Retail Unbundling

Status: The state has partially implemented comprehensive unbundling programs for its residential customers.

Overview: Retail unbundling by the major gas utilities in Ohio is being implemented through Ohio Public Utilities Commission (PUC) orders and stipulations with individual companies. Three utilities in the state (Columbia Gas of Ohio, Cincinnati Gas & Electric, and East Ohio) have had choice programs underway since 1997, and a fourth company (Vectren Energy Delivery of Ohio) began its program in January 2003. The first choice offerings were through pilot programs for a limited number of customers. The Columbia Gas and Cincinnati Gas & Electric programs were expanded to all customers in their service territories in June 1998 and the East Ohio Gas program was made company-wide in July 2000. Vectren Energy’s program was implemented in three phases, with 15 percent (about 45,000) of Vectren's customers eligible at the start, 33 percent in April 2003, and 100 percent in September 2003. No more than 20 percent of total participants in each phase could be nonresidential customers. As of December 2003, about 24 percent of Vectren’s residential customers were enrolled.

The state also allows communities to purchase natural gas through aggregation programs where the residents and businesses form buying pools to obtain better price deals. Local governments may choose an “opt-in” or “opt-out” form of aggregation. The opt-in program requires that customers sign up if they wish to participate, while the opt-out program includes all customers in the community unless they choose not to participate. In either case, the local governments must adopt an ordinance or resolution to create the programs. The opt-out programs must be approved by ballot at a primary or general election. According to the Ohio Consumers’ Counsel, more than 190 Ohio communities have approved aggregation programs, including the 112 communities that are part of the Northeast Ohio Public Energy Council (NOPEC). According to the Council’s web site, NOPEC is the largest public aggregation in the country with more than 600,000 potential customers. Customers already enrolled in choice programs are not included in aggregation programs unless they ask to join.

The aggregation programs were an outgrowth of legislation signed in March 2001, which also requires retail gas suppliers to be certified by the PUC; authorizes the PUC to order open access for large local distribution companies; and consolidates consumer protection authority over certain retail natural gas transactions. On rehearing, a gas supplier rules implementation group was formed to discuss certain marketer issues, such as whether "price-to-compare" information should be included in customers' bills. The PUC finalized its rules in support of the legislation in April 2002.

According to a report by the Ohio PUC in May 2001, the high natural gas prices in the winter of 2000-2001 caused some suppliers to exit the program because of difficulties in meeting fixed contractual obligations. The number and variety of rate plans offered also decreased, and many marketers scaled back or froze efforts to acquire new customers. This limited choice for consumers and also dampened consumer confidence in choice programs. Enrollment problems were also noted, with some enrollments delayed for more than 3 months and difficulties in changing back to LDC sales service because of enrollment cutoff dates. In the fall of 2003, however, a PUC spokesman noted that those customers who switched to an independent supplier when the choice program started in 2000 probably have saved money. Before deciding to switch, customers are encouraged to calculate the true costs of using an independent supplier, using the price comparison charts posted on the PUC web site. The comparison charts caution that total rates for regulated and unregulated suppliers differ in the types of taxes that are applied. The utilities assess their customers a gross receipts tax on the volume of gas consumed, while by law natural gas purchases from unregulated suppliers are subject to sales taxes. As of December 2003, 10 marketers were actively enrolling customers, up from 8 marketers in December 2001. In September 2003, First Energy announced that it would not renew its contracts with residential and small commercial customers, because of the current volatility in the gas market.

EIA State Data: In 2002, Ohio had 3,203,466 residential and 271,151 commercial customers. They consumed 321 and 163 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 $7.61 and $6.43 per thousand cubic feet, respectively.

*Total 2001 commercial customers include both large- and small-volume customers. Data for eligible and participating customers include only small-volume commercial customers.

Sources: Total 2002: Energy Information Administration, Natural Gas Annual 2002 (January 2004). Eligibility and Participation: Public Utilities Commission of Ohio (December 2003).

LDC Customer Data as of December 2003 from the Public Utilities Commission of Ohio

Summary: The Ohio General Assembly passed the Natural Gas Alternative Regulation law in June 1996, which set customer choice as a state goal in the provision of natural gas services. In March 1997, the Public Utilities Commission of Ohio adopted rules to implement this alternative regulation legislation. As of December 2003, the PUC is coordinating customer choice programs in the delivery areas of four local distribution companies with a customer base of about 3.0 million residential customers. The PUC has developed a series of price comparison charts known as "Apples to Apples" to provide customers with price information from the various marketers. Legislation was passed in 2001 that requires retail gas suppliers to be certified by the PUC; authorizes the formation of aggregate buying groups for natural gas; authorizes the PUC to order open access for large LDCs; and consolidates consumer protection authority over certain retail natural gas transactions. Rules in support of this legislation were finalized in April 2002 and became effective in July 2002. In a departure from the usual practice of quarterly price adjustments, the PUC is allowing CG&E to make monthly changes to its regulated gas rate during the period September 1, 2003, through August 31, 2004. Vectren Energy can also adjust prices monthly, while Dominion East Ohio and Columbia Gas can adjust their rates only at quarterly intervals.

Legislation	3/01	House Bill 9. Governor signed amended substituted HB 9, which requires retail gas suppliers to be certified by PUCO; authorizes governmental aggregation for competitive retail gas service; authorizes PUCO to order open access for large LDCs; and consolidates consumer protection authority over certain retail natural gas transactions.
	6/96	The Natural Gas Alternative Regulation Law, House Bill 476. Establishes customer choice as a state policy goal.
Regulatory Action	08/03	PUC Allows Monthly Rate Adjustments for CG&E. Despite objections by the Ohio Consumers’ Counsel, the PUC decided to allow CG&E to make monthly changes to its regulated gas rate during the period September 1, 2003, through August 31, 2004. CG&E will file its new rate one day before it goes into effect. Previously customers were guaranteed the same rate for 3 months. The PUC also approved a monthly rate for Vectren. Energy Delivery.
	05/03	PUC Ordered Some Revisions to Dominion East’s (DEO) Proposed Tariff. PUC approved most provisions in tariff but sided with marketers in their complaints about some financial and creditworthiness issues. PUC agreed that OFO penalties are not costs that should be associated with participation in choice programs and that DEO should give 5 days notice before requiring additional financial security measures from marketers. PUC refused the marketers’ request to consolidate DEO’s tariff filing with those of Columbia and CG&E.
	05/03	Five LDCs Request “Bad-Debt Tracker.” Utilities file to allow mechanism to recover gas costs for nonpaying customers. Blame growth in number of nonpayments on variable rates through gas choice programs.
	03/03	PUC Investigates Possible Shift to Monthly GCRs. The PUC set up informal meetings with LDCs and marketers to consider shift to monthly gas cost recovery charges instead of quarterly.
	11/02	Ad Hoc Marketer Coalition Wants Statewide Financial Standards. Group of seven marketers asked PUC for uniform statewide standards for marketers including standards for financial security and defaults. The group asked that PUC develop uniform criteria against which the tariffs filed by Columbia, CG&E, and Dominion East Ohio on Nov. 1, 2002, can be measured.
	11/02	Companies File Tariff Revisions to Correspond to New Rules for Competitive Retail Gas Service. Columbia Gas of Ohio (Case No. 02-2903-GA-ATA), CG&E (02-2895-GA-ATA), and Dominion East Ohio (01-1371-GA-ORD) filed new tariffs on November 1, 2002.
	10/02	Review of Utilities' Financial Health Initiated. The PUC plans an in-depth review of the financial condition of tbe state's public utilities to ensure that the unregulated activities of their affiliates do not compromise the integrity of energy services to Ohio utility customers..
	8/02	Choice Program Approved for Vectren Energy Delivery. The PUC approved a choice program for Vectren Energy, which distributes natural gas to 320,000 customers in the Dayton and west central Ohio area. The program will be implemented in three phases, with 15 percent of Vectren's customers eligible at the start, 33 percent in April 2003, and 100 percent in September 2003. No more than 20 percent of total participants in each phase can be nonresidential customers. Customers can begin choosing suppliers on November 1, 2002.
	4/02	Finalized Retail Choice Rules. PUC finalized rules in accordance with Amended Substitute House Bill 9, signed on March 27, 2001, which establish certification requirements for competitive retail gas suppliers and aggregators, rules re formation and operation of governmental aggregation, consumer protection measures, and reporting and enforcement procedures to ensure rules are followed. According to law, all marketers must be certified by July 26, 2002.
	7/01	Proposed Retail Choice Rules. On June 19, 2001, PUC issued for comment proposed rules for competitive retail natural gas service and providers. Rules are modeled after those developed for electric service.
	5/01	PUC Report:Gas Price Issues, Winter 2000-01. Rising commodity prices caused some suppliers to exit the program- difficult to compete with slower rising GCR and to meet fixed contractual obligations. Difficulty maintaining rate plan options - Number of rate plans offered and variety of options decreased (fixed rate options, discounts off GCR rate). Variable rate contracts introduced or only options remaining. Fewer marketers - thus limiting choice and eroding consumer confidence in choice programs. Also some scaled back or froze efforts to acquire new customers. Enrollment problems - some enrollments delayed for more than 3 months - also difficulty in changing back to LDC because of enrollment cutoff date.
	3/01	Request for Study of Natural Gas Price Issues. PUC directed staff to investigate the impact of recent high prices on Ohio gas consumers and the natural gas choice programs. Report request initiated in response to a petition filed by the Ohio Consumers' Counsel in January 2001 and numerous inquiries by the public and the Ohio General Assembly.
	12/99	Continuation of Pilot Programs Approved, Cases 98-593-GA-COI, 98-594-GA-COI, 98-595-GA-COI, 98-1167-GA-COI, 99-661-GA-COI. PUCO approved, with conditions, the continuation of pilot customer choice programs for Columbia Gas of Ohio, East Ohio Gas, and Cincinnati Gas and Electric. One of the prominent conditions for approval is that the PUCO staff will develop a proposal, within 30 days, designed to address complaints associated with door-to-door solicitations on the part of marketers. Another concern is the lack of timely reporting by marketers to PUCO staff of rates for residential customers to be included in the"Apples to Apples" comparison chart. In today's order, PUCO directed local distribution companies to make such reporting a requirement for marketer participation in the program.
	12/99	Columbia Gas Pilot Extended, Cases 94-987-GA-AIR, 96-1113-GA-ATA, 98-222-GA-GCR, 97-122-GA-FOR. PUCO approved a stipulation that, among other things, extends Columbia Gas of Ohio's Customer Choice program through October 2004, freezes Columbia's base rates through October 2004, and establishes a process to address issues related to merchant function, obligation to serve, and provider of last resort roles and responsibilities.
	6/99	Staff Report: Second Evaluation of Natural Gas Choice Programs. Staff recommends that the East Ohio pilot remain limited to 10-county area for the 1999-2000 heating season because of continuing computer problems. Recommends that the PUCO continue to provide marketer price comparisons and that marketers who fail to provide timely information be excluded. Supports incorporation of marketer conduct guidelines in LDCs' Code of Conduct section of tariff filings. Endorses Columbia Gas's telephone and Internet enrollment process as a model for other programs and recommends improved enforcement of Codes of Conduct rather than restricting door-to-door solicitations. Agrees with LDCs that under existing law LDCs have sole right to propose changes to the gas cost recovery (GCR) mechanism and other service modifications and that the PUCO cannot order companies to exit the merchant function; thus recommends a forum approach for further discussion of issues relating to GCR reform and obligation to serve.
	6/99	Investigation of Code of Conduct Tariff Language, Case 99-661-GA-COI. The PUCO approved interim rules that would exclude or suspend marketers from participation in retail choice programs if they violated existing codes of conduct. Customers of noncomplying marketers would then return to being bundled service customers of the LDC.
	1/99	Internet Enrollment Allowed, Cases 98-549-GA-ATA. The PUCO approved use of the Internet for enrolling customers in Columbia Gas's retail choice program. The enrollment must be initiated by the customer rather than the marketer. Required safeguards include: a 7-day period during which customers can cancel without penalty; written confirmation of enrollment; and a secure encryption account number code.
	6/98	Columbia Gas Program Expanded, Cases 94-593-GA-COI et al. The PUCO approved expansion of Columbia Gas retail choice program to all its residential and small business customers (1.3 million) during the 1998-99 winter and the continuation of the existing programs of East Ohio Gas and Cincinnati Gas and Electric. Marketers may not sign up new customers until August 1, 1998.
	1/98	Transition Cost Recovery Mechanism Approved for Columbia Gas, Cases 94-987-GA-AIR and 96-113-GA-ATA. The PUCO approved a transition cost recovery mechanism for Columbia Gas that was proposed by a 13-member collaborative representing consumers, government, industry, and PUCO staff and would take effect if Columbia Gas pilot is expanded statewide. Base rates would remain the same until 2000. A 4-year fund would be established from revenue from voluntary capacity assignments, balancing services, interstate pipeline company refunds, and some of the offsystem revenue to offset purchased interstate pipeline and storage services that would be unneeded if customers bought gas from marketers. Columbia would be "at risk" for 11 percent of its transition costs. Half the revenues from offsystem sales that exceed $17.2 million in any of the next 4 years would be allocated to the cost recovery mechanism and the other half would be kept by Columbia.
	7/97	CG&E and East Ohio Pilot Programs Approved, Cases 95-656-GA-AIR and 96-1019-GA-ATA. The PUCO approved 18-month pilot programs for Cincinnati Gas and Electric (CG&E) and East Ohio Gas companies. All CG&E residential and small business customers are eligible to participate, while the East Ohio program covers customers in a 10-county area. After 1 year, the PUCO decides whether or not East Ohio's pilot should be expanded to a wider service territory. Both companies must provide consumer education programs and continue as suppliers of last resort. Under the East Ohio settlement, upstream pipeline and storage capacity would be assigned to the marketer on a pro-rata basis; if the assignment was below a set level, East Ohio would use the capacity for its core market and the marketer would have to obtain alternative capacity. Part of the assigned storage capacity could be remarketed.
	3/97	Rules Adopted To Implement Alternative Regulation Legislation, Case 96-700-GA-ORD. The PUCO adopted rules to implement the Natural Gas Alternative Regulation Law. The rules allow LDCs to apply to the Commission for the opportunity to compete directly with marketers for supplies, allowing the general public to benefit from an array of natural gas suppliers. The rules also require a natural gas company to adopt a "code of conduct" to demonstrate how it is guarding against cross subsidies or other anticompetitive actions.
	1/97	Columbia Gas Pilot Approved, Case 96-1113-GA-ATA. The PUCO approved Columbia Gas of Ohio's request to operate a pilot choice program for natural gas residential and small business customers (using less than 2 million cubic feet (MMcf) per year) in the Toledo area. The program begins in April 1997 and is open to all marketers who agree to participate in Columbia's aggregation service. Participating marketers must have at least 200 residential customers or a group of commercial customers with annual throughput of at least 2 MMcf. Marketers will be charged a daily balancing fee if they do not take storage and upstream capacity from Columbia.

Customer Type	Total 2002	Eligible		Participating
Customer Type	Total 2002	Total	Percent of 2002 Total	Total	Percent of Eligible	Percent of 2001 Total
Residential	3,203,466	2,921,713	91	1,253,596	42.9	39.1
Commercial*	271,251	242,128	89	102,456	42.3	37.8
Total	3,474,617	3,163,841	91	1,356,052	42.9	39.0

Local Distribution Company	Number of Customers
	Residential		Small Commercial
	Eligible	Participating	Eligible	Participating
Columbia Gas of Ohio	1,2467,256	561,649	109,218	48,805
Cincinnati Gas & Electric	379,130	29,906	30,324	4,645
Dominion East Ohio Gas	1,078,716	610,511	81,582	45,183
Vectren	217,611	51,530	21,004	3,823
Total	2,921,713	1,253,596	242,128	102,456