15.2	73,842	100	15.2
Commercial	56,560	13,031	23.0	13,031	100	23.0
Total	543,892	86,873	16.0	86,873	100	16.0

Sources: Total 2002: Energy Information Administration, Natural Gas Annual 2002 (January 2003). Eligibility and Participation: Kinder Morgan Retail Gas Division.

Summary: Individual communities and municipalities, rather than a statewide regulatory body, regulated retail natural gas service in Nebraska until passage of the State Natural Gas Regulation Act, effective as of January 1, 2004. In setting up its Nebraska Choice Gas Program, KN Energy (now doing business as Kinder Morgan) reached an agreement with each municipality. The company agreed to fund formation of a Municipal Oversight Committee, which would recommend any changes needed in the program and serve as a mediator in any disputes. Nearly all the communities in the company’s service territory have voted to participate in the choice program.

The new legislation is modeled after laws governing natural gas regulation in Kansas and repeals the Municipal Natural Gas Regulation Act which had given regulatory authority of natural gas utilities to local governments. The act includes an option for municipalities and LDCs to negotiate rates for natural gas, but otherwise the Nebraska Public Service Commission will have the responsibility for overseeing the rates charged for natural gas service and also oversight of the terms and conditions of service. Utilities operating in the state must obtain a certificate of public convenience from the PSC. The PSC also has authority to insure that gas marketers operating in the state are properly qualified and capable of providing service. The law also creates a 5-member citizen’s utility ratepayer board to represent consumers in rate proceedings.

Legislation	5/03	Governor Signs State Natural Gas Regulation Act (Bill 790). Act repeals the Municipal Natural Gas Regulation Act and creates a new regulatory structure whereby the Nebraska Public Service Commission will regulate natural gas utilities, assuming responsibility for rates charged for gas service and also the terms and conditions of service. Act includes an option for municipalities and LDCs to negotiate rates; otherwise the PSC will do so. Public utilities doing business in the state must obtain a certificate of public convenience from the PSC. The act becomes effective on January 1, 2004.
Municipality/ Community Action	5/03	Customers Select Suppliers for 2003-2004 Choice Program. Balloting to select a supplier for the 2003 choice program occurred in April 2003. Selections were as follows: Kinder Morgan Choice Gas Supply–60,297; Public Alliance for Community Energy (formerly ACE)--22,510; ONEOK Gas Marketing-4,066.
	5/02	Customers Select Suppliers for 2002-2003 Choice Program. Balloting to select a supplier for the 2002 choice program occurred in April 2002, with 86,151 customers returning supplier selection forms. Selections were as follows: KM Gas Services-38,950; Kinder Morgan-21,912; ACE-21,338; ONEOK Gas Marketing-3,951.
	5/01	Customers Select Suppliers for 2001-2002 Choice Program. Balloting to select a supplier for the 2001 choice program occurred in April 2001, with 86,669 customers returning supplier selection forms. Selections were as follows: KN Gas Services-41,366; KN Energy-23,995; ACE-18,472; ONEOK Gas Marketing-1,727; Midwest United Energy- 969; and MxEnergy-142.
	5/00	Customers Select Suppliers for 2000-2001 Choice Program. Balloting to select a supplier for the 2000 choice program occurred in April 2000.
	5/99	Customers Select Suppliers for 1999-2000 Choice Program. Balloting to select a supplier for the 1999-00 choice program occurred in April 1999, with KN Energy announcing that about 71 percent chose their current supplier. Nearly all communities (176 of 180) are participating in the program.
	5/98	Customers Select Suppliers. Balloting to select a supplier for the 1998-99 choice program occurred between 4/17/98 and 5/1/98, with most (82 percent) choosing KN Services, a wholly owned subsidiary of KN Energy. By the end of March 1998, 165 towns had passed ordinances approving participation in the choice program.
	2/98	Towns Approve Choice Program. More than half (109 of 181) the Nebraska towns in KN' service territory passed ordinances that allow customer choice in their communities. KN customers can purchase gas from one of four suppliers. The company will continue to provide bundled service to those customers who do not choose a supplier. The utility also offers additional services through a program called "Simple Choice" that allows customers to purchase entertainment, communication, and energy services with "one call" and one bill.
	12/97	Agreement Reached on KN Energy's Proposed Choice Program. KN Energy and several Nebraska municipalities reached an agreement on KN's proposed PGA rate increase and planned Choice program. KN Energy agreed to fund formation of a municipal oversight committee, which would recommend program changes and mediate disputes. Municipalities will be able to participate as a supplier in the choice program without having to open their own systems to competition. Towns in KN's service territory will vote on whether or not to participate.