Retail Unbundling - Maryland

Status: The state has partially implemented comprehensive unbundling programs for its residential gas customers.

Overview: Almost all of Maryland's residential customers may select their gas supplier under comprehensive programs in place for the state's three largest local distribution companies (LDCs): Baltimore Gas & Electric (BGE), Washington Gas Light (WGL), and Columbia Gas of Maryland (CGMD). The participation cap on CGMD's pilot was removed in September 2000 to include all residential customers. Before then, participation was capped at 10,000 customers (approximately 40 percent of its total number of residential customers). Until November 1, 1999, the BG&E program had been capped at 50,000. As of September 2001, the Maryland Public Service Commission (PSC) estimated that 173,282 residential customers in the state were buying gas from nonutility suppliers. This is more than double the number participating 2 years earlier, and represents more than 18 percent of those eligible to choose. All commercial and industrial customers served by these LDCs may choose their gas suppliers.

In accordance with the Natural Gas Supplier Licensing and Consumer Protection Act of 2000, all suppliers must be licensed by the PSC. Applicants must provide proof of financial integrity, post a bond if they collect deposits from customers, and establish procedures for billing practices. In December 2001, 12 marketers were serving residential customers in the state.

EIA State Data: In 2000, Maryland had 941,384 residential and 70,671 commercial natural gas customers. They consumed 84 and 56 billion cubic feet of natural gas, respectively. The average prices paid for natural gas purchased from local distribution companies by residential and commercial customers were $9.78 and $8.08 per thousand cubic feet, respectively. The average city gate price in the state was $5.36 per thousand cubic feet.

Eligibility/Participation in Retail Choice Programs:

Status as of September 2001: LDC Customer Data



Local Distribution Company

Number of Customers

Residential

Firm Service Commercial and Industrial

Eligible

Participating

Percent of Eligible

Eligible

Participating

Percent of Eligible

Baltimore Gas & Electric 557,559 85,749 15.4 41,000 9,032 22.0
Columbia Gas of MD 28,600 1,998 7.0 3,100 355 11.5
Washington Gas Light 349,851 85,535 24.4 27,447 10,901 39.7
Total 936,010 173,282 18.5 71,547 20,288 28.4

Source: Maryland Public Service Commission (December 2001).


Maryland: Regulatory and Legislative Actions on Retail Unbundling

Summary: In February 1995, the Maryland Public Service Commission (PSC) began a "roundtable" collaborative process with the state's three largest local distribution companies -- Baltimore Gas and Electric (BG&E), Washington Gas Light (WGL), and Columbia Gas of Maryland (CGMD) -- to unbundle natural gas services. Since then, the PSC has approved several customer choice programs developed by the LDCs. The first programs extended choice only to commercial and industrial customers, but now all three LDCs have choice opportunities for residential customers. The first programs for residential customers had participation caps, but now all customers of these three LDCs may choose their own gas supplier. The programs include customer protection requirements and require that participating marketers be financially sound and have sufficient upstream capacity to ensure reliable service. The LDC is the supplier of last resort.

Regulatory and Legislative Actions
Legislation 10/00 Natural Gas Supplier Licensing and Consumer Protection Act of 2000 (Section 7-601 et seq. of the Public Utility Companies Article of the Maryland Annotated Code). Directs the PSC to adopt licensing requirements and procedures for natural gas suppliers and to set consumer protection requirements for suppliers.
Regulatory Actions 12/01 Gas Choice Enrollment Report. As of September 2001, about 173,282 residential customers were enrolled, accounting for 18.7 million decatherms (Dth) in annual volumes (BG&E-- 85,759 customers, 10.3 million Dth; WGL-85,535, 8.2 million Dth; CGMD-1,998, 224,415 Dth). Volumes delivered under choice accounted for nearly one-fourth of annual volumes to eligible residential customers (82.6 million Dth).
6/01 Gas Roundtable Report on Supplier Exits. Best result when supplier notifies all applicable parties in advance and also arranges shift to alternative supplier. No notice exits and bankruptcy require further review. Appendix includes case studies of supplier exits in 2000 and 2001.
6/01 Gas Choice Enrollment Report. The PSC reported on the status of the state's three LDC customer choice programs: As of June 2001, about 166,800 residential customers were enrolled, accounting for 19.4 million decatherms (Dth) in annual volumes (BG&E-- 91,000 customers, 11.1 million Dth; WGL-73,039, 8.0 million Dth; CGMD-1,998, 224,415 Dth). Volumes delivered under choice accounted for nearly one-fourth of annual volumes to eligible residential customers (82.6 million Dth).
12/00 Gas Supplier Licensing (Order No. 76643, Case 8846). The PSC adopted application and licensing procedures recommended by the gas roundtable in its 10/00 report. Regulations proposed by the roundtable will be used by the PSC on an interim basis, pending review by regulations coordinator and subsequent publication. All suppliers must be licensed by the PSC. Applicant must provide proof of financial integrity, post a bond if it collects deposits from customers, and establish procedures for billing practices.
9/00 Removal of Participation Cap in CGMD's Customer Choice Program (Order No. 76473, Case 8683). The PSC approved continuation of Columbia's pilot program until October 31, 2002, with certain changes. The cap on participation numbers was lifted and marketers can make their own arrangements to bring gas to CG's city gate. The PSC also approved a competitive transition cost mechanism and the selling of customer lists. The company will need further PSC approval to charge and collect stranded costs and to set the fee for customer list sales.
10/99 Status of Customer Choice Programs in MD. The PSC reported on the status of the state's three LDC customer choice programs: As of July 1999, about 81,500 residential customers were enrolled, accounting for 8.3 million decatherms (Dth) in annual volumes (BG&E-- 45,000 customers, 4.5 million Dth; WGL--34,000, 3.6 million Dth; CGMD--2,500, 235,000 Dth). Pilot phase of WGL's program ended Oct. 31, 1998, and pilot phase of BG&E's on Oct 31, 1999. Effective 11/1/99, all BG&E's residential customers (485,000) can choose their own supplier. All customers in BG&E's and WGL's choice programs pay a stranded cost surcharge. All BG&E, WGL, and CGMD industrial and commercial customers can choose their own supplier. As of 7/99, 17,135 smaller volume commercial customers were participating with an annual throughput volume of 22.6 million Dth. Two other LDCs (Chesapeake Utilities and NUI/Elkton) are in the process of developing customer choice programs.
2/98 Affiliate Transactions. Order 74038 Re Affiliate Transactions and Standards of Conduct, Case 8747. Establishes code of conduct governing relationships between a utility and its affiliates, differentiating between standards to be applied to all affiliate activities and those applicable only to energy-related ("core-service") affiliates. A utility may not give its affiliates (or affiliates' customers) any preference in providing regulated services; may not tie regulated service to any other product; and may not disclose any customer-specific information (unless requested by customer). Any utility information disclosed to its affiliates must be simultaneously given to nonaffiliated suppliers. Joint use of equipment and certain personnel by affiliates and utilities is allowed as long as costs are allocated on a fully distributed cost basis. Asset transfers will be governed by asymmetric pricing principles (asset transfers from parent to affiliate at the greater of book cost or market value, while those from affiliates to utility at the lesser of book cost or market value). Asymmetric pricing not required for the transfer of services between a utility and affiliates. In a sale or transfer, utility assets are the tangible property included in a utility's rate base. Utilities can guarantee the indebtedness of an affiliate but cannot receive a fee for the service. Utilities must inform the PSC about all new nonutility activities on a "time-concurrent basis" and indicate the level of assets involved. Utilities must offer billing services to nonaffiliated energy marketers (but not to other nonaffiliates) so that customers can have a one-bill option. Startup costs of affiliates are supported by stockholders. Affiliates can borrow funds from the utility at market rates upon review and approval by the PSC. Promotional materials can identify associations between utilities and affiliates (including logos) but joint promotions are prohibited unless offered to other competitors. When an affiliate uses a utility's name or logo, it must include a disclaimer that the companies are separate entities.
7/96 Pilot program for CGMD residential customers. Approved 2-year pilot program for CGMD residential customers in western Maryland beginning 11/1/96. The program is limited to 10,000 households, on a first-come, first-serve basis. The program was developed in cooperation with the Maryland People's Counsel and several gas marketers.
6/96 Pilot program for WG&L residential customers. Approved 2-year pilot program for Washington Gas residential customers beginning 11/1/96. Program will be limited to 6,000 customers and/or a maximum of 2,000 decatherms per day (dth/d). Marketer pools must have a minimum of 300 customers, or 100 dth/d.
4/96 Code of Conduct for BG&E Affiliate Transactions. Ordered separation of BG&E utility and marketing operations and detailed 12 standards of conduct. BG&E cannot give its marketing affiliate any preference with respect to gas delivery, capacity assignment or release, contract administration, capacity allocation, customer information, discounts, etc.
4/95 Cost Allocation Issues. Investigation into Allocation of Costs Between Regulated and Unregulated Business Activities of the Baltimore Gas and Electric Company, Case 8577. Adopts four cost allocation principles: •Costs must be allocated on a fully distributed basis. •In transactions in which BG&E provides benefits to its affiliate, the cost of services are to be based on the full cost, including direct and indirect.•For services that BG&E could market to the public, their fair market value is to allocated as the imputed cost to the affiliate for these services. •Asset transfers will be governed by asymmetric pricing principles (see2/98 order).
2/95 Roundtable Collaborative. Directed the formation of a collaborative LDC roundtable process to develop unbundled services for customers of the state's three largest LDCs (BG&E, WGL, and CGMD). Consensus on unbundling issues would allow the LDCs to file unopposed restructuring plans with the PSC.

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File last modified: 06/19/2002