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Blue-Flame Blues: Gas Pilots Sputter at Burnertip

Fortnightly Magazine - October 1 1997

change services, delivery, how it allocates upstream capacity, how it manages gas control functions.

"This is not a walk in the park," says an LDC executive. "Who enjoys tearing apart their company?"

In Massachusetts, A Rising Star

Joel Singer, Bay State president and COO, has taken that walk in Massachusetts and will take it again in Maine and New Hampshire as residential rates of his company's Northern Utilities Inc. subsidiary are unbundled there.

The utility has won the respect of the regulatory, marketing and LDC community for its open, issue-resolving collaborative negotiations.

"New York provides a lesson in what is going on," says McGrath. "Bay State is a star."

Singer sees the importance of marketer relationships for several reasons, not the least of which is to increase the 43 to 47 percent "off the main" saturation of natural gas in New England.

"When I ask the question (em Is competition good? (em the answer is 'yeah,'" he says. "It means more choices, lower prices and for us as a utility; it means more throughput."

Bay State serves 300,000 customers, but has 140,000 who aren't hooked to mains running past their homes. Another 43,000 use gas, but not for heating.

In Bay State's first pilot, NorAm Consumer Services targeted oil-to-gas conversions, partly because Bay State offered a $300 incentive. Over a month, NorAm converted about 30 homes. That's a small number considering Bay State's 6,000 new hookups a year, but significant from the perspective of a utility growing its transportation business while opening commodity sales.

Singer says marketers increase awareness through advertising. Because they're unregulated, they can offer "fixed prices, caps, collars tied to oil, rebates, all sorts of things as we saw during our pilot, which are downright fun for customers."

Bay State is developing a program with marketers and the state DPU to set incentives for marketers to meet customer service and other standards. Marketers would get anointed "sales partners" and receive so-called "Good Housekeeping" approvals. The move is in response to customers asking the utility for endorsements, Singer says.

Besides its progressive attitude toward new relationships, what Bay State has done that most New York utilities haven't is extract all costs of supplying gas (em up front.

"All they do in New York is pull out the incremental cost of the gas that you sell to the customer," says John O'Brien, Wheeled Electric Power's president. "And they keep the entire fully bundled rate. ... On the other hand, they're not incurring costs involved. When the customer has a question about the cost of their bill, they don't call Niagara Mohawk, they call us. ... That should result in costs they don't incur, but they still collect those revenues. ... They want to have extra revenue coming in."

But O'Brien has a suggestion.

"We're in favor of figuring out a rate any way you like. You pull out the last incremental cost of a dekatherm, but then you give it a haircut. And say, 'We think you can tighten up your operation. We're going to give you 90 percent of that