Did you know?
Large commercial and industrial consumers have had the option to purchase the natural gas commodity separately from other natural gas services for many years.
As of December 2014, 24 states and the District of Columbia had legislation or programs allowing residential natural gas customer choice.
How customer choice programs work
Natural gas customer choice programs give consumers the option of purchasing natural gas from a natural gas supplier (marketer) that may be a different company than the local natural gas utility.
If a consumer chooses to buy from a marketer, the marketer purchases the natural gas (from other sources) and arranges for its delivery to the local natural gas utility. The local natural gas distribution utility, sometimes referred to as a local distribution company (LDC), provides, and charges for, the transportation and distribution of the natural gas to the consumer. Local distribution companies are regulated by state utility or public service commissions and cannot earn a profit on the sale of natural gas itself. Sales of natural gas by marketers are unregulated, and marketers may earn a profit on the sale of natural gas.
Most natural gas customer choice programs began in the 1990s in an effort to promote more competition in local energy markets. Traditionally, local distribution companies provide natural gas to their customers as part of a bundled service that includes both the price of the natural gas (sometimes called sales service) and the price for distributing the natural gas to consumers. In customer choice programs, natural gas sales are unbundled, or listed separately on a customer's bill from distribution and other delivery-related services and costs.
The availability and characteristics of existing customer choice programs vary widely. Some states allow all natural gas customers to choose a natural gas supplier, while some limit choice to specific service areas or limit choice to a specific category or number of customers. In some cases, even though choice is allowed statewide, there may not be any programs being offered or there may not be any marketers participating.
Customer participation is determined by a variety of factors, such as the customer's potential to save money and the terms of service. In addition to month-to-month variable rates or fixed rates for longer terms, some marketers offer introductory rates, rebates, budget plans, or capped rates. Marketers' participation is influenced by the potential to earn a profit on natural gas sales.
Top five states with the highest share of residential natural gas deliveries from LDCs for other suppliers in 2014:
- New York—30%