Office of the Ohio Consumers' Counsel

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Natural Gas Industry

Energy efficiency and natural gas choice programs dominated the agenda of the Office of the Ohio Consumers’ Counsel (OCC) for consumers’ natural gas service in 2006. The price of natural gas proved to be less volatile than in 2005 although there were some ups and downs. Ohio witnessed the lowest natural gas market prices recorded since December 2002 and enjoyed a warmer than normal 2005-2006 winter. Also in 2006, the OCC participated in the Public Utilities Commission of Ohio’s (PUCO) review of two sets of rules that govern natural gas utilities and alternative suppliers.

Energy efficiency and conservation

Over the past several years one of the OCC’s main focuses has been to find ways for consumers to better manage their monthly natural gas bills. The OCC has been advocating for company-sponsored, comprehensive energy efficiency programs. While talks have been initiated with each of the four major natural gas utilities, the OCC came close to having programs implemented in the Vectren Energy Delivery of Ohio and Duke Energy service areas. In the Vectren case, the PUCO significantly altered an agreement among stakeholders including the OCC, denying the majority of Vectren customers any benefits from energy efficiency programs. Instead, the PUCO limited participation to low-income customers and allowed Vectren to increase all customers’ rates in order to recover revenues lost from decreased natural gas usage. The Duke Energy comprehensive energy efficiency filing was made in January 2006. This filing was a collaboration among Duke, the OCC and a group of stakeholders. In January 2007, the PUCO took its first action in this case, by ordering PUCO staff to provide a report on its investigation of this filing.

Natural gas choice

The OCC continued to educate consumers and provide comparison information on natural gas choice programs and suppliers. During 2006, the number of customers participating in natural gas choice was fairly stationary with those served by Columbia Gas of Ohio and Dominion East Ohio having eight or more alternative natural gas suppliers from which to choose. In late fall 2006, the percentage of residential natural gas consumers that had switched to an alternative natural gas supplier ranged from 12 percent in the Duke Energy service area to around 68 percent in Dominion’s service area. Both Columbia and Vectren were in the 30 to 40 percent range. Also, competitive choices for natural gas continued to be supported by governmental aggregators, such as the Northeast Ohio Public Energy Council. Governmental aggregators leverage in their communities the buying power of large groups of consumers to supply them with natural gas in competition with the natural gas utility.

A major change in Ohio’s natural gas industry occurred when Dominion changed the way it purchased natural gas for sale to its customers. As opposed to Dominion purchasing the natural gas in the market for customers who had not switched to an alternative supplier, it instead held an auction in August to allow wholesale natural gas suppliers to bid on serving portions of its customers. The result of the bid was a lower rate which will save the average customer approximately $100 this year. Through this change in October, Dominion customers no longer see the Gas Cost Recovery Rate on their bills, but are instead charged the Standard Service Offer. At the end of 2006, some retail suppliers lowered the rates they were offering in order to compete with the new market-based Standard Service Offer.

Natural gas prices

Natural gas prices in 2006 were lower than in previous years. This can be attributed to several events. First, the winter of 2005-2006 was warmer than normal which resulted in less natural gas being used and more left in storage which meant that there was a greater supply of natural gas than the year before. Also, the 2006 hurricane season was dramatically less severe than in 2005. Furthermore, the devastation caused to drilling and production operations by hurricanes Katrina and Rita had somewhat recovered, and with the less severe hurricane season, natural gas production continued at near normal capacity. At the start of 2006, most Ohio consumers were paying between $1.13 and $1.36 per unit of natural gas. By the end of the year, residential consumers were paying anywhere between 90 cents and $1.02 per unit.

Although prices seemed to be better for consumers than last year, the OCC continues to review filings made by the utilities to make sure that utilities are using reasonable practices for purchasing the natural gas they sell to consumers and that the utilities’ charges are accurately calculated.

Vectren energy efficiency plan

In November 2005, Vectren Energy Delivery of Ohio asked the Public Utilities Commission of Ohio (PUCO) to put a mechanism in place, in conjunction with energy efficiency options, so the company could recoup revenues it was no longer earning as a result of customers using less natural gas. This revenue mechanism – which would be a charge on customers’ bills – would be based on the amount of natural gas that the company typically would have been distributing to customers and would provide it with revenues that the utility was authorized to collect from customers. The Office of the Ohio Consumers’ Counsel (OCC) participated in the case to gain benefits for residential customers. The OCC, Vectren and Ohio Partners for Affordable Energy negotiated an agreement, signed in April 2006, which would allow Vectren to recover its lost revenues if the company would support and implement energy efficiency programs for its 300,000 customers in southwestern Ohio. After much negotiation and discussion, a portfolio of energy efficiency programs were agreed upon including rebates for purchasing energy efficient appliances and an on-line home energy audit tool that would help customers determine updates that were necessary to make their homes more energy efficient. Part of the funding for these programs was to come from a refund OCC had successfully obtained for consumers in Vectren’s last rate case. As part of the agreement, Vectren agreed to spend approximately $900,000 of its money to educate consumers about the programs. This agreement was submitted to the PUCO for approval.

In September, the PUCO made significant and substantial changes to the agreement. The PUCO reduced the funding for the energy efficiency programs from $4.6 million over two years to $2 million and limited participation in the programs to low-income customers instead of all customers, despite the fact that all customers will pay higher rates through the revenue mechanism. The OCC requested the PUCO to reconsider its decision, which the Commission rejected. The OCC filed to withdraw from the original agreement and asked the PUCO to schedule a hearing to allow the OCC to present information in support of an energy efficiency plan that will serve Ohio consumers and protect them from automatic rate increases that are not offset by energy efficiency benefits. The OCC’s withdrawal was accepted and a hearing was scheduled for Feb. 28, 2007.

— Case 05-1444-GA-UNC

Eastern Natural Gas and Pike Natural Gas PIPP adjustments

Eastern Natural Gas and Pike Natural Gas asked the Public Utilities Commission of Ohio (PUCO) to modify their tariff riders related to funds they collect for the Percentage of Income Payment Plan (PIPP). PIPP is a program in which low-income consumers can pay a percentage of their income toward their monthly natural gas bill while the remainder of the amount due is placed on the account as debt. All customers pay a small tariff charge, or a rider, each month to compensate the natural gas companies for what they are not paid by PIPP customers.

The Office of the Ohio Consumers’ Counsel (OCC) sought to participate in the case and advocated that a portion of the companies’ PIPP debt be recovered over three years rather than the two years requested by the companies. The OCC asked for the PUCO to require more frequent reviews of the PIPP riders in order to lessen the rate shock for customers.
The PUCO denied OCC’s request to participate in the case and took no action on the requests from Eastern and Pike. Since no action was taken, the PIPP rider increases automatically went into effect, resulting in increases to 12,300 customers’ monthly bills.

— Cases 06-1031-GA-PIP, 06-1032-GA-PIP

Columbia and Dominion PIPP rider adjustments

Columbia Gas of Ohio and Dominion East Ohio requested increases to their tariff riders for the Percentage of Income Payment Plan (PIPP). PIPP is a program in which low income consumers can pay a percentage of their income toward their monthly natural gas bill while the remainder of the due amount is placed on the account as debt. All customers pay a small charge, or a rider, each month to compensate the natural gas companies for what they are not paid by customers.

Both companies wanted to recover the balances of PIPP debt over a 12-month period of time. The Office of the Ohio Consumers’ Counsel (OCC) asked that the companies spread the recovery of the PIPP debt balances over a longer period of time than the year requested by the companies.

Columbia and Dominion each supplemented their request to the PUCO and asked for reduced rider increases that provided for recovery of PIPP debt balances over three years instead of 12 months. The PUCO took no action on the requests so the increases automatically were approved. The OCC requested the PUCO reconsider approval of the increases and require that the companies’ requests for PIPP rider adjustments be performed more frequently to prevent future rate shock. The PUCO denied the OCC’s requests.

— Cases 05-1421-GA-PIP, 05-1427-GA-PIP

Dominion East Ohio natural gas purchasing changes

In April 2005, Dominion East Ohio filed a two-phase proposal with the Public Utilities Commission of Ohio (PUCO) to change the way it purchased natural gas for residential consumers. Dominion would continue to deliver natural gas to all 1.1 million customers in its service area. During Phase 1, Dominion would obtain natural gas for customers who have not chosen an alternative supplier through an auction process involving wholesale natural gas suppliers. The new rate consumers would pay for natural gas in place of the regulated Gas Cost Recovery (GCR) rate would be called the Standard Service Offer. In Phase 2, customers would be required, by a certain date, to choose a retail supplier or they would be randomly assigned to a supplier. In addition to delivering the natural gas, Dominion would step in and provide natural gas to customers in the event a supplier failed to provide it.

The Office of the Ohio Consumers’ Counsel (OCC) concluded that Phase 1 of Dominion’s two-phase proposal should be approved by the PUCO if modifications were made. Those modifications included effective and timely customer education, an auction process that resulted in a weighted average price for natural gas, a comprehensive energy efficiency program to provide tangible benefits to customers, full examination by the PUCO of Dominion’s current rates in order to streamline ratepayer cost and PUCO oversight of any costs Dominion would continue to charge customers.

In May, the PUCO approved Phase 1 of Dominion’s proposal as a two-year pilot program and required Dominion:

• To hire an independent auctioneer to facilitate the auction that would determine a portion of the Standard Service Offer.
• To provide funding for a consultant to assist in evaluating the auction.
  
• To educate consumers prior to the implementation of Phase 1 through at least a bill insert.

The PUCO also acknowledged the OCC’s recommendation for a rate review and indicated that, prior to any approval for Phase 2, it would consider certain rate changes to ensure that customers are not being charged twice for the same service.

An auction occurred in late August and resulted in a fee of $1.44 that would be added to the price of natural gas reported at the end of each month on the New York Mercantile Exchange. The auction results produced a relatively low fee, resulting in potentially lower rates for customers than what they could have seen under the GCR rate structure. Phase 1 will continue until September 2008. A request for Phase 2 approval will require a separate application from Dominion and be subject to a hearing.

— Case 05-474-GA-ATA

Minimum gas service standards

The Public Utilities Commission of Ohio (PUCO) proposed Minimum Natural Gas Service Standards in May 2005. The standards were to apply to natural gas utilities and protect the rights of residential consumers. The Office of the Ohio Consumers’ Counsel (OCC) and other interested stakeholders provided comments on the rules in July 2005. The OCC recommended that the utilities be required to offer customers a four-hour window when utilities would be required to arrive for scheduled service calls, availability of alternative bill formats such as large print and Braille, the ability for customers to receive one free meter test every three years and the assurance that credits would be issued to customers if the utility missed a scheduled appointment. The utilities believed that the PUCO lacked the authority to require minimum service standards in the natural gas industry.

The PUCO issued final rules in January 2006. It agreed with the OCC that utilities should adopt the four-hour window for service calls. The PUCO denied the OCC’s other recommendations. The OCC asked the PUCO to reconsider several issues including the alternative bill formats and credits for missed appointments.

In May 2006, the PUCO issued its final decision and denied a reconsideration of the OCC’s recommendations. The rules were effective Jan. 1, 2007.

— Case 05-602-GA-ORD

Competitive retail service rules

In March 2006, the Public Utilities Commission of Ohio (PUCO) asked for comments on proposed amendments to the Competitive Retail Natural Gas Service rules. The rules pertain to alternative retail natural gas suppliers and protect consumers who receive natural gas from those companies. This was part of a five-year agency rule review required by state law.

In its comments, the Office of the Ohio Consumers’ Counsel (OCC) stated that while there were many recommended changes made by PUCO staff that would benefit consumers, more needed to be done. Some of the changes that the OCC recommended included putting a more visible notice on the envelopes of “opt-out” materials, having governmental aggregators provide contact information for residents, ensuring that marketing materials clearly state that a natural gas affiliate is separate from a local natural gas utility and requiring a third-party verification be conducted on 100 percent of door-to-door enrollments. Other suggestions by the OCC included requiring suppliers to retain audio records of customer enrollments for two years, performing an actual meter read within 15 days before a customer switches to a supplier and requiring suppliers to provide payment centers and authorized agents that immediately credit a payment to the customer’s account.

The PUCO issued the final rules incorporating several of the OCC’s suggestions. The PUCO agreed to place more visible notices on “opt-out” aggregation materials sent to consumers from natural gas suppliers and a clearer separation on consumer marketing materials when a natural gas utility and its affiliate use similar logos or company names. The PUCO also partially agreed with the OCC on improving the requirement to have a third party verify the authenticity of natural gas suppliers’ door-to-door enrollments of consumers. The PUCO improved the rule by requiring the verification of 50 percent of the enrollments of consumers instead of the original requirement to verify just 25 percent of enrollments.

The OCC, along with other stakeholders, asked the PUCO to reconsider multiple issues, which the PUCO granted in part and denied in part. In its request, the OCC asked the PUCO to require suppliers to provide the OCC all communications and marketing materials they send to customers. If the OCC received these materials in advance, the agency could better educate customers about their rates and the changes they are facing, to which the PUCO agreed. It also agreed to limit authorized agent charges to twice the cost of a first class postage stamp for natural gas payments, as requested by the OCC.

The PUCO denied OCC’s request to require that consumers be reimbursed if they are wrongfully switched to a higher rate during their agreement period. The PUCO also did not require utilities to allow former Percentage of Income Payment Plan (PIPP) customers to participate in natural gas choice if they are paying off their PIPP debt. OCC believes this potentially deprives low-income customers the opportunity to shop in order to save on their natural gas costs.

— Case 06-423-GA-ORD

 

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