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The 1998 Gas Industry Executives Forum Mapping the Universe of Natural Gas: Closed, Shrinking or Expanding?

Fortnightly Magazine - May 1 1998

think that would make it affordable. But gas¼ is clean, it's reliable and it's cheap. What the impact of pricing will be if we see a great deal of gas-fired generation (em that's a different issue. It may increase slightly because the more demand, the more the price.

Craig G. Matthews, president, Brooklyn Union Gas Co.

ELECTRIC DEREGULATION. I think it's going to be less than was anticipated at one point. I think people envisioned more dramatic reductions in electric rates resulting from unbundling or deregulation. I think¼ there's a good chance that the reductions and the electric prices will be somewhere between 5 and 10 percent, and of course that's going to be phased in over a period of generally five years. That kind of reduction is not enough to have any transfer in any variety of applications, whether it's electric heating or air conditioning versus gas heating or air conditioning or oil.

Gas air conditioning now has a lot more applications and it's become more competitive. So, you have electric deregulation and most people's reaction was electric rates will decrease across the board and that will make electric air conditioning more competitive with gas. Well, it might, except some of the ways that the public service commissions are applying these reductions would not have a reduction during peak periods.

CONSUMER SAVINGS? Yes, I think there are some savings, I think they are just less than originally anticipated. In our region, a gas customer can expect to save $50, $60 a year (em that's it. In New York state, utilities pay more taxes by far than the marketers, and we've been pushing very hard to have those taxes eliminated so we have the same playing field. The primary reason that marketers can save customers in the commercial sector a little bit more is because there's a sales tax that they don't pay, as well as gross receipts tax.

The gas industry in general is about two years ahead (em in some states maybe more than that (em than the electricity market on unbundling. We've seen the impact of unbundling in our commercial markets and what marketers have been able to do, but also what they've been unable or unwilling to do.

In the commercial market marketers have had reasonable success, but we're coming up on two years now where the whole market has been unbundled and yet marketers only have about 10 percent of our commercial customers. Other than our marketing affiliate, which has been going into the residential market, we have about 5,000 residential heating customers [out of 500,000] that have decided to switch. We can't get marketers interested in the residential market at all; it's too small a potential savings or margin for them.

I'll grant you that part of it is a timing issue, an education issue. We have a lot of customers [who] still are not aware of what's going on. We've had bill inserts, speeches, and some of this may take time. But even the educated are saying, "No, I don't know you, I don't know