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