Retail Unbundling - Virginia


Status: The state has begun the process of implementing comprehensive unbundling programs for its residential gas customers.


Overview: Since July 1, 2000, Virginia law has allowed utilities to offer statewide customer choice programs if approved by the state corporation commission (SCC). Effective April 1, 2001, Washington Gas Light (WGL) became the first utility with authorization to permit all of its customers in the state to buy natural gas directly from a certified, retail energy supplier. The program was phased in during a one-year period, with choice available at first to 150,000 residential customers and then to the rest of the company's residential customers in the state in January 2002. As of January 1, 2003, 71,442 residential customers and 7,402 commercial customers in WGL's service territory were participating in the program. A year earlier, about 43,500 residential customers and 6,330 small commercial customers were participating. Columbia Gas of Virginia also has a choice program in place for all customers in its service area since October 1, 2002. The company has had a pilot program since 1997 in selected areas of Northern Virginia, with about 9,600 residential customers enrolled as of July 2002.


On June 20, 2001, the SCC adopted permanent rules for energy choice that became effective on August 1. These rules require that local distribution companies provide marketers with names and addresses of eligible customers and their monthly energy consumption for the previous 12 months, if customers choose to have the information released. All bills must use standard terms and include a customer's monthly energy consumption for the past 12 months and a description of all applicable charges and rate changes. Marketers must be licensed by the SCC and demonstrate the financial and technical ability to deliver services to Virginia utility customers. As of December 2002, six marketers were serving residential natural gas customers in the state. WGL’s unregulated affiliate, WGES, is serving about 70 percent of the choice customers in WGL’s service area.


EIA State Data: In 2001 Virginia had 941,582 residential and 84,839 commercial customers who consumed 70 and 60 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 $11.96 and $9.36 per thousand cubic feet, respectively. The average city gate price in the state was $6.76 per thousand cubic feet.


Eligibility/Participation in Retail Choice Programs:


Status as of December 2002: Number of Customers


Customer Type


Total 2001

Eligible

Participating

Total

Percent of 2001 Total

Total

Percent of Eligible

Percent of 2001 Total

Residential

941,582

543,900

57.8

81,042

15.0

8.6

Commercial*

84,839

40,700

48.0

8,104

19.9

9.6

Total

1,026,421

584,600

57.0

89,146

15.2

8.7


*Large commercial customers already have the option of purchasing natural gas from suppliers other than local distribution companies. The participating commercial customers include only small-volume commercial customers.


Sources: Total 2001: Energy Information Administration, Natural Gas Annual 2001 (February 2003). Eligibility: Based on customer totals for Washington Gas Light, Shenandoah Gas, and Columbia Gas of Virginia reported on Form EIA-176, "Annual Report of Natural and Supplemental Gas Supply and Disposition," which is the primary data source for EIA's Natural Gas Annual. Participation: Virginia State Corporation Commission and Washington Gas Web Site (www.washgas.com).



Virginia: Legislative and Regulatory Actions on Retail Unbundling


Summary: The Virginia General Assembly enacted legislation on July 1, 1999, that allows all gas utilities in the state to offer retail supply choice to its customers as of July 2000. All retail choice plans must first be approved by the state corporation commission. The legislation was reenacted and modified in 2000 and included provisions for a natural gas consumption tax that would be added to customers' bills. The General Assembly has also passed legislation (enacted July 1999) that opened the retail electricity market to competition during a phase-in period from January 1, 2002, to January 1, 2004. Competitive suppliers participating in natural gas pilot programs must apply for a permanent license and operate under rules adopted by the SCC that became effective on August 1, 2001. In order to become licensed, a provider must demonstrate the financial and technical ability to deliver services to Virginia utility customers. Retail choice rules apply to both natural gas and electricity markets.


Regulatory and Legislative Actions

Legislation

 3/00

Modifications to Retail Choice Legislation, HB 279 and SB 185. Legislation approved (enacted July 2000) that authorizes gas suppliers, pipeline distribution companies, and gas utilities to file a retail supply choice plan that includes provisions to implement the program, methodology to recover stranded costs, proposed unbundled rates and terms, and provisions to insure that one class of customer does not subsidize another class. The bill would also create a natural gas consumption tax, which would be added to the consumer's bill.

 

 3/99

Statewide Retail Choice Approved, Senate Bill 1105. Legislation was approved (enacted July 1999) that authorizes all natural gas local distribution companies to offer supply choice to their customers. Such plans are to be approved by the SCC and would not start before July 2000. The law also calls for a study of gas utility taxation issues before the 2000 legislative session. The legislation will expire on July 1, 2000, unless reenacted by the General Assembly.

Regulatory Actions

 6/02

Columbia Gas Authorized to Extend Choice to All Customers. The SCC authorized Columbia Gas of VA to extend its customer choice program to all its customers in the state. The company serves about 200,000 customers in central Virginia, portions of the Shenandoah Valley, portions of Northern Virginia, and part of the Hampton Roads region, including Suffolk and Portsmouth. The company plans to implement its choice plan in time for the 2002-2003 heating season.

 

 4/01

Washington Gas Authorized to Extend Choice to All Customers. The program is being phased in during a one-year period, with choice available at first to 150,000 residential customers and then to the rest of the company's residential customers in the state in January 2002.

 

 6/01

Permanent Retail Choice Rules Adopted (effective August 2001). These rules require that local distribution companies give marketers the names, addresses, and monthly energy consumption for the year (previous 12 months) of eligible customers, if customers' choose to have the information released. All bills must use standard terminology for distribution service, competitive transition charge, natural gas supply service, and taxes. Bills must include a customer's monthly energy consumption for the past 12 months and a description of all applicable charges and rate changes. Marketers must be licensed by the SCC and demonstrate the financial and technical ability to deliver services to Virginia utility customers

 

 2/00

Retail Access Pilot Program Rules, Order Inviting Comments, Case PUE980812. The SCC revised proposed standards governing retail access pilot programs presented in the hearing examiner's August 1999 report. The rules cover the relationship between LDCs and competitive service providers, their responsibilities to retail customers, and licensing requirements for competitive service providers. The revised rules are more detailed than in the hearing examiner's report and include a definitions section and a section on requirements for aggregators. Written comments are due by 2/24/2000.

 

 12/99

Consumer Education Program Plan, SCC Report to Legislature. The SCC recommends a 5-year education program to inform consumers about energy choice in Virginia. The program would require mass media marketing and advertising and would be funded through the SCC's special revenue tax assessed on regulated utilities. The report will be considered by the Legislative Transition Task Force, which was established to monitor the state's energy restructuring effort.

 

 8/99

Columbia Gas Pilot Extended, Case PUE990245. The SCC approved continuance of Columbia's customer choice program (formerly Commonwealth Choice) until October 1, 2000, provided that the company file an interim balancing study by the end of August 1999 and a final balancing report at the end of the pilot. Originally the pilot was approved for the 2-year period from October 1997 to October 1999. About 25 percent (6,500) of eligible customers are participating.

 

 8/99

Retail Access Pilot Program Rules, Hearing Examiner Report, Case PUE980812. The examiner recommended that the task force's proposed rules be adopted with limited modifications and clarifications. Marketing materials must include clear pricing terms and residential monthly bill estimates based on 7.5 thousand cubic foot consumption. Customers have a 3-day rescission period. Deposits required by marketers cannot exceed the equivalent of a customer's estimated liability for 2 months of service. Marketers must have sufficient gas delivery capability to serve their firm customers; if not, LDCs can impose penalties. A utility may not give its affiliates 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). Utilities and affiliates must maintain separate books and records. All aggregators and competitive service providers must be licensed by the Commonwealth. License applications must identify geographic area of proposed service, name of LDC certified to serve the area, and include sufficient information to indicate "financial fitness" for providing proposed services.

 

 3/99

Standards of Conduct: Task Force Report. Report proposes standards of conduct governing issues common to both retail gas unbundling programs and retail access pilot programs for electric utilities. The rules address conduct standards for competitive service providers, LDCs and their affiliates, and licensing and filing requirements. Formal hearings are scheduled to allow comment by all interested parties, with a hearing examiner assigned to conduct all further proceedings.

 

12/98

Number of Commercial/Industrial Customers in WGL Pilot Increased, Case PUE971024. The SCC approved Washington Gas Light's (WGL) request to expand the number of eligible commercial and industrial customers to include all applications received by 12/9/98, which is the last date to apply for service beginning 1/1/99. The original program covered 10 percent, and WGL has received applications from about 16 percent of the customer class.

 

 6/98

Approval of WGL Pilot Program, Case PUE971024. The SCC approved a 2-year pilot program that would allow Washington Gas Light to provide delivery-only service to 10 percent (20 percent the second year) of eligible firm bundled service customers. Balancing service would be offered to suppliers on an annual basis the first year and monthly the second year. Qualifying suppliers must aggregate at least 100 dekatherms of average daily contract quantities.

 

 3/98

Special Rate Guidelines, Case PUE970695. The SCC adopted guidelines for utility applications for special rates for particular customers or customer classes. Utilities must show the effect of such rates on total company revenues, total company expenses, and the return on rate base (if applicable), as well as the rate impact on other customers. Applications will be reviewed on a case-by-case basis.

 

9/97

Approval of Commonwealth Gas Service Pilot Program, Case PUE970455. The SCC approved a 2-year pilot choice program for residential and small commercial customers in the Gainesville area. The program will begin October 1, 1997, and continue until October 1, 1999. Enrollment will be open rather than limited to a particular period, aggregation service agreements are to be included in the tariff as well as provisions that participating marketers must respond to SCC data requests, and the company is to conduct a balancing study "using daily load sampling in conjunction with the pilot to gather information about customer gas consumption in comparison with load profiles used by marketers." The SCC also directed that a task force be established to develop a code of conduct to govern retail gas unbundling.


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File last modified:1/31/2003