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Marketers and Brokers

Fortnightly Magazine - September 15 1995

to avoid paying their fair share.

How can LDCs cope with this dilemma?

We must let our customers know how much it costs them to absorb these obligations.

We must end the situation by arguing strongly against our customers bearing a disproportionate share of our state's social engineering programs.

We must oppose using customer bills to pass through societal or business taxes.

We must back away from programs that have not been proven appropriate for our business and cost our customers real money.

We must listen when our customers tell us that the high cost of energy is putting them out of business or forcing them to relocate out of state.

Finally, we must encourage legislators and regulators to address the competitive imbalance between LDCs and unregulated suppliers that results from utilities' obligation to serve even those who cannot or will not pay their bills. The significant and inequitable costs associated with this obligation can be modified by requiring all competitors to share the burden, placing the funds received in a special pool to support public policy programs.

Are we threatened by competition? No! We welcome it. Competition is the foundation of our economic system. We are threatened by being forced to play when the deck is stacked against us. It is our job to even up the odds.

Beverly A. Wharton

President, Gas Division

MidAmerican Energy Co.

Marketers and brokers do not pose a threat to gas distribution utilities except in the case of

physical bypass. Even then, flex pricing on the utility's part can be an effective deterrent and a proper recognition of the competitive situation.

Gas utilities generally earn their profits from transporting gas on their system (em not from the sale of natural gas. With transportation, gas utilities have the opportunity to sell balancing and unregulated gas-sales services to further enhance their bottom line. And if marketers and brokers are able to provide gas supply with the same reliability but at a lower price, gas utilities will benefit from the increased throughput on their

system (em with resulting greater earnings. For these reasons, marketers and brokers should be viewed as partners.

However, in the case of residential and other smaller firm customers, a level playing field will require resolution of the "obligation to serve" issue, which currently rests with the gas distribution utility. To ensure balanced competition, the party with the obligation must be appropriately compensated for all cost incurred. Resolution of the "obligation to serve" issue can generally be addressed through regulatory action; legislative fixes may not be needed. Mandated social programs also create artificial incentives for end users to switch to alternative fuels (em to the detriment of the gas distribution utility.

Bernard J. Kennedy

Chairman, President, & CEO

National Fuel Gas Corp.

The emergence of gas marketing and brokering companies has been an important element in the development of today's competitive natural gas market. We embraced the concept of end-user transportation over a decade ago; without the services offered by marketers and brokers, it would have been difficult to retain as much industrial load as