Retail Unbundling

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

Overview: Three natural gas utilities in Florida (Central Florida Gas, which is the Florida Division of Chesapeake Utilities Corporation, Indiantown Gas Company, and Sebring Gas System) have obtained approval 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 (PSC) allowed Central Florida Gas 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. Central Florida Gas 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. Central Florida will remain as the supplier of last resort and maintain the customer service function, customer account records, and billing and collection functions. The company was to 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.

The PSC approved a similar request by Indiantown Gas Company in November 2002 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 Central Florida’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. As of December 2004, the company is still in Phase 1 of the transition and part of the same customer pool as Central Florida Gas.

In May 2004, the PSC also allowed Sebring Gas System to exit the merchant function and transfer its small sales customers (using less than 100,000 therms per year) to a single aggregated customer pool. The agreement between the company and the pool manager allows customers to select between two pricing options: a monthly indexed price or a fixed price. Sebring must submit a report to the PSC 90 days before the conclusion of the initial 2-year period of the program that evaluates customer acceptance, the company’s capability to expand the program and, and the feasibility of continuing the program.

EIA State Profile: In 2003, Florida had 617,373 residential and 55,121 commercial customers. They consumed 16 and 54 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 $16.17 and $10.39 per thousand cubic feet, respectively.

Customer Type	Total 2003	Eligible December 2004		Participating December 2004
Customer Type	Total 2003	Total	Percent of 2003 Total	Total	Percent of Eligible	Percent of 2003 Total
Residential	617,373	12,635	2.0	12,635	100	2.0
Commercial	55,121	1,367	2.5	1,362	100	2.5
Total	672,494	13,997	2.1	13,997	100	2.1

Sources: Total 2003: Energy Information Administration, Natural Gas Annual 2003 (December 2004).

Eligibility: Florida Public Service Commission. Participation: Central Florida Gas Company, Indiantown Gas Company, and Sebring Gas Systems, Inc.

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	05/04	Pilot Transportation Service Approved for Sebring Gas System. PSC approved Sebring’s request to convert its remaining sales customers to transportation service and to exit the merchant function on an experimental basis. Company is to file a report 90 days before the conclusion of the initial period of the program that details customer acceptance, assesses the company’s capability to expand the program and determines the feasibility of continuing the program.
	11/02	Pilot Transportation Service Approved for Indiantown Gas Company. PUC approved Indiantown Gas’s request to convert its remaining sales customers to transportation service and to exit the merchant function. As with Central Florida’s request, PSC approved a 2-year pilot that transfers customers to aggregated customer pools administered by a pool manager. Reporting and program requirements are the same as for Central Florida’s pilot.
	11/02	Pilot Transportation Service Approved for Central Florida Gas. PUC approved aggregated customer pool for Central FL Gas’ residential customers. Company 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. Central Florida 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.
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 separated 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.