ECO 436
Natural Gas
Natural Gas Unbundling in IL for Small
Customers
What are benefits to unbundling?
What are the costs?
How is it done?
ECO 436 David Loomis 309-438-7979
Why Small Customers?
• All Large Commercial and Industrial
customers have the option of purchasing
natural gas from suppliers other than LDCs.
• Small volume commercial customers and
residential customers do not have choice.
ECO 436 David Loomis 309-438-7979
What are the Benefits?
Lower prices
consumer choice
new products and services
more responsiveness to consumer preferences
greater cost efficiency initiatives
ECO 436 David Loomis 309-438-7979
What are the Benefits? (cont’d)
reduced regulatory oversight
less cost shifting
more innovation
more accurate price signals
• LDCs - questioned if cost savings
significant because of competitive gas
supply
ECO 436 David Loomis 309-438-7979
What are the costs?
potentially greater price volatility
add’l supply risk (less reliability)
new billing system costs
add’l “supplier of last resort” costs
potentially higher prices
ECO 436 David Loomis 309-438-7979
What are the costs? (cont’d)
consumer exploitation
new admin. & transactions costs
potential stranded costs
higher consumer risk
public information and education costs
loss of consumer protections
marketer-questioned significance of
these
ECO 436 David Loomis 309-438-7979
Features of unbundling:
most fundamental principle of small
customer unbundling is “aggregation”
concept
marketer buys gas for many customers
within a group w/ no separate accounting
for utility provided daily balancing or
storage services.
ECO 436 David Loomis 309-438-7979
Possible Unbundling
–
–
–
–
–
–
–
transportation
balancing
standby
storage
metering
emergency services
gas supply
ECO 436 David Loomis 309-438-7979
Remaining Questions
• Should local utility retain the option of providing
fully bundled service?
• Can reliability be maintained?
• Do marketers have to use “firm” capacity?
• Should ICC regulate or license marketers?
• Should LDC be required to release customer
information?
ECO 436 David Loomis 309-438-7979
Remaining Questions (cont’d)
• What will be the impact of electric restructuring
on gas industry?
• Should LDCs be required to release capacity to
marketers?
• Is PBR preferable to residential unbundling?
ECO 436 David Loomis 309-438-7979
Residential Pilot Programs
• ThermQuest – CILCO – 5 year program
started in 1996
• Customer Select – NICOR Gas – 3 year
pilot started in 1997
• Peoples Gas program – 2 year program
started in November 1997and extended
through June 30, 2000
ECO 436 David Loomis 309-438-7979
Eligible in IL Pilot Programs
Type
Total 1998
Total
Eligible
Pct of
Total
Residential
3,556,736
285,000
8.0
271,585
177,000
65.2
3,828,321
462,000
12.1
Commercial
Total
ECO 436 David Loomis 309-438-7979
Participation in IL Pilot
Programs
Type
Total
Participating
Pct of
Eligible
Pct of Total
Customers
Res
25,800
9.1
0.7
Com
22,585
12.8
8.3
Total
48,385
10.5
1.3
ECO 436 David Loomis 309-438-7979
Customer Select in
Bloomington/Normal
• Started Jan. 6, 2000
• Enrollment ended March 31, 2000
• NICOR expanded program to all customers
effective 3/1/02
ECO 436 David Loomis 309-438-7979
Customer Select in BloomingtonNormal
Community
Number
Pct
Participation
Bloomington
4,950
20
Normal
2,820
24
Avg Participation of
other Communities
ECO 436 David Loomis 309-438-7979
23.4
Other States (March 2000)
ECO 436 David Loomis 309-438-7979
Participation in Other States
Participation in Selected Gas Choice Programs (1998)
State/Utility
Number
Total
Pct
MI/Michigan Consolidated Gas
3,800
47,000
8%
NE/KN Energy
68,000
100,000
68%
NJ/NJ Natural Gas
30,000
30,000
100% *
NJ/ South Jersey Gas
13,000
13,000
100% *
NM/Public Service of NM
10,500 4,000,000
0%
NM/Brooklyn Union Gas
5,000
500,000
1%
OH/Cincinnati Gas & Electric
9,500
360,000
3%
OH/Columbia Gas
50,000
160,000
31%
OH/East Ohio Gas
35,794
173,000
21%
ECO 436 David Loomis 309-438-7979
Participation in Other States
Participation in Selected Gas Choice Programs (1998)
State/Utility
Number Total
Pct
PA/Columbia Gas
37,000 100,000
37%
PA/Natural Fuel Gas
15,600
19,350
81%
PA/Peoples Natural Gas
98,000 317,000
31%
WI/Wisconsin Gas
1,464
1,464
100%
WY/KN Energy
5,700
10,500
54%
ECO 436 David Loomis 309-438-7979
Participation in Other States
Participation in Selected Gas Choice Programs (1998)
State/Utility
Number Total
Pct
IL/ CILCO
3,500
10,000
35%
Iowa/Mid-American
82%
MD/ Baltimore Gas & Electric
14,775 530,000
3%
50,000
50,000
100%
MD/Columbia Gas
2,500
27,600
9%
MD/Washington Gas Light
18,132 300,000
6%
21,000 300,000
7%
MA/Bay State
6,500
83,000
8%
24,100
83,000
29%
ECO 436 David Loomis 309-438-7979