Hedging programs promise protection against energy-market price spikes, and they can be important to the regulatory goal of sustainable, lowest long-term service cost. But how much price...
Burnertip and Beyond
Erroll B. Davis, Jr.
President & CEO
Wisconsin Power & Light Co.
WP&L advocates that the following steps be taken to create a level playing field for merchants entering the retail market:
s Distribution rates should be fully unbundled from retail sales tariff rates. WP&L took this step years ago.
s Gas procurement, salaries, overhead, and gas storage working capital should be removed from distribution rates.
s Meter charges for transporters should be lowered to the true incremental cost to the LDC of providing transportation service versus "core" service, if any.
s LDCs should provide variable levels of firm backup to customers willing to pay for this service, anywhere from zero to 100 percent of full requirements.
Burnertip access will favor those entities most able to meet customer needs, regardless of where they currently operate in the gas business. LDCs that want to assume a retail merchant role, but are unwilling or unable to do so for risk and profit will be at a
severe disadvantage. Serious issues, such as whether utilities will be forced to provide gas as supplier of last resort, must be resolved for LDCs.
James A. Carrigg
Chairman, President, & CEO
New York State Electric & Gas Corp.
The retail gas distribution market is the most competitive aspect of the gas business. There is currently open access on most distribution systems. Several LDCs individually have more transportation customers than the entire pipeline industry. There is more customer choice beyond the city gate than anywhere else in the gas delivery chain. In addition to open access, gas LDCs compete against pipelines, local production, and alternative fuels.
Patrick J. Maher
Chairman & CEO
Washington Gas Light Co.
Distribution markets have been opening up for 10 years. Most LDCs have been transporting gas for end users and putting together negotiated, tailor-made deals for many customers. The wellhead market is clearly competitive, but the secondary market for interstate pipeline capacity is not there yet. The FERC needs to address that issue and needs to rethink rate design too.
At the retail level, other marketers seek assignment of interstate pipeline capacity from LDCs in order to offer full city-gate service. To make this happen, we need to find rules that work fairly for all concerned and ensure reliable service for even the smallest customer. It will also be vital to find ways to achieve other social objectives traditionally provided through utility service.
Beverly A. Wharton
President, Gas Division
MidAmerican Energy Co.
For the most part, there is effective open access and competition for large- and medium-sized gas customers across the United States. These services largely
involve interruptible customers who have alternative energy- consuming capability, like fuel oil. Competition in residential and smaller commercial firm retail markets will occur when reliability, pricing, and the obligation to serve are replicated by several qualified, creditworthy gas suppliers.
Fair burnertip access will not necessarily favor pipelines, distributors, marketers, or brokers. It will favor suppliers that provide the best combination of price, reliability, flexibility, and service. The only significant risks are the obligation to serve (supplier of last