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A Round Robin of Residential Unbundling

Fortnightly Magazine - October 15 1996

would say that kind of competition, ironically, hurts the program," the PSC chairman says. "Because it makes it that much more difficult if you're operating on a thin margin."

If KN's entire 60,000 customer base were open, he argues, the program would attract more competitors seeking better margins.

In moving the pilot to reality, the PSC will look at the program's advantages for customers. Is it reliable? Is there safety of supply? Adds Ellenbecker: "We need to look at price advantage. The customers are going to see a 7- to 10-percent reduction in prices for this season."

Another item on the PSC's review list: After the first year, customers who picked new suppliers will pay a $37 "change fee." Will this fee prove a disincentive to competition?

Other issues the PSC will scrutinize after more than six months of Choice Gas in action:

s Balloting. KN managed it, and the PSC received reports that signup material wasn't objective. Wyoming Gas Community, a partnership of municipalities aggregating customers, felt it could have signed more than 13 percent of the pilot customers if an independent company had handled balloting.

s Supply. KN said that the program's reliability relied critically on gas entering the system at the same historical points in and out of state. This approach, however, hurt Wyoming Gas Community, which wanted to market and exclusively deliver Wyoming gas.

s Reciprocity. In the Choice Gas docket, the PSC voted against requiring neighboring gas utilities that entered KN's service territory to open their own markets to competition. Ellenbecker dissented. He considers reciprocity an issue of fairness worth tackling again.

The PSC also will consider gas-supply management farther upstream for competitors, raising the reliability question to a new level.

State commissioners can't change Wyoming's population: a mere 480,000 people, served by about 15 natural gas utilities. But if the PSC can prove Choice Gas works, rural distribution shouldn't hurt the outcome of Wyoming's residential gas marketing.

New Jersey:

Paying for Choice with Lost Taxes

Here's a dilemma for gas unbundling in the 90's: Savings for residential customers turn into millions of lost gross receipts and franchise taxes.

How? State gross receipts and franchise taxes are assessed as unit charges on various parts of gas utility rates. Customers that switch from a local distribution company (LDC) to an unregulated marketer no longer pay the taxes on the commodity portion of their bills.

For New Jersey, this has eroded taxes by as much as $30 million a year, ramping up from when the commercial/industrial (C/I) market unbundled in late 1994.

The Board of Public Utilities (BPU) and the state's Department of Treasury have proposed a legislative solution, says Robert S. Chilton, the BPU's energy division director.

"It cuts both ways," Chilton says of the tax loss. "On one hand, it has allowed business to become more competitive. ... If you have a large industrial customer in your district, it has allowed his costs to become more competitive and has saved jobs."

The experience is one of many that have helped New Jersey as it moves toward residential