How customer choice programs work

Did you know?

Large commercial and industrial consumers have had the option to purchase natural gas separately from other natural gas services for many years.

Did you know?

As of December 2016, 23 states and the District of Columbia had residential natural gas customer choice programs.

Natural gas customer choice programs give consumers the option of purchasing natural gas from a natural gas supplier (marketer) that is a different company than the local natural gas utility.

If a consumer chooses to buy from a marketer, the marketer purchases the natural gas (from other sources) and arranges for its delivery to the local natural gas utility. The local natural gas distribution utility, sometimes referred to as a local distribution company (LDC), charges the consumer to transport and distribute the natural gas to the consumer's home or business. State utility or public service commissions do not allow an LDC to earn a profit on the sale of natural gas itself. Sales of natural gas by marketers are unregulated, and marketers may earn a profit on the sale of natural gas.

Most natural gas customer choice programs began in the 1990s to promote more competition in local energy markets. Traditionally, local distribution companies provide natural gas to their customers as part of a bundled service that includes both the price of the natural gas (sometimes called sales service) and the price for distributing the natural gas to consumers. In customer choice programs, the volume and price of natural gas purchases may be listed on a customer's bill separately from distribution and other delivery-related services and costs.

The availability and characteristics of existing customer choice programs vary widely. Some states allow all natural gas customers to choose a natural gas supplier, while some limit choice to specific service areas or to a specific category or number of customers. In some cases, even though choice is allowed statewide, the state may not have participating marketers.

A variety of factors affect customer participation, such as the customer's potential to save money and the terms of service. In addition to month-to-month variable rates or fixed rates for longer terms, some marketers offer introductory rates, rebates, budget plans, or capped rates. The potential to earn a profit on natural gas sales influences marketer participation.

The top five states with the highest share of residential natural gas deliveries by LDCs for other suppliers in 2016

  • Georgia—88%
  • Ohio—81%
  • New York—28%
  • Wyoming—27%
  • Maryland—26%