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Blue-Flame Blues: Gas Pilots Sputter at Burnertip

Fortnightly Magazine - October 1 1997

and if you can cut your costs by 15 percent, you get to keep 5 percent (em performance-based ratemaking.'"

Meath, of Agway, can relate to the hard reality of these arguments. The first target on his list is capacity release. He says he's not blaming utilities, they're simply passing along capacity release requirements to marketers and customers.

"Once you throw this bogey in of having to have this capacity release on a 12-month basis, even in the middle of summertime, having to buy capacity as though that customer was using the same loads as they were in the middle of the winter ... is ludicrous," he says. "The only way for a marketer to sell gas to an upstate residential natural gas customer and save them money is for the marketer to lose money (em and we are."

Changes in Attitude

Cost shifting by utilities is Issue Two, Meath says, and it's a point that's of keen interest to the PSC. When a utility's costs are broken into transportation, commodity, interstate pipeline and other charges, the costs have to be carefully analyzed, he says. "It may appear as though their actual gas cost might be only $2.80, when in reality, the cost is much more, but they're shifting this around."

Protocols and paperwork are another problem, Meath says. "The fact of the matter is that every one of the five utilities we're approved to sell on today, there's not one single protocol ... everything from us winning approval to getting a customer approved.

"And I recognize that they're all unique businesses and they have unique needs, but a natural gas customer in Albany, N.Y., shouldn't be any different from a customer in Rochester, N.Y."

Or from a customer in Westborough, Mass., one might add.

"It makes it harder for us, harder for customers," Meath says. "It makes it such that not many will try an alternative."

Attitudes, Meath says, will take much longer to change. Few "upstate" utilities have publicly said they want to exit the merchant function. "But some are closer to it than others. I've had a couple of CEOs tell me kind of one-on-one. And I want them, when they're ready, to say that. I can tell you that my guess is that Niagara Mohawk is a little closer to it than anybody."

Bailey, of NiMo, says marketers are company partners.

"We have more or less taken the stand that the marketers can be and have been our allies," she says. "And we have regular marketer communication meetings and we walk them through the tariff and how to set up pools.

"The marketers are having a difficult time competing with our gas price," she adds. "Our gas prices are the lowest in New York state. And since we're just stripping out the gas cost and the customer has to pay all the other costs, the marketer finds himself competing with the cost of our gas. And that is very difficult for some customers."

Bauer, LILCO contract/program manager, admits it's not his utility's goal to exit the commodity business. But