Enrollment in “customer choice” programs increased in 2006 for the first time since 2003, although the number of States allowing choice remained unchanged. Overall, about 12 percent or about 4.2 million of the approximately 35 million residential gas customers with access to choice were buying gas from marketers as of December 2006 (Table 1), up from the 3.9 million participating in 2005 and about 28,000 more than the record high in 2003 (Table 2). Most of the gains were in Ohio, which is second only to Georgia in the size of its residential choice market with almost 45 percent of all households participating and enrollment levels of more than 1.3 million. Georgia has the most comprehensive choice program in that all 1.4 million residential customers in Atlanta Gas Light Company’s service territory (more than 80 percent of the State’s residential gas customers) purchase their natural gas directly from marketers. Atlanta Gas Light still delivers the gas but no longer provides any sales service. Together Georgia and Ohio accounted for two-thirds of the residential customer enrollment total in 2006.

Twenty-one States and the District of Columbia have legislation or programs in place that let residential consumers and other small-volume gas users purchase natural gas from someone other than their traditional utility company. However, the availability and characteristics of these customer choice programs vary widely from State to State. Seven 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 three of these States. Six States are in the process of implementing choice statewide, with programs available to more than half their residential customers, and another eight States have pilot or partial unbundling programs in place or awaiting development. Two other States discontinued their pilot programs several years ago after deciding not to proceed with choice. The remaining 27 States are not considering choice programs at this time. Large commercial and industrial consumers have had the option of purchasing the natural gas commodity separately from natural gas services for many years.

2006 Highlights

The number of marketers offering services to residential customers (Marketer Summary Table) increased or remained the same in all States except Maryland, even though the overall total was about the same as in 2005 (82 vs. 81) (Table 3). Ohio had the largest increase (from 9 to 14), while New York had by far the largest number (41) of active marketers. Many marketers have expanded their price offerings in attempts to attract customers and to manage the relatively high natural gas prices and increased price variability in recent years. Besides month-to-month variable rates or fixed rates for longer terms, some marketers offer introductory rates, rebates, budget plans, or capped prices that let customers pay less if retail prices drop.

Enrollment in residential choice programs was 8 percent (326,853) more than in 2005 and 6 percent (218,979) more than in 2004. Ohio and New York had the largest increases, with enrollment gains of about 211,000 and 55,000, respectively, since 2005.

Participation percentages increased or remained the same in all but five States, as regulators continued to refine and evaluate existing programs. For example:

• Ohio: The second-largest local distribution company (LDC) in Ohio, Dominion East Ohio Gas Company with a customer base of more than 1.2 million, became the first LDC in the State to take steps toward exiting the commodity market and becoming a distribution-only company. In May 2006, the Ohio Public Utilities Commission (PUC) approved the company's request to change the way natural gas is purchased for its customers during phase 1 of a proposed 2-phase restructuring plan. From October 2006 through August 2008, Dominion East will buy natural gas each month for its non-choice (sales) customers from six suppliers at the monthly New York Mercantile Exchange (NYMEX) settlement price plus a set fee of $1.44 per thousand cubic feet. The fee was determined through a PUC-monitored auction where marketers bid to serve groups of customers. Under phase 2, if approved by the PUC, remaining sales customers would either choose or be assigned to participating marketers on a pro rata basis. At that point Dominion would become a distribution-only company, like Atlanta Gas Light Company in Georgia, but continue its role as the provider of last resort.
• New York: The New York Public Service Commission (PSC) continued its efforts to expand consumer education programs during the year and held several energy fairs and consumer forums to give natural gas customers an opportunity to obtain information about marketers and compare energy services. The PSC also directed participating marketers to post real-time price information on the Commission’s “Power to Choose” web site. Beginning December 2006, by the 5th day of each month, marketers must post a snapshot of prices for residential services as of the 1st day of the month. Reported price offers also must include information on terms and conditions, such as type of price offer (fixed, variable, or capped), types of payment and billing options, cancellation fees, deposit requirements, and late payment charges. Non-compliant marketers would be prohibited from enrolling new customers and would be dropped from a utility's referral program.
• Pennsylvania: The Pennsylvania Public Utility Commission formed a task force to consider what actions should be taken to encourage competition on a statewide level, such as changes to market structure and operation and to regulatory and legislative guidelines (incentives). The group is examining issues related to mandatory capacity assignments, purchase of receivables, consumer education, consumer protection rules, and costs of retail supply services and also considering possible incentives that might result in LDCs exiting the merchant function. The task force plans to submit its recommendations to the PUC by March 2007.
• Indiana: The Indiana Utility Regulatory Commission in January 2006 approved extension of the State's pilot choice program, which is operated by Northern Indiana Public Service Company (NIPSCO)--the largest LDC in the State. The program was scheduled to end in March 2005 but was extended through April 2010 in an agreement between NIPSCO and the Indiana Office of Utility Consumer Counselor that includes provisions for a reduction in the interstate transportation costs charged to residential and small business customers. NIPSCO’s alternative regulatory plan includes the choice program as well as a price protection service (PPS) in which customers have a choice of a 1-year fixed or capped rate set by the company that includes a price premium. The company also offers a “DependaBill” payment plan, in which monthly prices are fixed without an end-of-year adjustment but include a monthly fee of up to 10 percent. Neither the PPS nor the DependaBill option is regulated by the State.

No significant changes occurred in the States that allow consumer choice but have virtually no participation. Despite an increase, Massachusetts had only 0.1 percent of residential customers participating. New Mexico and West Virginia had fewer than 100 residential customers participating. The customer aggregation program continued in California, but accounted for only 0.3 percent of deliveries to residential customers (based on most recent EIA data). Only about 0.3 percent of residential and commercial customers in Montana chose alternative suppliers, and only 0.2 percent of South Dakota gas consumers (all sectors) used transportation service. Colorado allows utilities to offer customer choice programs if approved by the PUC, but no utilities have submitted unbundling plans.