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Blue-Flame Blues: Gas Pilots Sputter at Burnertip

Fortnightly Magazine - October 1 1997

it recognizes that by using marketers customers could get another chance to save money.

LILCO offers marketers incentives. Based on load profiles, it gives them free summer gas storage. LILCO also has a program where it releases capacity for marketers on the pipeline; they're responsible only for variable costs. Demand costs are embedded in the customers' transport rate.

"We try to make it as simple as possible," Bauer says. "So far the reaction we've gotten from marketers is that we have one of the more friendly programs out there."

LILCO has 457,460 customers, with 3,100 transporting. Some 485 are core customers.

Bauer admits to unbundling's disadvantages: "The savings in many cases, especially for smaller customers, are fairly small. Based on dual billings and things like that, some of them don't want to get involved."

Ironing Out Wrinkles

Phillip S. Teumim, gas and water division director at the New York PSC, hopes to resolve some of the issues raised by marketers and LDCs. He says the 50-plus marketers certified to do business in the state meet regularly with LDCs and PSC staff. He feels despite low customer participation, the number of certified marketers is significant.

"As to whether and to what extent a marketer can make money and when they would start to make money as the program develops, I don't know," he says.

Teumim says the capacity-release issue has loomed large, but it's one the commission feels has been resolved. In the aggregation order, the commission allowed, but did not require, the LDCs to assign a pro-rata share of capacity to a migrating customer. It wasn't a blanket allowance, in that if a utility needed more capacity for growth, for example, it could simply assign capacity. In other cases, though, LDCs could assign capacity (em until March 1999. The commission balanced interests, recognizing utilities have contracts with pipelines for capacity for varying terms and that sudden change would have created strandable costs if customers left the LDC and pipeline costs remained.

In March 1998, the LDCs must file a report with the commission explaining what they've done to allay their capacity situation. After March 1999, the commission has offered no guarantees about recovering potential capacity costs, but utilities could appeal to the commission for recovery. Teumim says the commission hasn't indicated it would reconsider the matter before the three-year deadline.

On the issue of shifting embedded costs, Teumim says arguments have gone both ways.

"The LDCs said there were going to be additional costs associated with the program," he says. "Marketers and others said no, there were going to be savings, beyond strictly commodity. If there's capacity savings, there should be savings perhaps in the customer service area. ... What the commission did was basically back out the upstream costs and say there could be costs that go both ways. And we'll resolve any of those additional issues in rate cases.

"I think the commission said probably a rough balancing would capture most, if not all, of the costs associated with the commodity and capacity and [for] anything else it would take