Overview: Columbia Gas of Kentucky, Inc. (Columbia) has operated a pilot choice program for its residential and small-volume commercial customers since September 2000. The program, called "Columbia Customer Choice," is available to all of Columbia's customers who consume less than 25 million cubic feet of natural gas per year. The company continues as the supplier of last resort and remains in the merchant business, both selling and transporting natural gas to consumers.

In June 2003, Columbia stated that choice participants were not saving money and asked that the pilot be discontinued 7 months before its scheduled termination date of October 31, 2004. Interstate Gas Supply, Inc. (IGS), which supplies gas to most of Columbia's choice participants, disputed the claim, as did many other parties. Subsequently, the Kentucky Public Service Commission (PSC) determined that Columbia had used an inaccurate accounting procedure to evaluate the program. Instead, the PSC found that program participants, in the aggregate, had saved on their gas bills and ordered Columbia to extend the pilot through March 31, 2005.

The PSC later approved (April 2005) Columbia’s request to extend the program for another 4 years, from April 1, 2005, through March 31, 2009, and then (November 2008) for an additional 2 years through March 31, 2011. Under terms stipulated in Columbia's August 2007 rate case, the marketer's accounts receivable discount was reduced from 2.5 percent to 2.0 percent and the tiered marketer fee was replaced by a flat fee of $0.05 per thousand cubic feet. The company must continue to file annual reports on the program by June 1 of each year. As of December 2009, about 30,000 residential customers were participating in the pilot, down substantially from the 45,600 participating in June 2002 although 5,000 more than the number enrolled in December 2007.

On January 13, 2002, the PSC approved an agreement wherein marketers participating in Columbia’s choice program will “take assignment of minimum levels of the utility’s storage and transportation capacity and undergo a prospective capacity audit.” If a marketer does not meet its capacity requirements, the utility may assign capacity to meet the shortfall. As of December 2009, three marketers participate in the pilot program. Larger volume customers throughout the State have had access to unbundled service since the 1980s.

Regulatory and Legislative Actions on Retail Unbundling

"An Act relating to natural gas retail competition," House Bill 542, introduced in February 2009, defines terms and requirements for eligibility and application. It specifies that the Public Service Commission has exclusive jurisdiction over choice programs and the regulatory authority to certify marketers, provide for consumer protections, and set mechanisms for recovery of stranded costs. The bill passed the House in March 2009. No further action has been taken.