Retail Unbundling

Retail Unbundling - Florida
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Status: The State has approved three pilot unbundling programs for residential customers.

Overview: Three natural gas utilities in Florida (Central Florida Gas, which is the Florida Division of Chesapeake Utilities Corporation, Indiantown Gas Company, and Sebring Gas System, Inc.) have converted their residential and commercial sales customers to transportation service and exited the merchant function as part of experimental transitional pilot programs. In November 2002, the Florida Public Service Commission (PSC) allowed Central Florida Gas to transfer its remaining sales customers (which accounted for only 4 percent of the company's throughput volumes) to aggregated customer pools, administered by a qualified pool manager selected by the company. In October 2006, the company requested implementation of Phase 2, in which customers would have a choice of at least two pool managers and a range of pricing options. Phase 2 offers at a minimum the same rate options available under Phase 1, but customers are able to choose either of the pool managers, after a 6- to 12-month implementation period, during an annual open enrollment period. The company's request for Phase 2 was approved by the PSC in May 2007. In January 2008, Central Florida Gas held the first open enrollment period where customers could choose between two gas marketers and from several pricing programs. In addition to gas marketer choices during the enrollment period, residential customers could also choose from two rates for transportation service received from Central Florida Gas. If no selection was made, the standard price and transportation option would apply. A second open enrollment period was held from January to March 2009. Central Florida Gas remains the supplier of last resort. Phase 3 will further expand the choices available to customers and will require PSC approval.

The PSC approved a request by Indiantown Gas Company in November 2002 to convert its remaining sales customers to transportation service and to exit the merchant function, similar to Phase 1 of Central Florida's pilot program. Indiantown's sales customers represented only 2.5 percent of the total system throughput. The company claimed that the continuing migration of its customer base to transportation service made it increasingly difficult to deliver gas at competitive prices, as the number of producers and/or marketers interested in providing gas supply for such a small usage level is limited. The PSC approved a 2-year transitional pilot program that transfers customers to aggregated customer pools, administered by a pool manager. Reporting and program requirements are the same as for Central Florida's pilot. The company is still in Phase 1 of the transition.

In May 2004, the PSC also allowed Sebring Gas System to exit the merchant function and transfer its small sales customers (using less than 100,000 therms per year) to a single aggregated customer pool. The agreement between the company and the pool manager allows customers to select between two pricing options: a monthly indexed price or a fixed price. Like Indiantown, Sebring is still in Phase 1 of the transition.

EIA State Profile: In 2008, Florida had 679,265 residential and 58,125 commercial customers. They consumed approximately 16 and 51 billion cubic feet of natural gas, respectively. The average prices residential and commercial customers paid for natural gas from local distribution companies were $21.19 and $14.51 per thousand cubic feet, respectively.

Eligibility and Participation in Retail Choice Programs:

Eligibility and Participation by Customer Class, December 2009

Customer Type	2008 Customer Total	Eligible 2009		Participating 2009
Customer Type	2008 Customer Total	Total	Percent of 2008 Customer Total	Total	Percent of Eligible	Percent of 2008 Customer Total
Residential	679,265	14,440	2.1	14,440	100	2.1
Commercial	58,125	58,125	100	16,961	29.2	29.2
Total	737,390	72,565	9.8	31,401	43.3	4.3
Sources: 2008 Customer Total: Energy Information Administration, Natural Gas Annual 2008 (March 2010). Eligibility and Participation: Company reports and the Natural Gas Annual 2008.

Legislative and Regulatory Actions on Retail Unbundling

Summary: In April 2000, the Florida Public Service Commission adopted rules that extend customer choice to all nonresidential users of natural gas in the State regardless of volume. This gives small businesses in Florida the same option that was previously available only to large industrial and commercial customers. The rules also specify that local distribution companies may offer transportation services to residential customers.

Regulatory and Legislative Actions

Regulatory Actions	05/07	Phase 2 of Central Florida's pilot approved. The PSC approved implementation of Phase 2 of the transitional transportation service pilot program to all former sales customers, which were residential and small-volume commercial customers. Under Phase 2, Cental Florida retains, through competitive bid, two marketers interested in serving residential and small-volume commercial customers. Initially, customers are assigned to one of the marketers, on an equal and random basis and receive the standard pricing option (which is the same for both marketers). Within 6 to 12 months following implementation, customers will have the opportunity to switch shippers and/or select an alternative pricing option. Changes in shipper or pricing option must be submitted in writing. Central Florida Gas will administer the open enrollment process, on at least an annual basis.
	05/04	Pilot transportation service approved for Sebring Gas System. PSC approved Sebring's request to convert its remaining sales customers to transportation service and to exit the merchant function on an experimental basis. Company is to file a report 90 days before the conclusion of the initial period of the program that details customer acceptance, assesses the company's capability to expand the program and determines the feasibility of continuing the program.
	11/02	Pilot transportation service approved for Indiantown Gas Company. PUC approved Indiantown Gas's request to convert its remaining sales customers to transportation service and to exit the merchant function. As with Central Florida's request, PSC approved a 2-year pilot that transfers customers to aggregated customer pools administered by a pool manager. Reporting and program requirements are the same as for Central Florida's pilot.
	11/02	Pilot transportation service approved for Central Florida Gas. PUC approved aggregated customer pool for Central FL Gas' residential customers. Company must maintain a contractual relationship with the pool manager throughout a 2-year transition period and see that customers have two pricing options: a monthly indexed price or a fixed price. Central Florida will remain as the supplier of last resort and maintain the customer service function, customer account records, and billing and collection functions. The company must submit a report within 90 days after the completion of the program's first year, and then again at the end of 2 years, to evaluate customer acceptance of the program and to determine whether to initiate Phase 2, in which customers would have a choice of at least two pool managers and a range of pricing options.
	06/02	Code of conduct rules adopted for natural gas marketing affiliates.Under the new requirements, an LDC will apply the same transportation tariff provisions to all marketers regardless of affiliation. No preference shall be given over nonaffiliated marketers/customers in matters relating to gas transportation or curtailment priority. Nonshared employees are to be physically separated from the LDC's marketing affiliate.