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Burnertip and Beyond

Fortnightly Magazine - September 15 1995

balanced among all suppliers to the retail market.

In July, the A.G.A. reported that the nation's overall natural gas demand is likely to grow 2.6 percent in 1995, with a 5.1-percent growth within the industrial market sector alone. If this projection holds, growth opportunities in the gas market will be open to distributors committed to competitive pricing and quality performance.

A level playing field (em offering open access and customer choice (em requires all distributors to assume risks and hold themselves accountable to the same standards of equity, environmental responsibility, service reliability, and other aspects of regulatory compliance.

Michael Baly

President & CEO

American Gas Association

The extent to which unbundling has already taken place is often understated. About three-quarters of industrial gas demand and nearly one-quarter of commercial gas demand are already delivered by LDCs under transportation arrangements. Nearly all LDCs offer at least some of their customers unbundled services, and in a number of jurisdictions, general-service transportation tariffs are available to any customer willing to purchase the metering equipment required to operate under such service. Unbundling is continuing, and while few residential customers are currently eligible for transportation services today, they may well be eligible in the future if the issues of standby service, scheduling, balancing, and market aggregation rules can be fairly established.

Unbundling does not inherently favor any segment of the industry. It favors companies that can use technology to control costs and react quickly in the marketplace.

Dean T. Casaday

President & CEO

Pennsylvania Gas and Water Co.

Mirroring the unbundling of the pipelines mandated by FERC Order 636 would open up retail gas-distribution markets to real competition, open access, and customer choice. However, making this work would generate new transition costs (em paid once again by the retail customers. These costs would include 1) installation of remote meter-reading devices at each retail customer location as well as a software system to collect data or the hiring of additional meter readers; 2) daily balancing and monthly cash out, setup costs, and administration; 3) abrogation of long-term supply and transportation contracts; and 4) any other costs incidental to the unbundling. An alternative would be to have a third party's personnel read the meters on a monthly basis and implement a mandatory standby charge systemwide to all customers in the form of a transition cost.

Burnertip access would favor marketers and brokers, since they are already shipping on the LDCs system and are unregulated. The main risk involved in open access is the utility's loss of control over the distribution system. Subordinate risks are the potential for runaway costs and loss of regulatory protection for the former residential core customers.

Jerald V. Halvorsen

President, Interstate Natural Gas Association of America

Individual states would have to take action to bring open access to the retail distribution market. If done correctly, open access will help pipelines, distributors, marketers, and customers, because there will be customer choice and good information that will lead to real competition, fair market pricing, and efficient services. However, all players must understand the service and contract obligations