Enrollment in “customer choice” programs increased in 2008 for the third year in a row, although the number of States offering choice remained the same. Most States with active programs had enrollment gains and increases in the percentage of eligible customers participating. New York had the largest enrollment increase with about 102,000 more residential customers participating than in 2007, a gain of 21 percent. Overall, more than 13 percent or about 4.7 million of the approximately 35 million residential natural gas consumers with access to choice were buying natural gas from marketers as of December 2008 (Table 1), up from the 4.4 million participating in 2007 (Table 2). Georgia continues to have the most comprehensive choice program in that all 1.5 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. Ohio has the second-largest choice program with about 48 percent of all eligible households participating and enrollment levels of nearly 1.4 million. Together Georgia and Ohio accounted for more than 60 percent of the residential enrollment total in 2008.

Currently, 21 States and the District of Columbia have legislation or existing programs 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 of the 21 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 of the 21 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, although a utility in one of these States remains committed to expanding its small-volume transportation program in the future, with a goal of eventually exiting the merchant function over several phases. 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.

2008 Highlights

The number of marketers providing services to residential customers (Marketer Summary Table) increased or remained the same in most States, and the overall total was 9 percent more than in 2007 (99 vs. 91) (Table 3). Thirty-six marketers have licenses in multiple States, with one marketer licensed and active in 10 States and six others active in at least 4 States (Marketer List). Some of the larger marketers have formed an advocacy group to promote competition in natural gas retail markets, with an initial focus on markets in Illinois, Michigan, New York, and Pennsylvania. New York has by far the largest number (50) of active marketers, accounting for more the half the U.S. total. Customers in some parts of New York State have a choice of more than 30 marketers and 50 different price offerings such as introductory discount rates, month-to-month variable rates, fixed rates for longer terms, and budget plans.

Enrollment in residential choice programs reached a new high in 2008. Participation was about 6 percent (250,948) more than in 2007, 12 percent (507,439) more than in 2006, and 22 percent (834,292) more than in 2005. New York, Georgia, Illinois, Indiana, and Pennsylvania had the largest increases, with enrollment gains of about 102,000, 65,000, 43,000, 26,000, and 25,000, respectively, since 2007. (Georgia’s increase was due to an increase in the number of Atlanta Gas Light customers, all of whom purchase gas from marketers.)

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

• Maryland: The Maryland Public Service Commission (PSC) drafted new rules that would establish consumer protections for choice customers, require uniform procedures for retail gas supply, and give local distribution companies (LDCs) who send consolidated bills the option of sharing customers' partial payments with marketers on a pro-rata basis or of purchasing the marketers' receivables. (In purchase of receivable programs, the LDC is responsible for billing the customer, collecting payment, and then reimbursing the marketer, even if the customer does not pay.) The PSC scheduled a rulemaking session for March 2009 to consider final adoption of the proposed rules.

• New Jersey: The New Jersey Board of Public Utilities adopted new rules to replace portions of previous energy competition standards. The standards define options for community aggregation programs, require the separation of LDCs and affiliates, and include consumer protection provisions regarding "anti-slamming" for accounts signed up electronically via the Internet. The rules are effective through April 18, 2011.

• New York: The New York Public Service Commission (NYPSC) approved new marketing standards that strengthen consumer protection measures and conducted a review of retail access policies. It concluded that the State’s retail market was well enough established that marketers rather than ratepayers should pay the costs of promotional programs such as market expos, energy fairs, and marketer referral programs. The NYPSC also directed utilities to continue consolidated billing and purchase of accounts receivable programs, as they require no subsidies from ratepayers. LDCs will be allowed to discontinue customer and marketer satisfaction surveys but must continue to share information about marketers. The PSC directed all LDCs to establish marketer referral programs that give customers an opportunity to obtain a discount off the utility's commodity price for an introductory period when switching to a marketer (currently four LDCs have referral programs).

• Ohio: The Ohio Public Utilities Commission (PUC) approved gas-pricing auction results for Dominion East Ohio Company and Vectren Energy Delivery and authorized Columbia Gas of Ohio to submit its auction application in 2009. In the PUC-monitored auctions, marketers bid to supply natural gas for the LDCs' non-choice (sales) customers and determine a set fee (called a retail price adjustment) that is added to the monthly New York Mercantile Exchange (NYMEX) settlement price to establish the rate customers pay. The customer rate varies from month to month but the set fee stays the same. Dominion East’s PUC-approved auction in August 2006 determined the set fee for supplies from October 2006 through August 2008 and a second auction in July 2008 established the fee for September 2008 through March 2009. Vectren held an auction in August 2008 to determine the retail price adjustment from October 2008 through March 2010, while Columbia Gas Company expects to submit its auction application in 2009. The PUC also approved Dominion East's request to begin the second phase of its restructuring plan in April 2009. Under phase 2, the company will conduct two auctions to purchase supplies for April 2009 through March 2010. One auction will establish a new rate for low-income or choice-ineligible customers and the other will set the rate for choice-eligible (sales) customers. In contrast to phase 1 auctions, marketers will bid to supply gas for specific groups of customers and the customers' bills will identify the supplier. Another round of auctions will be held in February 2010 for the period April 2010 through March 2011. The PUC must approve all auction results and reserves the right to terminate the pilot at any time. At the end of phase 2, if approved by the PUC, Dominion plans to eliminate all sales services and become a "pipes-only company" but would continue its role as the provider of last resort. Remaining sales customers would either buy gas from a marketer of their choice, join a government aggregation buying group, or be assigned to participating marketers on a pro-rata basis.

• Pennsylvania: The Pennsylvania Public Utility Commission (PUC) in September 2008 approved a 2-year action plan to reduce or eliminate barriers to marketer participation in choice programs. The first phase will include formation of an Office of Competitive Oversight within the PUC, advocacy and development of legislative changes dealing with capacity assignment and release, and expansion of the purchase of receivables program. The second phase will include rulemakings to address specific LDC, marketer, and business practice issues. In December 2008, the PUC initiated a rulemaking to change the requirements for marketer licensing and revise the consumer protection guidelines in purchase of receivable programs.

No significant changes occurred in the States that allow consumer choice but have virtually no participation. Massachusetts had only 0.1 percent of residential customers participating, while New Mexico and West Virginia had fewer than 20 residential transportation customers. The customer aggregation program continued in California, but accounted for only 0.3 percent of deliveries to residential customers. Montana had no known participants in its choice programs in 2008, 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 Colorado Public Utilities Commission, but no utilities have submitted unbundling plans.