Enrollment in “customer choice” programs reached a new high in 2007, increasing nearly 11 percent over the level in 2006, although the number of States with choice programs remained the same. Overall, about 13 percent or about 4.6 million of the approximately 35 million residential natural gas customers with access to choice were buying natural gas from marketers as of December 2007 (Table 1), up from the 4.2 million participating in 2006 (Table 2). Most of the gains were in Georgia and the large gas-consuming States of Michigan, New York, and Ohio, where consumers have a choice of many marketers and numerous pricing options. Georgia continues to have the most comprehensive choice program in that all 1.6 million residential customers in Atlanta Gas Light Company’s service territory (more than 80 percent of the State’s residential gas customers) purchase their natural gas directly from marketers. Atlanta Gas Light still delivers the gas but no longer provides any sales service. Ohio has the second-largest choice program with about 48 percent of all eligible households participating and enrollment levels of nearly 1.4 million. Together Georgia and Ohio accounted for nearly 65 percent of the residential customer enrollment total in 2007.

Twenty-one States and the District of Columbia have legislation or programs in place that let residential consumers and other small-volume gas users purchase natural gas from someone other than their traditional utility company. However, the availability and characteristics of these customer choice programs vary widely from State to State. Seven States and the District of Columbia allow all residential consumers to choose their natural gas suppliers, but a lack of marketer participation has precluded the development of competitive retail markets in three of these States. Six States are in the process of implementing choice statewide, with programs available to more than half their residential customers, and another eight States have pilot or partial unbundling programs in place or awaiting development. Two other States discontinued their pilot programs several years ago after deciding not to proceed with choice, although a utility in one of these States has proposed some changes to its transportation program as part of its most recent base rate proceeding, with a goal of exiting the merchant function over several phases. The remaining 27 States are not considering choice programs at this time. Large commercial and industrial consumers have had the option of purchasing the natural gas commodity separately from natural gas services for many years.

2007 Highlights

The number of marketers providing services to residential customers (Marketer Summary Table) increased or remained the same in all States but two, and the overall total was 11 percent more than in 2006 (91 vs. 82) (Table 3). Thirty marketers have licenses in multiple States, with one marketer licensed and active in 10 States and eight others active in at least 4 States (Marketer List). New York has by far the largest number (46) of active marketers, with customers in some parts of the State having a choice of more than 20 marketers and 50 different price offerings. Many marketers have expanded their price offerings in attempts to attract customers and to manage the relatively high natural gas prices and increased price variability in recent years. Besides month-to-month variable rates or fixed rates for longer terms, some marketers offer introductory rates, rebates, budget plans, or capped prices that let customers pay less if retail prices drop. One marketer even offered 2 months of free natural gas to encourage customers to use its services.

Enrollment in residential choice programs was about 11 percent (458,697) more than in 2006 and 20 percent (785,550) more than in 2005. Georgia, New York, Ohio, and Michigan had the largest increases, with enrollment gains of about 151,000, 103,000, 96,000, and 88,000, respectively, since 2006, accounting for virtually all (96 percent) of the increase.

Participation percentages increased or remained the same in all but five States and the District of Columbia, as regulators continued to refine and evaluate existing programs. For example:

• Florida: The Florida Public Service Commission in May 2007 approved Phase 2 of a transportation pilot program for customers of Central Florida Gas. In Phase 1, the 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. In Phase 2, customers will have a choice of at least two pool managers and a range of pricing options. Initially, customers will be assigned to one of two marketers, on an equal and random basis and receive the standard pricing option (which is the same for both marketers).  As of March 2008, customers have the opportunity to switch shippers and/or select an alternative pricing option.  Central Florida Gas will remain the supplier of last resort.
• New York: The New York Public Service Commission (NYPSC) continued its efforts to accelerate the State’s transition to a competitive retail energy market and encouraged companies to establish marketer referral programs and begin "purchase of receivables" programs. Four local distribution companies (LDCs) have referral programs that provide customers with the opportunity to obtain a 7-percent discount off the utility's commodity price for an introductory period when switching to a marketer. These offers are posted on the NYPSC's "Power to Choose" web site, which also includes a listing of all marketers who have signed a voluntary statement of marketing principles. By the fifth day of each month, marketers must post a snapshot of prices for residential services as of the first day of the month. Reported price offers also must include information on terms and conditions, such as the type of price offer (fixed, variable, capped), types of payment and billing options, cancellation fees, deposit requirements, and late payment charges. Noncompliant marketers will be prohibited from enrolling new customers and dropped from a utility's referral program.
• Ohio: Two LDCs in Ohio have taken steps toward exiting the commodity market and becoming distribution-only companies. In May 2006, the Ohio Public Utilities Commission (PUC) approved Dominion East Ohio Gas Company's (the second-largest LDC in Ohio) request to change the way natural gas is purchased for its customers during phase 1 of a proposed 2-phase restructuring plan. From October 2006 through August 2008, Dominion East Ohio will buy natural gas each month for its nonchoice (sales) customers from six suppliers at the monthly New York Mercantile Exchange (NYMEX) settlement price plus a set fee of $1.44 per thousand cubic feet. The fee was determined through a PUC-monitored auction where marketers bid to serve groups of customers. In its yearend review of 2007, the PUC reported that customers appear to have saved some money through the new standard service offer. However, the PUC intends to evaluate the long-term implications of the new rate before moving to the next phase of the program and reserves the right to terminate the pilot at any time. Under phase 2, if approved by the PUC, remaining sales customers would either choose or be assigned to participating marketers on a pro rata basis. At that point Dominion East Ohio would become a distribution-only company, like Atlanta Gas Light Company in Georgia, but continue its role as the provider of last resort. Columbia Gas Company of Ohio also has asked for PUC approval of a new gas purchase plan for its sales customers that would be similar to Dominion East Ohio's program.

Despite the overall increase, interest in customer choice seems to have waned in several States with long-standing programs. Most programs with decreased participation in 2007 have had substantial enrollment declines since 2002. Enrollment in the District of Columbia program in 2007 was less than half the number in 2002 (11,990 vs. 26,438), as participation fell from nearly 20 percent of total residential customers to less than 9 percent. Participation in Kentucky's pilot program was also down sharply, with enrollment 46 percent less than in 2002. Downward trends were also evident in Virginia, Maryland, and Pennsylvania as participation declined by 34, 31, and 26 percent, respectively, since 2002. Pennsylvania has formed a task force to consider what actions should be taken to encourage competition on a statewide level.

No significant changes occurred in the States that allow consumer choice but have virtually no participation. Massachusetts had only 0.1 percent of residential customers participating, while New Mexico and West Virginia had fewer than 20 residential transportation customers. The customer aggregation program continued in California, but accounted for only 0.3 percent of deliveries to residential customers (based on most recent EIA data). Montana had no known participants in its choice programs in 2007, and only 0.2 percent of South Dakota gas consumers (all sectors) used transportation service. Colorado allows utilities to offer customer choice programs if approved by the PUC, but no utilities have submitted unbundling plans.