Barbarians at the City Gate

Fortnightly Magazine - September 15 1995
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In the wake of Federal Energy Regulatory Commission (FERC) Order 636, gas marketing entrepreneurs gained unprecedented opportunities to compete for noncore, industrial loads. That market has matured. Competition is intense, and margins in the noncore market have fallen below 5 cents per thousand cubic feet (Mcf).About a year ago, gas marketers began reaching beyond the noncore market to target core customers (em commercial and residential customers that lack alternate fuel capability and rely on firm service for space heating and other

temperature-sensitive needs. Some states, particularly New

Jersey, have actively encouraged marketing to core customers through regulations mandating 636-style unbundling at the local distribution level. In all cases, the entrepreneurs offer core customers what seems a bargain. Some marketers see today's efforts as the thin end of a wedge that will shatter the local utilities' domination of the core market. One has already trumpeted "the day when unregulated merchants and outraged captive customers smash the rate base and storm the Bastille."2

Marketer access to the core

market is becoming the major

industry issue of the late 1990s, and resolution of this issue may well determine the future of gas utility service. Regulators must, at the very least, look beyond the sales pitch to determine whether entrepreneurial marketing to core customers will provide genuine economic value, or so much smoke and mirrors.

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