PUC Approves New Rules Aimed at Improving Retail Natural Gas Competition

Today, in split vote, the PUC approved new regulations intended to level the playing field for natural gas competition.

PROPOSED RULEMAKING-PROMOTION OF COMPETITIVE RETAIL MARKETS,  L-2008-2069114.  While the final rulemaking order may not be publicly available for a few days, it appears that the new rules will require Natural Gas Distribution Companies to remove certain costs of providing default service from the base rate distribution charge, which all customers pay, and instead collect those charges as part of the gas cost rate, which is paid only by customers who remain on default service.

Based upon comments and earlier iterations of the rulemaking process, it appears likely that the Commission also will address Natural Gas Supplier requests to eliminate or shorten the recovery of prior period gas costs from customers who switch to a competitive provider from default service.  These payments are collected through a mechanism referred to as a “migration rider” and are now recoverable for a full year after a customer switches.  The new rules are expected to shorten the time period over which those costs may be recovered.

One other important change proposed by the new rules will be a further refinement of the Price to Compare.  The PTC, as it is known, is intended to assist customers in evaluating competitive offers by presenting the “rate” that the customer pays, in theory, to their local gas utility for the commodity portion of service.  The goal has always been for the PTC to provide a meaningful comparison point for competitive offers. Up till now, however,  the PTC has not reflected a similar basket of costs as those faced by competitive suppliers, some of which change significantly over time.  The new rules will require that additional costs that customers now pay as part of default service be explicitly included in the price to compare.  Significant among those currently unrecognized costs that will in the future be included in the PTC is what is known as the e factor, which varies quarterly and is intended to recover or refund differences in actual prior period gas costs from projected prior period gas costs.  It is the projected costs that form the basis of the rates customers actually pay. Including the e factor in the PTC is intended to make the PTC a better comparison point by making it more representative of the costs that a customer avoids by taking service from a competitive supplier.

The Final Rulemaking Order should be available within two weeks.