Retail Unbundling - U.S. Summary

 

Overview:  Enrollment in existing “customer choice” programs decreased in 2004, although more consumers were eligible to participate than ever before. In total, nearly 33 million of the approximately 62 million residential gas customers in the United States have access to choice programs, a gain of about 2.5 percent since 2003, and about 4 million are participating (12 percent of eligible) (Table 1). However, enrollment dropped by almost 5 percent in 2004, marking the first downturn in participation levels since some states began opening up residential retail markets to competitive supply offers in the 1990s. Almost all of the decline (88 percent) can be attributed to decreased participation in Ohio, as the state had 168,173 fewer residential choice customers in 2004 than in 2003 (Table 2). Still Ohio is second only to Georgia in the size of its residential choice market with more than a third of all households participating and enrollment levels of nearly 1.1 million. Michigan, which has the fourth largest choice enrollment, had the next largest decrease with a participation decline of 37,844. Pennsylvania had a decline of 14,027. 

 

Apparently, the sharply higher prices for natural gas in the past few years and increased price variability have dampened consumer interest in alternative supply options and reduced the number of marketers interested in serving residential customers ( Marketer Summary Table). About 30 percent fewer marketers were authorized to serve residential customers in 2004 than in 2001 (115 vs. 165), and the number of marketers actually selling to residential customers has dropped from 159 to 83 (Table 3). Furthermore, many marketers are not enrolling new customers. For example, Michigan has only two marketers enrolling customers, and Pennsylvania has virtually no marketer activity in large areas of the state.

 

Despite the overall enrollment decline, pilot programs in several states (Kentucky, Indiana, and Wyoming) have requested extensions, and state regulatory agencies are continuing to refine and evaluate existing programs. Florida allowed another utility to exit the merchant function on a 2-year trial basis and transfer its residential and commercial sales customers to aggregated customer pools. In New York, which has the third largest choice enrollment, the public service commission affirmed its commitment to customer choice and outlined strategies to boost participation, such as encouraging aggregation programs and utility-specific programs that help customers switch to third-party suppliers. In particular, utilities were encouraged to replicate Orange & Rockland’s successful “PowerSwitch” program in which the utility purchases marketers’ accounts receivable without recourse, which simplifies marketers’ operations and eliminates their need to perform credit checks. In return marketers in the program offered a guaranteed discount for a 2-month period and agreed to take all residential and small commercial customers that are referred by the utility. Customers are assigned randomly to participating marketers.

 

In Pennsylvania, the public utility commission began an investigation in May 2004 to evaluate the competitiveness of natural gas supply services in the state. If it is determined that the market is not sufficiently competitive, further actions are to be considered, including legislation. Massachusetts began an investigation in January 2004 to determine whether retail markets are sufficiently competitive to allow local distribution companies (LDCs) to assign pipeline capacity voluntarily rather than on the currently mandated basis. The investigation is ongoing with most LDCs advocating for the status quo and most marketers advocating for changes. No suppliers are currently offering services to household consumers in Massachusetts.

 

No significant changes occurred in the states that allow consumer choice but have virtually no participation. As in 2003, Massachusetts had almost no participation with fewer than 100 residential customers participating, while West Virginia and New Mexico had no participants. The customer aggregation program continues in California, but accounts for only 0.4 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 December 2004, 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 eight states are considering action on customer choice, two fewer than in 2003, while nineteen states have thus far taken no action and two states have discontinued their pilot programs. The most far-reaching program still exists in Georgia where all residential customers in Atlanta Gas Light Company's service territory (more than 80 percent of the residential gas customers in the state) purchase their natural gas directly from marketers. Atlanta Gas Light 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 until they could ensure reliable service.

 

EIA Data: In 2003, the United States had 61,857,913 residential and 5,150,925 commercial customers. They consumed 5,078 and 3,217 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 $9.52 and $8.29 per thousand cubic feet, respectively.

 

Table 1. Eligibility/Participation in Retail Choice Programs

Status as of December 2004: Number of Residential Customers

 

Category/State

 

Total 2003

Eligible in 2004

Participating in 2004

Total

Percent of 2003 Total

Total

Percent of Eligible

Percent of 2003 Total

Statewide Unbundling: 100-Percent Eligibility

D.C.

136,258

136,258

100

16,405

12.0

12.0

New Jersey

2,562,856

2,562,856

100

133,226

5.2

5.2

New Mexico

498,852

498,852

100

0

0

0

New York

4,218,180

4,218,180

100

304,626

7.2

7.2

Pennsylvania

2,572,746

2,572,746

100

180,863

7.0

7.0

West Virginia*

360,022

360,022

100

0

   0

  0

Subtotal

10,348,914

10,348,914

100

635,120

6.1

6.1

Statewide Unbundling: Implementation Phase

California*

9,803,306

9,803,306

100

38,030

0.4

0.4

Georgia

1,747,017

1,427,661

81.7

1,427,661

100

81.7

Maryland

987,863

984,495

99.7

142,917

14.5

14.5

Massachusetts

1,315,103

1,315,103

100

83

(*)

(*)

Michigan

3,140,021

2,884,930

91.9

203,866

7.1

6.5

Ohio

3,225,908

2,937,280

91.1

1,085,423

37.0

33.6

Virginia

996,564

579,812

58.2

70,826

12.2

7.1

Subtotal

21,215,782

19,932,587

94.0

2,968,806

14.9

14.0

Pilot Programs/Partial Unbundling

Florida

617,373

12,635

2.0

12,635

100

2.0

Illinois

3,702,308

2,083,400

56.3

161,082

7.7

4.4

Indiana

1,644,715

150,000

9.1

47,789

31.9

2.9

Kentucky

762,130

127,932

16.8

41,121

32.1

5.4

Nebraska

492,451

74,848

15.2

74,848

100

15.2

Wyoming

135,441

61,256

45.2

27,502

44.9

20.3

Subtotal

7,354,418

2,510,071

34.1

364,977

14.5

5.0

Total

38,919,114

32,791,572

84.3

3,968,903

12.1

10.2

U.S. 2003 Total

61,857,913

--

--

--

--

--

-- = Not applicable. (*) = Less than 0.05 percent.

* Based on Energy Information Administration, Natural Gas Annual 2003 (December 2004).

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 2003: Energy Information Administration, Natural Gas Annual 2003 (December 2004). Eligibility and Participation: State public utility commissions, utility company web sites, and Energy Information Administration estimates.

 

Table 2. Historical Overview:

Number of Residential Customers in Customer Choice Programs, 2000-2004

 

State

Residential Participation Levels as of:

Percent of Eligible

Mar 2000

Dec 2001

Dec 2002

Dec 2003

Dec 2004

2000

2001

2002

2003

2004

CA

--

--

(R)21,119

25,319

38,030

--

--

0.2

0.3

0.4

 DE*

6,076

--

--

--

--

40.5

--

--

--

--

DC

11,014

15,807

26,438

21,673

16,405

8.3

11.4

19.5

15.1

12.0

FL

--

--

10,187

10,388

12,635

--

-

100

100

100

GA

1,370,421

1,375,556

1,430,323

1,419,131

1,427,661

100

100

100

100

100

IL

25,800

65,833

132,577

153,897

161,082

9.1

23.1

6.8

7.4

7.7

IN

14,120

10,001

40,488

43,014

47,789

2.3

1.6

27.0

28.7

31.9

KY

--

NA

45,570

41,095

41,121

--

NA

36.2

32.0

32.1

MD

161,129

166,800

162,889

151,233

142,917

21.7

17.9

17.1

15.6

14.5

MA

17,024

NA

255

208

83

20.5

--

(*)

 (*)

(*)

MI

207,863

199,218

332,244

241,710

203,866

NA

24.7

23.2

10.3

7.1

NE

74,194

73,669

73,228

73,842

74,848

100

100

100

100

100

NJ

67,635

57,040

105,576

126,519

133,226

3.0

2.4

4.3

5.2

5.2

NM

0

0

0

2

0

0

0

0

(*)

0

NY

75,787

244,823

318,670

295,322

304,626

1.8

5.9

7.5

6.9

7.2

OH

572,099

825,148

1,082,073

1,253,596

1,085,423

33.3

30.1

40.1

42.9

37.0

PA

NA

253,734

215,614

194,890

180,863

--

10.0

8.5

7.6

7.0

VA

45,736

45,630

81,042

73,996

70,826

52.5

24.8

14.9

12.9

12.2

 WI*

1,869

--

--

--

--

7.5

--

--

--

--

WV

40

21

12

10

0

(*)

(*)

(*)

(*)

0

WY

9,169

9,185

48,339

33,760

27,502

100

100

100

56.0

44.9

Total

2,659,976

3,342,465

(R)4,126,644

4,159,605

3,968,903

21.6

19.6

13.5

13.0

12.1

  -- = Not applicable. (R) = Revised. NA= Not available.

*Pilot program was discontinued.

   (*) = Less than 0.05 percent.

   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: 2004: State public utility commissions, local distribution companies, marketers, and Energy Information Administration, Natural Gas Annual 2003 (December 2004). 2000-2003: Energy Information Administration, Historical files. http://www.eia.gov/oil_gas/natural_gas/restructure/restructure.html.

 

Table 3. Historical Overview:

Number of Marketers Serving Residential Customers, 2001-2004

 

State/District

 

December 2001

 

December 2002

 

December 2003

 

December 2004

*Total

**Active

*Total

**Active

*Total

**Active

*Total

**Active

CA

--

--

3

3

2

2

1

1

DC

3

3

5

5

4

4

4

4

FL***

--

--

0

0

(R)1

(R)1

1

1

GA

8

8

10

10

10

10

10

10

IL

2

2

6

6

8

6

10

9

IN

4

1

4

2

7

7

7

7

KY

--

--

5

3

3

3

2

2

MD

12

12

13

10

13

9

14

9

MA

4

1

3

3

0

0

0

0

MI

3

3

6

6

8

8

7

4

MT

4

4

11

11

4

4

4

4

NE

6

6

4

4

3

3

3

3

NJ

6

3

8

6

6

5

5

5

NY

52

50

50

44

45

42

38

37

OH

10

8

22

10

24

10

27

8

PA

35

10

(R)29

4

29

4

29

4

VA

13

4

8

6

4

4

6

6

WY

3

3

4

4

5

5

5

5

Total****

165

159

(R)131

104

(R)122

(R)93

115

83

   -- = Not applicable. (R) = Revised.

*Total Marketers: Number of companies that have been authorized by the public service commission to provide gas service in the state, even if not actively serving customers.

   **Active Marketers: Supplier has been authorized by the public service commission to provide gas service in the state and is actively serving customers in the state.

   ***Florida marketer data were not included in previous years.

   ****Totals do not equal sum of state totals because some companies are licensed and operate in multiple states. Also note that the December 2002 Total differs from data in the historical file in that the number of PA active marketers (4) was inadvertently listed as total marketers for the state, rather than 29 (estimated). The revision results in an additional 12 marketers in the United States in 2002.

Sources: 2004: State public utility commissions and utility company web sites. Energy Information Administration, Natural Gas Annual 2003 (December 2004). 2001-2003: Energy Information Administration, Historical files. http://www.eia.gov/oil_gas/natural_gas/restructure/restructure.html

 

 

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File last modified: 01/31/2005