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Burnertip and Beyond

Fortnightly Magazine - September 15 1995

of an open-access delivery system. Further, the issue of cross-subsidization must be resolved to avoid unfairly penalizing any segment of the retail gas market.

Michael G. Morris

President & CEO, Consumers Power Co.

It will take major regulatory changes to allow access as proposed in this question. Such regulatory change can only come from market-driven pressure; such demand on the part of the customer simply does not exist today. The reason is that natural gas companies all across the country continue to deliver lower and lower costs to their customers and, therefore, natural gas service consumes less of the customer's disposable income.

Allowing residential and small commercial customers the same choices may seem intriguing, but usually fails upon further analysis. Obligation to serve, notwithstanding cost-effectiveness, may limit the sellers, and uncollectible accounts will surely cause most sophisticated sellers to shy away from that market. Curtailment plans based on need rather than cost will also chill the market for many sellers. A gas marketer or broker that fails to perform for a small customer may find regulatory oversight a bit more than it bargained for.

John E. Hayes, Jr.

CEO, Western Resources

Many believe the next logical step in the deregulation of the natural gas industry is restructuring of local retail gas distribution companies. In this way, LDC customers, for the most part a captive market, would gain access to pricing opportunities that are available to interstate pipeline

customers. Depending upon individual interests, restructuring of LDCs clearly offers owners and operators distinct challenges and opportunities.

If our industry is to give customers the opportunity to reap advantages that an increasingly competitive marketplace can bring, we must be prepared to sign on to the reality of open access (em a total unbundling of services (em at the LDC level. In five to 10 years, open access at the LDC level could be a reality. As an industry, that is something we need to be planning now. A variety of concerns must be addressed: firm supply issues, long-term contracts, special handling requirements for transporters, service responsibilities, peak-period supply reliability and accountability, "obligation to serve," and shutoff rules.

Experience has shown that once open access arrives, customers will seek the most complete and reliable service available at the most reasonable price. To meet this challenge, LDCs should review current service offerings and determine from their customers what services should be expanded, modified, or added.

Value takes many forms for the customer, but we can be sure it includes basic components such as responsiveness to customers' needs, reliability and safety of service, and cost. Beyond basic components, LDCs can demonstrate added value through sensitivity to customers' needs and by helping them develop uniquely tailored solutions to meet those needs.

Open access does not mean we will see a proliferation of new local distribution systems. It does mean LDCs will have opportunities to price and package separate services they now bundle together at a set fee. Preparing now to identify, package, and price these options will determine how easily LDCs transition to the new marketplace and how well