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Marketers and Brokers

Fortnightly Magazine - September 15 1995

to end users fail.

D. Louis Peoples

Vice Chairman & CEO

Orange and Rockland Utilities, Inc.

Gas marketers and brokers pose a threat to gas distribution utilities only to the extent that utilities may be unable to compete due to regulatory and legislative restrictions. Unencumbered by regulation, and without having to absorb capital costs, marketers and brokers operate in a true free market. Programs for customers with special needs or service standards are not mandated. In effect, they are allowed to cherry-pick only those customers, in any geographic market, that will return a suitable profit.

Utilities have an obligation, by law, to provide safe and reliable service to all customers within a franchised service territory. Also, utilities are charged with the duty of making such services available regardless of financial risk or potential profit from doing business with a particular customer or groups of customers.

A utility's obligation to serve, especially on peak days, and current significant tax inequities are two principal "level playing field" concerns. Another is our belief that firm customers should not be able to avoid paying a portion of the capacity costs that were incurred to provide them service. Nonetheless, once the playing field is leveled, gas distribution by marketers and brokers can serve as a competitive catalyst (em not as a threat (em to gas distribution utilities. Their involvement will push LDCs to raise their own levels of performance, and help supplement supply for our fixed contracts.

Eugene R. McGrath

Chairman

Consolidated Edison Co. of New York, Inc.

Marketers and brokers have been a part of our supply portfolio since the mid-1980s when the

unbundling process began. Like many local distributors, as well as producers and pipeline companies, Con Edison has an unregulated gas marketing subsidiary that competes in the national market. We have used the availability of competitively priced spot gas as an incentive to convert large commercial and industrial customers from oil to gas, by allowing them to use our transportation service and purchase their gas in the open market. At the same time, we've been competing with marketers for these large customers while growing our market by developing attractive ancillary services such as balancing, storage, and tailored pricing.

However, inequities occur when gas from marketers is taxed at a lower rate than utility gas. Significant equity considerations attach to making transportation services (or "open access") available to small residential customers. Putting marketers, brokers, and LDCs on an equal footing would require marketers to shoulder their share of environmental and other social costs. In addition, they would have to provide the same level of reliability that LDCs have historically provided to small, low-load-factor customers.

George A. Davidson, Jr.

Chairman & CEO

Consolidated Natural Gas Co.

I look at this issue from both sides of the fence, because CNG is both a regulated gas distributor and an unregulated energy

marketer. Our five LDCs collectively make up the nation's fifth largest distribution system, while our CNG Energy Services subsidiary markets natural gas, electricity, and related services throughout the East Coast.

Unquestionably, local utilities are facing intense new