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Marketers and Brokers

Fortnightly Magazine - September 15 1995

rates for transportation service. Under fair regulatory treatment, LDCs are eager and able to compete.

Dean T. Casaday

President & CEO

Pennsylvania Gas and Water Co.

Certainly marketers and brokers have added another dimension to the future of LDCs. They have no responsibility to the core customers being served by the utility; their objective is moving gas. If gas does not move, revenues are not generated. Therefore, some marketers and brokers will flow gas whether or not the market is taking it and, in some cases, rely upon the utility to balance the distribution system at the expense of core customers.

To compete on an even footing, the utility must have parity with marketers and brokers relative

to the Gross Receipts Tax,

preferential gas distribution rates for natural gas produced within the regulatory agency's jurisdiction, certain sales taxes, and social responsibility for the customers (em not to mention an opportunity to receive better prices for the release of firm interstate transportation capacity into the secondary market and exemption from the FERC maximum rate cap on released capacity.

Legislation must be enacted to classify brokers and marketers as suppliers of natural gas and related services and subject them to the same rules as the utility. Alternatively, the utility should be exempted from the regulatory constraints. Also, the cost of the gas should be deregulated (em as it is the case in the federal domain (em and exempt from prudence review since the actual cost is always reflected in an unrecovered purchased-gas cost account and the utility pays interest to retail customers on overcollections.

Jerald V. Halvorsen

President, Interstate Natural Gas Association of America

Marketers are not a threat to gas distribution companies. They share, in fact, an important synergy. Marketers provide LDCs and retail customers with choices for supply purchases and offer efficient services to help manage supply and arrange for transportation. However, distributors and marketers do operate on different footings, and perhaps the regulatory scheme needs a second look.

Many industry participants, including INGAA, have questioned whether the current rules setting price caps for secondary capacity and prohibiting direct assignment of capacity by LDCs and other capacity holders are now necessary for the second market. The FERC is currently reviewing these very policies on capacity release and trading on the interstate system. The state commissions can address service obligation issues on a case-by-case basis, if need be.

Glenn R. Jennings

President & CEO

Delta Natural Gas Co., Inc.

If LDCs expect to continue to provide sales service to all their customers without any competition, marketers and brokers might pose a threat. LDCs can be hindered by traditional regulation in competing with marketers and brokers. Historically, LDCs calculated their sales prices (tariffs) including their weighted average cost of gas and could not easily vary their sales prices. Changes in regulation to allow more pricing flexibility could help LDCs compete since marketers and brokers are not so hindered.


We view marketers and brokers as customers and work with them in any ways possible. We began transporting gas in the early 1980s to meet