Status: More than 85 percent of the State's residential natural gas consumers have access to customer choice programs. |
Overview: The Public Utilities Commission of Ohio (PUCO) has encouraged retail unbundling by the major natural gas
utilities in Ohio through PUCO orders and stipulations with individual companies. Three
utilities (Columbia Gas of Ohio, Cincinnati Gas and Electric Company (now doing business as Duke Energy of Ohio) and East
Ohio Gas Company (now doing business as Dominion East Ohio Gas)) in the State have had
choice programs underway since 1997, and a fourth company (Vectren Energy
Delivery of Ohio) began its program in January 2003.
More than 50 percent of the State's residential natural gas customers were participating in choice programs as of December 2009, with by far the largest participation (94 percent) in Dominion East Ohio's (Dominion) service area. In April 2005, Dominion filed a formal application with PUCO to exit the commodity market and become a distribution-only company in the near future. As a first step in its two-phase restructuring plan, the company received permission (May 2006) to eliminate its gas cost recovery rate and replace it with a more market-based rate, called a standard service offer, on a trial basis. From October 2006 through August 2008, Dominion purchased natural gas each month for its non-choice (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 (Mcf). The fee, or “retail price adjustment,” was determined through a PUCO-monitored bidding process in August 2006. The company held a second auction in July 2008, which resulted in a new retail price adjustment of $2.33 per Mcf for September 2008 through March 31, 2009. The standard service offer (SSO) rate varies from month to month, much like the gas cost recovery rate it replaced. According to the Office of the Ohio Consumers' Counsel, a typical customer saved $100 per year as a result of the bidding process in the first auction.
Phase two of Dominion's restructuring plan began in April 2009. The company held two auctions in February 2009 to purchase supplies for April 2009 through March 2010. One auction established a new SSO for low-income or choice-ineligible customers and the other set a standard choice offer (SCO) rate for choice-eligible customers. The SCO rate changes monthly based on the NYMEX month-end settlement price, plus a set fee of $1.40 per Mcf. Another round of auctions will be held in February 2010 for the period April 2010 through March 2011. PUCO must approve all auction results and reserves the right to terminate the pilot at any time. At the end of phase two, if approved by PUCO, Dominion would eliminate all sales services and become a "pipes-only company" but continue its
role as the provider of last resort. The company would continue to be responsible for the distribution of natural gas as well as billing, reading meters, and maintaining pipelines. Remaining sales customers would either buy gas from a marketer of their choice, join a government aggregation buying group, or be assigned to participating marketers on a pro rata basis.
Columbia Gas Company of Ohio and Vectren Energy Delivery have also received PUCO permission to eliminate their gas cost recovery rate and replace it with an SSO, established through a wholesale auction process. Vectren's auction in August 2008 resulted in a retail price adjustment of $2.35 per Mcf, for the period October 1, 2008, through March 31, 2010. Customers could choose the SSO service or Vectren's choice program. Another auction was held in January 2010 to establish an SCO rate in which a customer's bill will identify the supplier. The auction established a new retail price adjustment of $1.55 per Mcf that will be in effect from April 1, 2010, through March 31, 2012. Columbia Gas Company will hold its first wholesale auction in April 2010 to obtain natural gas supplies for April 2010 to April 2011.
Ohio consumers can also purchase natural gas through an aggregated group. The State allows communities and organizations such as churches, schools, and membership-based groups 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 126
communities that are part of the Northeast Ohio Public Energy Council
(NOPEC). According to its 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 PUCO, authorizes PUCO to order open access for large local distribution companies, and
consolidates consumer protection authority over certain retail natural gas
transactions. On rehearing, PUCO formed a gas supplier rules implementation group to discuss certain marketer issues, such as whether
"price-to-compare" information should be included in customers' bills. PUCO finalized its rules in support of the legislation in April 2002.
Before deciding to enroll in choice programs, PUCO encourages customers to use the price comparison charts posted on its web site to calculate the true costs of using an independent supplier. 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 2009, PUCO has certified 36 marketers as competitive retail
natural gas suppliers for residential and small commercial customers and 15 marketers are actively serving residential customers. |
EIA State Data: In 2008, Ohio had 3,262,716 residential, 272,899 commercial, and 6,806 industrial customers. They consumed approximately 307 billion cubic feet (Bcf), 167 Bcf, and 283 Bcf of natural gas, respectively. The average prices paid for natural gas purchased from local distribution companies and marketers by residential and commercial customers were $14.52 and $12.79 per thousand cubic feet, respectively. The average price for natural gas purchased from local distribution companies by industrial customers was $12.71 per thousand cubic feet. |
Eligibility and Participation in Retail Choice
Programs: The first customer choice
offerings in the State were through pilot programs for a limited number of customers.
Columbia Gas of Ohio's and Cincinnati Gas and Electric Company's 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 Delivery of Ohio ’s
program was implemented in three phases, with 15 percent (about 45,000) of
Vectren's customers eligible at the start (January 2003), 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. About 24
percent of Vectren’s residential customers were enrolled in December 2003
and about 29 percent in December 2005. |
Eligibility and Participation by Customer Class, December 2009
Customer Type |
2008 Customer Total |
Eligible 2009 |
Participating 2009 |
Total |
Percent
of 2008 Customer Total |
Total |
Percent
of Eligible |
Percent
of 2008 Customer Total |
Residential |
3,262,716 |
2,863,664 |
87.8 |
1,665,256 |
58.2 |
51.0 |
Commercial/Industrial* |
279,705 |
249,299
|
89.1 |
153,286
|
61.5 |
54.8 |
Total |
3,542,421 |
3,112,963 |
87.9 |
1,818,542 |
58.4 |
51.3 |
*Ohio had 272,899 commercial and 6,806 industrial customers in 2008.
Sources: 2008 Customer Total: Energy
Information Administration, Natural Gas Annual
2008 (March 2010). Eligibility and
Participation: Public
Utilities Commission of Ohio (March 2010).
|
|
|
Eligibility and Participation by Local Distribution Company, December 2009
Local Distribution
Company |
Number of Customers |
Residential |
Commercial/Industrial |
Eligible |
Participating |
Eligible |
Participating |
Columbia Gas of Ohio |
1,200,880 |
509,692 |
108,865 |
55,062 |
Duke Energy of Ohio |
374,658 |
94,127 |
30,445 |
11,592 |
Dominion East Ohio Gas |
1,019,578 |
954,031 |
86,351 |
77,774 |
Vectren
Energy Delivery |
268,548 |
107,406 |
23,638 |
8,858 |
Total |
2,863,664 |
1,665,256 |
249,299 |
153,296 |
Source: Public
Utilities Commission of Ohio (December 2009). | |
Regulatory and Legislative Actions on
Retail Unbundling
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 2009,
PUCO coordinates customer choice programs in the delivery areas of
four local distribution companies with a customer base of about 2.9 million residential customers. PUCO has developed a series of price
comparison charts known as "Apples to Apples" to provide customers with
price information from the various marketers. Legislation passed in
2001 requires retail gas suppliers to be certified by PUCO;
authorizes the formation of aggregate buying groups for natural gas;
authorizes PUCO to order open access for large LDCs; and consolidates
consumer protection authority over certain retail natural gas
transactions. Rules in support of this legislation became effective in July 2002.
In 2008, PUCO allowed rate increases for Columbia Gas of Ohio, Dominion East Ohio, and Duke Energy Ohio and approved a new levelized residential distribution rate structure. Under the levelized rate, customers pay a flat monthly charge that does not change with gas usage. The remainder of the distribution rate consists of a lower usage-based gas delivery charge. According to PUCO, the levelized rate will better relect the fixed cost of delivering natural gas. The State consumer advocate opposed the change, stating that it would hurt customers who try to conserve energy and result in low-use, low-income customers subsidizing high-use, high-income ones. |
Regulatory and Legislative Actions
Legislation |
05/08 |
Ohio Energy Law, Senate Bill 221, efective July 31, 2008. Revises the regulatory structure for electric public utility companies and establishes new policies for the development of advanced and renewable energy. The law mandates that by 2025, at least 25 percent of all electricity sold in the State come from alternative energy resources. Additionally, electric utilities will be required to achieve energy savings of 22.5 percent by the end of 2025 through energy efficiency programs. The law authorizes the Public Utilities Commission of Ohio to develop rules for decoupling and requires PUCO to adopt rules establishing greenhouse-gas reporting requirements. |
|
06/05 |
House Bill
66.
Governor signed biennial
budget for fiscal year 2006-2007, which consolidated the call
centers operated by the Ohio Consumers' Counsel (OCC) and PUCO
into one center at PUCO. PUCO must keep OCC informed of
all calls. |
|
03/01 |
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. |
|
06/96 |
The Natural
Gas Alternative Regulation Law, House Bill 476. Establishes customer choice as a State policy
goal. |
Citizen
Action |
11/08 |
Voters
approve aggregation program. Voters in the Village of Albany (Athens
County); Pickerington City (Fairfield County); Indian Hill City, Lockland Village, Norwood City, Reading City, Sycamore Township, and Wyoming City (Hamilton County); Fredericktown Village and Mount Vernon City (Knox County); Bazetta, Bloomfield, Braceville, Bristol, Brookfield, Champion, Farmington, Fowler, Greene, Gustavus, Hartford, Howland, Hubbard, Johnston, Kinsman, Liberty, Lordstown, Mecca, Mesopotamia, Newton, Southington, Vernon, Vienna, Warren, and Weathersfield Townships (Trumbull County); and Marshallville Village (Wayne County) voted to give local officials the authority to
purchase natural gas on behalf of residents, except where any person elects to opt out. |
|
11/06 |
Voters
approve aggregation program. Voters in Woodmere Village (Cuyahoga
County), Gallipolis City (Gallia County), Middlefield Township (Geauga County), Cheviot City and Green Township (Hamilton County), North Perry Village (Lake County), Austintown Township (Mahoning County), Champion Township (Trumbull County), and Perrysburg Township (Wood County) voted to give local officials the authority to
purchase natural gas on behalf of residents, except where any person elects to opt out. |
|
05/06 |
Voters
approve aggregation program. Voters in Salem City (Columbiana County), Fostoria City (Seneca County) and Marietta City (Washington County) voted to give local officials the authority to
purchase natural gas on behalf of residents. |
|
11/05 |
Voters
approve aggregation program. Voters in West Chester Township (Butler
County), Grandview Heights City and Hilliard City (Franklin County),
Xenia City (Greene County), Colerain and Springfield townships
(Hamilton County), and Liberty Township and Newton Falls City
(Trumbull County) voted to give local officials the authority to
purchase natural gas on behalf of residents. |
Regulatory
Action |
12/09 |
PUCO gives final approval of wholesale auction process for Columbia Gas. The company will stop buying gas through individual contracts with producers and instead hold annual auctions in which suppliers can compete for the ability to provide gas to Columbia. The auctions will establish a market-based rate, called a standard service offer (SSO). Customers can choose the SSO service or Columbia's choice program.The first auction will purchase gas for April 2010 to April 2011 and the second one for April 2011 tso April 2012. A third set of auctions will be held in 2012 to establish a standard choice offer (SCO) rate in which a customer's bill will identify the supplier. The company will establish a new charge to recover the costs of the transition to the market-based auction structure.
|
|
09/09 |
Complaint resolved against marketer. The Office of the Ohio Consumers' Counsel filed a complaint that the marketer Dominion East Ohio Energy had incorrectly informed customers that natural gas service could be interrupted if they did not choose a supplier. PUCO fined the company $50,000 and directed it to submit marketing and solicitation materials to PUCO for pre-approval. It also must contact customers who enrolled as a result of the solicitation and waive any cancellation fees.
|
|
02/09 |
PUCO approves Dominion East's auction results. The company held auctions to purchase supplies for April 2009 through March 2010. One auction set a standard choice offer (SCO) rate for choice-eligible customers and the other a new SSO for low-income or choice-ineligible customers. The SCO rate changes monthly based on the NYMEX month-end price plus a set fee of $1.40 per Mcf. Customers who have not chosen a supplier under the choice programs will be assigned one. The supplier will be identified on the customer's bill.
|
|
01/09 |
PUCO approves levelized rate structure and rate increase for Vectren Energy Delivery of Ohio. Customers will pay a flat monthly charge to cover their share of fixed distribution costs that do not change with gas usage. PUCO also approved a $14.8 million, or 3 percent, rate increase, compared with the company's initial request for a $34.1 million, or 5.8 percent. Low-income customers not enrolled in PIPP will be eligible for a pilot program to reduce their flat rate charge. The fixed charges under the pilot program would be $4 less than those for the average residential customer.
|
|
12/08 |
On rehearing, PUCO increases Dominion East's distribution rate of return. PUCO agreed to re-establish the company's rate of return at 8.49 percent. In its October 2008 order, PUCO had lowered the rate to 8.29 percent on the basis that the company's risk would be reduced by the approved levelized rate design. However, on rehearing, PUCO found that a lower rate of return had already been incorporated in the new rate structure agreement. The new rate will result in a revenue increase of $40.5 million rather than the $37.5 million increase at the lower rate.
|
|
12/08 |
PUCO revises the percentage of income payment plan (PIPP) program, which is an energy assistance plan for low-income natural gas consumers. The new plan reduces the required gas payments for program-eligible customers from 10 percent to 6 percent of their income. All PIPP-eligible customers must pay either 6 percent of their income each month or $10, whichever is greater. PUCO also set new credit rules and procedures for disconnection of residential utility services. The program will be reevaluated within 2 years.
|
|
12/08 |
PUCO approves new "levelized" rate structure and rate increase for Columbia Gas of Ohio. Customers will pay a flat monthly charge to cover their share of Columbis's fixed distribution costs that do not change with gas usage. Previously some delivery costs were based upon gas usage, which increased costs during the winter when bills are high. The consumer advocate opposed the change, stating that it would hurt customers who try to conserve energy and result in low-use, low-income customers subsidizing high-use, high-income ones. PUCO also approved a $47.1 million rate increase, compared with the company's initial request for $87.8 million.
|
|
10/08 |
PUCO approves levelized rate structure and rate Increase for Dominion East's distribution service. Customers will pay a flat monthly charge to cover their share of Dominion's fixed distribution costs that do not change with gas usage. Previously some delivery costs were based upon gas usage, which increased costs during the winter when bills are high. The consumer advocate opposed the change, stating that it would hurt customers who try to conserve energy and result in low-use, low-income customers subsidizing high-use, high-income ones. PUCO also approved a $37.5 million rate increase, compared with Dominion's initial request for $75 million.
|
|
08/08 |
PUCO approves results of Vectren Energy's auction. The auction resulted in a retail price adjustment of $2.35 per Mcf from October 1, 2008, through March 31, 2010. This amount will be added to the NYMEX monthly settlement price to set the standard service offer (SSO) rate each month. Bids were received from six wholesale suppliers.
|
|
07/08 |
PUCO approves results of Dominion East Ohio's auction. The auction resulted in a new retail price adjustment of $2.33 per Mcf that will be in place from September 1, 2008, through March 31, 2009. This amount will be added to the NYMEX monthly settlement price to set the SSO rate each month.
|
|
06/08 |
PUCO approves phase two of Dominion East's plan to exit the retail market but extends phase one through March 31, 2009. The company replaced its gas cost recovery rate with a standard service offer rate in October 2006, based on a wholesale auction. Dominion will hold a new auction in the summer to set a new SSO rate for September 2008 through March 2009. Phase two of Dominion's plan will begin on April 1, 2009. Two more auctions will be held by February 2009 to purchase supplies for April 2009 through March 2010. One auction will set a standard choice offer (SCO) rate for choice-eligible customers and the other a new SSO for low-income or choice-ineligible customers. Another round of auctions will be held in February 2010 for the period April 2010 through March 2011. PUCO must approve all auction results.
|
|
06/08 |
PUCO approves levelized rate structure and rate increase for Duke Energy of Ohio. Customers will pay a flat monthly charge to cover their share of fixed distribution costs that do not change with gas usage. PUCO also approved a $18.2 million, or 3 percent, rate increase, compared with the company's initial request for a $34.1 million, or 5.8 percent, increase. The new rates will be phased in over 2 years. Low-income customers not enrolled in PIPP will be eligible for a pilot program to reduce their flat rate charge. The fixed charges under the pilot program would be $4 less than those for the average residential customer.
|
|
04/08 |
PUCO approves wholesale auction process for Vectren Energy Delivery of Ohio. Vectren received permission to eliminate its gas cost recovery rate and replace it with a more market-based rate, called a standard service offer (SSO). The SSO rate will be set through an auction scheduled for summer 2008 in which suppliers can compete for the ability to provide gas to Vectren. Customers can choose the SSO service or Vectren's choice program. Another auction will be held in 2009 to establish a standard choice offer (SCO) rate in which a customer's bill will identify the supplier. The program will be evaluated in March 2010.
|
|
01/08 |
PUCO approves wholesale auction process and demand-side management program for Columbia Gas of Ohio. The wholesale auction, proposed to begin by April 1, 2010, would replace the current process for purchasing gas to supply customers not enrolled in Columbia’s Customer Choice program. The company expects to submit its auction application by February 2009. PUCO also approved the company's energy efficiency program, which will be in effect from 2009 - 2011, and a $36.5 million credit to customers for anticipated revenues generated through nontraditional sales of gas and pipeline capacity.
|
|
12/07 |
Wholesale auction process proposed for Columbia Gas of Ohio. Columbia Gas of Ohio, OCC, and PUCO staff asked PUCO to approve an agreement to develop a wholesale auction process for natural gas service and a comprehensive energy efficiency program.
|
|
10/07 |
Standard service offer rate replaces gas cost recovery rate on Dominion East Ohio's bills, beginning October 2007. All customers will pay the same transportation rate for natural gas delivery, regardless of supplier. Dominion will continue to distribute natural gas and provide meter reading and billing services. |
|
08/06 |
PUCO approves results of Dominion East Ohio's auction. The result of the auction was a Retail Price Adjustment of $1.44 per thousand cubic feet (Mcf), which will be added to the monthly NYMEX settlement price to determine the monthly standard service offer price. Bids were received from 12 wholesale suppliers. PUCO staff concluded that $2.196 to $2.504 per Mcf above the NYMEX monthly price was a reasonable benchmark to evaluate auction results. |
|
07/06 |
Shell Energy announces transfer of choice customers to MXEnergy. Beginning August 1, Shell Energy Services Company will transfer all its Ohio choice accounts to MXEnergy, Inc. MXEnergy will honor any price plans and terms and conditions signed with Shell Energy for the full term of the customer's agreement. |
|
06/06 |
PUCO selects consultant to oversee Dominion East Ohio's supply auction. CRA International was selected from 11 applications to assist PUCO in overseeing the auction and evaluating the results. The consultant costs will be paid by Dominion. The auction will be jointly monitored by Dominion, PUCO staff, the Office of the Ohio Consumers' Counsel, and CRA International. |
|
05/06 |
PUCO conditionally allows Columbia Gas Choice suppliers access to capacity at Maumee Gate. Columbia Gas of Ohio must absorb any cost increases that would be passed on to sales customers as a result of the capacity allocation. |
|
05/06 |
PUCO approves
phase one of Dominion East Ohio pilot. As a first step in its two-phase restructuring plan, the company received permission to eliminate its gas cost recovery rate and replace it with a more market-based rate, called a standard service offer, on a trial basis that will cover two heating seasons. Instead of purchasing gas through individual contracts, the company will conduct an auction in which suppliers can compete for the ability to provide gas to Dominion. According to PUCO, the plan will test the ability of market-based rates to expand competition among suppliers and reduce natural gas rates in the long term. |
|
01/06 |
PUCO approves
minimum service standards for utilities. The rules address installation, metering,
billing, and customer service. Gas meters must be read at least once
every 12 months, and utility customers must be given written notice
of complaint procedures, customer rights and responsibilities, and
information about gas choice programs. |
|
12/05 |
PUCO approves
Cinergy-Duke Energy merger. Three States have approved the merger, with
two more States pending. With the merger, Duke Energy will acquire
Cinergy's Ohio subsidiary, Cincinnati Gas & Electric (CC&E).
Within 3 months of the merger, CC&E must hold a workshop to
discuss natural gas choice issues. |
|
04/05 |
Dominion East
Ohio submits plan to restructure its commodity sales function.
Company proposes a
two-phase pilot program as part of its plan to exit the merchant
function. In phase one, the gas cost recovery mechanism would be
eliminated for its non-choice (sales) customers and replaced by a
monthly market price determined through a bidding process. The
winning bidders would become wholesale suppliers to Dominion for
firm service re-delivery to the end-use customers. Under phase two,
remaining sales customers would be assigned to participating
marketers on a pro rata basis. At that point Dominion would become a
distribution-only company but continue its role as the provider of
last resort. |
|
01/05 |
PUCO allows
monthly rate adjustments for Dominion East and Columbia.
PUC approved Dominion East's application to
make monthly changes to its regulated gas rate for the period
February 4, 2005, through May 4, 2005, and Columbia's application to
change to monthly adjustments beginning January 31, 2005. Columbia
had proposed to return to quarterly filings duing the nonheating
season (May-October), but PUCO ruled that would require a
separate application. |
|