The best example of combined dynamic rates and smart billing is found in Ontario, Canada. It uses central MDM to produce time-differentiated customer bills.
In his recent article, "The Future of Local Gas Distributors" (Feb 1, 1995, p. 20), Vinod Dar presents a vision of executives at the local distribution company (LDC) lining up to buy cemetery plots (em even as the gas marketers, charging on horseback, seize the high ground of "middle" and
That sort of bravado cannot substitute for an in-depth knowledge of gas distribution. Mr. Dar in fact distorts or ignores many realities of the gas business. Let's look at some of the threats and responses he identifies for LDCs.
Threat (em Electric Competition. Electric-based equipment cannot approach the full-cycle fuel efficiency of gas-based equipment for water heating and steam boilers. And while electric heat pumps can compete effectively for space heating in some southern regions, they are increasingly unable to perform efficiently as one travels north. Moreover, even as heat pump technology advances, there is no reason to think that electric prime movers for such equipment cannot be replaced by gas powered prime movers.
As for space cooling, large-tonnage, multistage absorption equipment continues to gain both technological sophistication and market share. A.G.A. recently reported that the natural gas
market share of new single-family homes last year reached a record 67 percent.
Threat (em Deregulation.
Mr. Dar's assertion that middle- and residential market meters will bend to a "third wave" attack of crusaders wielding cellular phones and laptops, as full retail open access is imposed on LDCs, is a hallucination. Experience in Ontario should be ample proof. (Example: "Door-to-Door Marketers Get Slammed," by Shawn McCarthy, Gas Daily's NG, Aug/Sep '94). And why should anyone expect a marketer who is targeting low-load-factor, customers with a high daily swing to provide both reliable service and savings at the city gate, when LDCs and LDC buying coalitions possess significantly more market power and are already buying a large part of their requirements on the spot market?
Threat (em Info Technology. Billing and related information systems are no obstacle for LDCs, but rather an opportunity to reduce overhead and develop non-regulated activities. Nothing prevents LDCs, consortiums of LDCs, or pipelines from developing cross-territorial, regional information technology systems to serve gas customers.
Response (em Merge. Mergers and acquisitions take place in the gas industry for various reasons. That's not news. What is news is that smaller LDCs have been developing gas-purchasing coalitions to reduce gas costs, gain market power, and improve returns in the capacity-release market. Purchasing groups such as the Mansfield Consortium in New England have proven particularly successful. Where state commissions have allowed a premium over book value, it has usually been to recognize an explicitly identified reduction of gas costs. The success of LDC cooperative efforts should mitigate any regulatory induced "urge to merge."
Response (em Reposition Inside. Mr. Dar's "take the money and run" approach to the public utility business will surely raise the hackles of utility managers and regulators. True, as he indicates, utilities must learn more about customer wants and needs. Nevertheless, various LDCs already offer many of the services mentioned in his article, and the scope of gas management service