As evidence of a continuing trend toward competition in the retail market for natural gas, state regulators point to the continued popularity of special discount rates. Designed to allow local distribution companies (LDCs) to retain existing customers, these rates are often approved despite concerns about the costs and their effect on other customers.
The Delaware Public Service Commission (PSC), for one, recently approved a proposal from Delmarva Power & Light Co. to market firm gas service to a large industrial facility at a rate comparable to its rate for interruptible service. The service will permit the industrial customer to meet clean air regulations during the summer months at rates based on short-run marginal cost. In approving the unique contract, the PSC expressed a hesitation to "discourage the LDC's good faith efforts" to adapt to an increasingly competitive gas market. Finding that the new rate would generate positive margin contributions for the first year of the contract, the PSC nevertheless retained the authority to order the LDC to terminate the contract after March 31, 1996. It also rejected a proposal to retain the revenues from the contract pending a full review of the utility's cost of service in an upcoming rate redesign case. It further dismissed concerns that providing firm service at lower rates might constitute discrimination, finding that curtailments during the summer months were unheard of even for nonfirm customers. Re Delmarva Power & Light Co., PSC Dkt. No. 94-141, Feb. 14, 1995 (Del.P.S.C.).