Enrollment in “customer choice” programs reached a new high in 2009, with about 445,000 more participants than in 2008, an increase of 9 percent. Overall, nearly 15 percent or about 5.1 million of the approximately 35 million residential natural gas consumers with access to choice were buying natural gas from marketers as of December 2009 (Table 1), up from the 4.7 million participating in 2008 (Table 2). Ohio had about 279,000 of the new choice customers as the second-largest gas utility in the State began phase two of a pilot restructuring plan with the eventual goal of exiting the commodity market and becoming a distribution-only company like Atlanta Gas Light in Georgia. For the first time, Ohio instead of Georgia had the largest number of choice customers with about 58 percent of all eligible households participating and enrollment levels of nearly 1.7 million. However, Georgia continued 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. Together Georgia and Ohio accounted for more than 60 percent of the residential enrollment total in 2009.

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. The number of States offering choice has remained the same since 2003, but the availability and characteristics of the different State programs vary widely. 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, 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.

2009 Highlights

Enrollment in residential choice programs increased for the fourth consecutive year to reach an all-time high of 5.1 million. Ohio, New York, and Michigan had the largest increases, with enrollment gains of about 279,000, 98,600, and 43,490, respectively, since 2008. Along with Georgia, these States have the greatest number of households enrolled in choice programs and have access to many marketers and pricing options.

The number of marketers providing services to residential customers (Marketer Summary Table) increased or remained the same in all but two States with existing programs, and the overall marketer total was 11 percent more than in 2008 (110 vs. 99 (Table 3). Thirty-four 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). New York has by far the largest number (60) of active marketers, accounting for more the half the U.S. total and almost all of the increase in 2009. 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.

Although no additional States offered choice, participation percentages increased or remained the same in all but one of the States with active programs, as regulators continued to evaluate and refine existing programs. For example:

• Maryland: The Maryland Public Service Commission (MPSC) adopted new rules for competitive gas supply in September 2009. The rules 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 their compliance filings, all LDCs proposed to purchase the marketers' receivables, although initially one LDC had proposed to implement proration of payment. MPSC conducted hearings on these proposals in December 2009.

• Michigan: The Michigan Public Service Commission approved new consumer protection measures in October 2009. Choice customers are now able to cancel marketer service unconditionally up to 10 days beyond the due date of the first bill where the new marketer is listed. Previously customers had 30 days after enrollment to cancel. Also, marketers must execute cancellation requests without delay, even if an early termination fee or other penalty is owed. Only the customer account holder can sign a contract. Customers enrolling verbally or electronically will receive a written contract by mail, or by verifiable email, that is postmarked within 7 days of enrollment. These protections also apply to small commercial customers who use 500 thousand cubic feet (Mcf) or less per year; before they applied only to customers using 200 Mcf or less per year.

• New York: During rate cases in 2009, the New York Public Service Commission (NYPSC) continued to examine and refine LDCs' retail access and competitive market provisions. It also modified the electronic data interchange (EDI) standards and test plans for "bill-ready" consolidated billing to enable budget billing data to be displayed on customer bills. The modification requires programming changes and testing. NYPSC also approved a petition to establish a marketer contest period in the uniform business standards. The contest period would allow an incumbent marketer, with customer authorization, to cancel a pending enrollment with another marketer. NYPSC plans to issue revised EDI transaction standards for comment.

• Ohio: The Public Utilities Commission of Ohio (PUCO) allowed two more LDCs in the State to stop buying gas through individual contracts with producers and instead hold annual auctions in which suppliers can compete for the ability to provide gas to the utilities. The PUCO-monitored auctions determine a set fee (called a retail price adjustment), which is added to the monthly New York Mercantile Exchange (NYMEX) settlement price to establish the rate customers pay each month. PUCO also allowed the utility Dominion East Ohio to proceed with phase two of its restructuring plan. The company held two auctions in early 2009 to purchase supplies for April 2009 through March 2010. One auction set a rate for choice-eligible customers and the other a rate for low-income or choice-ineligible customers. In contrast to phase one auctions, marketers bid to supply gas for specific groups of customers and the customers' bills identify the supplier. Another round of auctions was held in February 2010 for the period April 2010 through March 2011. PUCO must approve all auction results and reserves the right to terminate the pilot at any time. At the end of phase two, if approved by PUCO, Dominion East Ohio 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 issued three rulemaking proposals as part of its 2-year action plan to reduce or eliminate barriers to marketer participation in choice programs. The first rulemaking, initiated in December 2008, would change the requirements for marketer licensing and revise the consumer protection guidelines in purchase of receivable programs. The second rulemaking proposal, issued in March 2009, would reformulate the "price to compare" used by consumers to judge whether a marketer's price is better than the LDC's. It would make permanent rules for establishing voluntary purchase of receivables programs, set guidelines for capacity release, assignment or transfer, and change the handling of recoverable costs related to competition activities and regulatory assessments. The third rulemaking, released for comment in April 2009, would establish a common set of business practices for LDCs in an effort to attract more marketer participation in the State's retail gas market. It also established a working group to develop and implement communication standards.

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 0.7 percent of deliveries to residential customers. Only 1 percent of Montana's residential and commercial gas consumers and 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.