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Marketers and Brokers

Fortnightly Magazine - September 15 1995

President & CEO, PECO Energy Co.

Marketers do not threaten gas utilities unless utilities and regulators respond inappropriately to the new environment. On the PECO Energy system, marketers supply gas to our largest 400 customers, which generally have alternate fuel capability. Our residential and commercial customers, however, generally do not have alternate fuel capability and are dependent on an absolutely continuous and reliable natural gas stream. I should say interdependent; supply/demand problems cannot be isolated to a single customer due to the commingled nature of the gas distribution system.

PECO Energy does not perceive major benefits to core customers from turning the merchant function over to marketers. We competitively source all gas supplies and all pipeline capacity. Marketers can underprice PECO Energy sales service to core market customers, but only because they do not pay the full cost of firm pipeline capacity, do not pay gross receipts tax, do not have an obligation to serve, and do not incur social program costs. These are artificial advantages, not efficiency advantages.

It is reasonable to believe that marketers do not weigh reliability as heavily as utilities, and consequently seek to reduce costs by taking greater risks. Risk to utilities and customers would come from a new environment that does not recognize the difference between real efficiency and artificial gains to some at the expense and risk of others. It will be up to utilities and regulators to ensure that any restructuring promotes the former and not the latter.

Michael G. Morris

President & CEO, Consumers Power Co.

I do not believe that marketers and/or brokers (em I never have

really been able to tell the

difference (em pose any threat to natural gas distribution utilities. Quite the contrary, I believe that they have added greatly to the choices that customers have,

saving them literally millions of dollars over the last 10 years.

The roadblock that prevents LDCs from s

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