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Marketers and Brokers

Fortnightly Magazine - September 15 1995

and local taxes on their sales transactions by transferring title to gas outside the state, while gas customers of LDCs are required to pay state and local gross receipts taxes on their purchases from LDCs. This burden of state and local taxes, more than any other factor, prevents New York's LDCs from competing against unregulated gas suppliers, and legislation is required to level the playing field. LDCs are quite willing to participate in the competitive battles, but they must be given a fair opportunity to do so through pricing flexibility as well as the elimination of many of the social burdens imposed by local regulators and elected officials.

Charles E. Zeigler, Jr.

Chairman, President, & CEO

Public Service Co. of North Carolina, Inc.

We do not see marketers or brokers as a threat any more than we see fuel oil or the electric heat pump as a threat in competing for existing or new business. If more competition can provide the services our customers want at lower prices, the whole natural gas industry will win. We welcome the opportunity to participate in such a business environment. The real threat materializes if a market

participant is unwilling or unable to compete due to regulation or legislation. Existing factors that limit LDCs' ability to compete vary from state to state based on their respective regulatory environments. What we most need is a comprehensive look at what our customers need and want. We are concerned that the natural gas industry is forgetting this step. Once customer needs are truly understood, our industry must work to create an environment and establish rules that will allow these needs to be satisfied at the lowest possible cost.

William E. Davis

Chairman and CEO

Niagara Mohawk Power Corp.

Nearly one-half of Niagara Mohawk's annual throughput is derived from the transportation of customer-owned gas, which is purchased from marketers and brokers. The shift from sales to transportation volumes has increased steadily since 1986, when we began open access on our system. So rather than view marketers and brokers as threats, we instead see them as partners.

Niagara Mohawk will continue to embrace the idea of competition with marketers and brokers as long as we remain on an even footing. Two issues could be a barrier, however. First, there can be no stranded costs as a result of the unbundling of LDCs. Also, to be competitive, Niagara Mohawk Gas must be able to "stream" gas prices to individual customers. Through streaming, we can sell a package of gas to a particular customer for a set period of time. We are currently awaiting a final order from the New York State Public Service Commission on this issue. However, we must be

allowed to earn a reasonable return for this effort and not saddle our shareholders with all of the risk and none of the rewards.

Also, for our company to be competitive with marketers and brokers, we need equal footing when it comes to taxes. And yes, legislation is needed to even up the odds in that regard.

Corbin A. McNeill, Jr.