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Mid-Atlantic States Set Standards for Natural Gas Marketers

Fortnightly Magazine - September 1 1997

Regulators in Pennsylvania and New Jersey have taken steps to address relationships between natural gas utilities, customers, marketers and brokers operating in their respective states, announcing policies to cover such topics as fitness requirements, marketing practices and consumer protection.

One question that continues to raise concern is price arbitrage by marketers during supply emergencies that might affect service to captive residential customers.

Pennsylvania. The Pennsylvania Public Utility Commission has issued standards for residential gas marketing, plus a final policy statement regarding fitness standards for utility and nonutility natural gas marketers and brokers operating in the state.

The policy statement requires gas utilities to consult with marketers and brokers in their service territory to develop transportation tariff provisions. The provisions would govern technical and financial requirements for a marketer or broker to enter the utility's service territory.

The commission said that its jurisdiction over the private suppliers was limited. It said such companies are not "public utilities" as defined under state law and the contracts for nonutility gas supply are between the marketer or broker and the end-user. Nevertheless, it has the power to regulate the operations of participants in the gas market to ensure that gas service is "safe, adequate and without unreasonable interruption or delay." In adopting financial and technical fitness requirements necessary to maintain gas system reliability, the commission said that it would make sure that local distribution utilities do not use the rules as "leverage" to impose market impediments in favor of affiliates.

New Jersey. The New Jersey Board of Public Utilities adopted a set of gas marketing standards on an interim basis, applicable to residential customers participating in pilot gas unbundling programs administered by several gas local distribution utilities. The standards will not extend to any other segments of the unbundled gas market. The standards consist of consumer protections that marketers and suppliers must adhere to in order to be eligible to supply gas to residential users under the LDC pilot programs.

Future Concerns. In Pennsylvania, Commissioner John Hanger warned that the policy statement failed to address the role of marketers and brokers in satisfying the requirements of "human needs" customers. He cited the possibility of "price arbitrage" by the brokers and marketers on cold winter days as suppliers seek to divert gas supply to other areas of the country because of higher prices in those markets. Hanger added that such behavior should give reason for revoking a supplier's right to do business in the state if its endangers reliable service to human needs customers. Re Fitness of Natural Gas Marketers, Docket No. M-00960839, May 28, 1997 (Pa.P.U.C.); Re Gas Residential Marketing Standards, Docket Nos. GT97020071, May 9, 1997 (N.J.B.P.U.).

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