Retail Unbundling - U.S. Summary

Overview: Enrollment in existing "customer choice" programs generally increased in 2002 as the number of eligible customers grew substantially and the number of competitive suppliers increased in several states (see Marketer Summary Table). The high natural gas prices in 2000 and the early months of 2001 had resulted in several suppliers exiting the market. This in itself reduced competitive options for consumers, but also focused attention on the need for improved consumer protection measures and more widespread use of risk management tools by competitive suppliers and local utilities. Subsequently, many states with active choice programs implemented more stringent credit requirements for participating marketers and fine-tuned their programs. Illinois passed legislation in 2002 that set up marketer certification standards, and Georgia enacted legislation that established a consumer bill of rights and provided for a regulated gas provider for low-income and high risk customers. Also during 2002, New York issued new requirements to marketers to ensure customers get back deposits in case of marketer bankruptcy, and the Ohio Public Utility Commission finalized rules in support of 2001 legislation that requires suppliers to be certified and consolidates consumer protection authority over certain retail gas transactions.

Most of the enrollment increases in 2002 can be attributed to the expansion of existing programs into new geographic areas or new enrollment caps as part of an approved phase-in to system-wide choice programs. Eligibility numbers doubled in Michigan, nearly tripled in Virginia, and increased more than five-fold in Wyoming and nearly seven-fold in Illinois. The choice program in Wyoming was expanded to include all residential customers of Kinder Morgan in the state (37 percent of total), requiring them to buy their natural gas directly from marketers, although customers in the new program areas can choose a regulated rate option. The program will be reevaluated after a year. Florida approved two transitional pilot programs in 2002, which allowed two utilities to exit the merchant function and transfer their residential and commercial sales customers to aggregated customer pools. This is the first time that residential customers in Florida are eligible for transportation service.

No significant changes occurred in the states that allow consumer choice but have virtually no participation by marketers. Massachusetts had fewer than 300 residential customers participating, West Virginia fewer than 20, and New Mexico had no participants. The customer aggregation program continues in California, but accounts for less than 0.7 percent of deliveries to residential customers (based on most recent EIA data). Only about 0.5 percent of residential and commercial customers in Montana have chosen alternative suppliers and only 0.2 percent of South Dakota gas consumers (all sectors) use transportation service. Colorado allows utilities to offer customer choice programs if approved by the public utilities commission, but no utilities have submitted unbundling plans.

As of January 1, 2003, 21 states and the District of Columbia have legislation or programs in place that allow residential consumers and other small-volume gas users to purchase natural gas from someone other than their traditional utility company. Five states and the District of Columbia allow all residential consumers to choose their natural gas suppliers, but a lack of marketer participation has precluded the development of competitive retail markets in two of these states. Eight states have begun to implement statewide programs, and eight states have pilot or partial unbundling programs in place. An additional 10 states are considering action on customer choice, while 18 states have thus far taken no action and two states have discontinued their pilot programs. Only two states have changed their unbundling status in the past 12 months. Michigan is in the process of implementing voluntary customer choice programs virtually statewide, and Florida approved two experimental pilot programs for residential transportation service.

The most far-reaching unbundling program exists in Georgia where all residential customers in the Atlanta Gas Light Company (AGL) service territory (more than 80 percent of the residential gas customers in the state) purchase their natural gas directly from marketers. AGL still delivers the gas but no longer provides any sales service. Large commercial and industrial consumers have had the option of purchasing the natural gas commodity separately from natural gas services for many years. State regulators and lawmakers, who are responsible for designing and implementing retail restructuring programs, have moved more slowly in implementing choice programs for residential and small-volume commercial customers, traditionally known as "core" consumers, until they could ensure reliable service.

EIA Data: In 2001, the United States had 60,239,034 residential and 5,030,122 commercial customers. They consumed 4,775 and 3,037 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 $9.64 and $8.43 per thousand cubic feet, respectively. The average city gate price in the United States was $5.72 per thousand cubic feet.

Eligibility/Participation in Retail Choice Programs:

Status as of December 2002: Number of Residential Customers


Total 2001

Eligible Participating
Total Percent of 2001 Total Total Percent of Eligible Percent of 2001 Total
Statewide Unbundling: 100-Percent Eligibility
D.C. 135,820 135,820 100 26,438 19.5 19.5
New Jersey 2,436,771 2,436,771 100 105,576 4.3 4.3
New Mexico 485,969 485,969 100 0 0 0
New York 4,243,130 4,243,130 100 318,670 7.5 7.5
Pennsylvania 2,542,724 2,542,724 100 215,614 8.5 8.5
West Virginia* 363,126 363,126 100 12 0.003 0.003
Subtotal 10,207,540 10,207,540 100 666,310 6.5 6.5
Statewide Unbundling: Implementation Phase
California* 9,600,493 9,600,493 100 21,199 0.2 0.2
Georgia 1,737,850 1,430,323 82.3 1,430,323 100 82.3
Maryland 959,772 954,936 99.5 162,889 17.1 17.0
Massachusetts 1,283,008 1,283,008 100 255 0.02 0.02
Ohio 3,195,407 2,700,968 84.5 1,082,073 40.1 33.9
Virginia 941,582 543,900 57.8 81,042 14.9 8.6
Subtotal 17,718,112 16,513,628 93.2 2,777,781 16.8 15.7
Pilot Programs/Partial Unbundling
Florida 590,221 10,187 1.7 10,187 100 1.7
Illinois 3,670,693 1,940,600 52.9 132,577 6.8 3.6
Indiana 1,613,373 150,000 9.3 40,488 27.0 2.5
Kentucky 749,106 126,000 16.8 45,570 36.2 6.1
Michigan 3,011,205 1,432,000 47.6 332,244 23.2 11.0
Nebraska 476,275 73,228 15.4 73,228 100 15.4
Wyoming 129,897 48,339 37.2 48,339 100 37.2
Subtotal 10,240,770 3,780,354 36.9 682,633 18.1 6.7
Total 38,166,422 30,501,522 79.9 4,126,724 13.5 10.8
U.S. 2001 Total 60,239,034 --


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- = Not applicable

* Based on Energy Information Administration, Natural Gas Annual 2001 (February 2003).

Note: Colorado law permits unbundling if approved by the state public utility commission, but no utilities have submitted unbundling plans. Also, two other states (Montana and South Dakota) have pilot programs or partial unbundling but residential data are not available (see state information pages).

Sources: Total 2001: Energy Information Administration, Natural Gas Annual 2001 (February 2003). Eligibility and Participation: State public utility commissions.

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File last modified: 01/31/2003