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Columbia Gas Recommends Ending Choice Program
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Columbia Gas of Maryland has recommended ending the current Choice Program and only allowing transportation service for eligible non-residential customers, due to the prohibitive costs of implementing various provisions of COMAR 20.59 and the fact that Choice customers have paid more than default service rates over the past eight years.
The Maryland PSC had directed Columbia to further analyze its implementation plan for COMAR 20.59 because the initial plan would have resulted in a POR discount rate of 28% due to the inclusion of all programming costs related to COMAR 20.59 (see 12/2). The requirements of COMAR 20.59 include Purchase of Receivables (or prorated partial payments at the election of the distribution company), a statewide standard for enrollment dates, and provisions for customer information.
Columbia informed the PSC that based on 1) a total of $372,691 that includes the actual costs expended as of December 10, 2010, cost estimates for completed work, and estimates for pending programming work; 2) Choice enrollment as of December 2010 of 772 customers; and 3) a two year cost recovery period, it will cost $20.12 per customer participating in Choice per month simply to recover programming costs related to COMAR 20.59
Columbia's Maryland distribution system has only 32,739 customers, versus 660,000 at Baltimore Gas & Electric and 440,000 at Washington Gas Light. Distribution companies similar in size to Columbia, such as Chesapeake Utilities (15,000 customers) and Elkton Gas (5,000 customers) have received various waivers from COMAR 20.59, although those distribution companies do not offer a full choice program open to all customer classes as is the case at Columbia.
The PSC has consistently said that ratepayers shall not pay the costs of any of the competitive market enhancements included in COMAR 20.59, meaning such costs shall be recovered through the POR discount rate, or a direct charge on customers participating in choice (or their suppliers).
"Had Columbia known prior to its original compliance plan filing on October 8, 2009 that the Commission would prohibit cost recovery through base rates or some other mechanism to spread the costs among all of its Choice eligible customers, it is likely that Columbia would have requested a waiver of the regulations entirely or portions thereof," Columbia said.
Columbia's Choice program achieved its highest participation during November 1999 at which time 2,473 residential and 426 commercial customers purchased their gas from five suppliers providing service on Columbia's system. Choice enrollment as of December 2010 is only 772 customers.
"Columbia's experience in providing its customers with the ability to procure gas supplies from an alternative, unregulated supplier has demonstrated that participants in Choice have not enjoyed cost savings relative to non-shopping customers," Columbia said.
Over the past five years, gas costs for customers participating in Choice have exceeded the Columbia PGA by an average of $20.19 per month. Aggregate costs for Choice service above the PGA rates have been nearly $1 million since June 2003.
"In fact, Columbia's reports dating back to June 2003 demonstrate that, as of December 2010, residential and small commercial Choice customers have paid an aggregate of $955,602.48 more than if they had purchased Commission-regulated gas supplies from Columbia. In January 2011 alone, participating residential customers paid on average $62.48 more than they would have paid for Commission regulated gas supplies, and participating commercial customers paid on average $225.48 more than if they had purchased the Commission regulated gas provided by Columbia. In fact, it has been over two years since a Choice customer has paid a lower gas cost rate than the PGA," Columbia reported.
Link to Columbia's Choice rate analysis (p. 25)
Columbia said that, due to the limited nature of Choice participation on its system, any option which allocates costs of COMAR 20.59 solely to Choice customers will further increase the cost of Choice service, in addition to the Choice rates which are currently higher than PGA rates. The attendant increases in Choice rates will only decrease the already minimal Choice participation (and thus ability to recover COMAR 20.59 costs), leaving Columbia with no alternative but to recover the costs from all distribution customers despite the Commission's opposition to such recovery.
"While Columbia has been a consistent advocate of gas competition over the last 15 years, Columbia believes that an important element of gas competition is that the customer must have a reasonable opportunity to reduce their bills through the competitive program. As discussed in this analysis, such opportunities do not appear to be realistic for Columbia's customers," Columbia said.
"Given the very limited participation in Choice, the high costs of implementation, the recognition that Columbia represents such a small part of the Maryland market, and Columbia's need for capital for its ongoing replacement of cast iron and bare steel in its system, Columbia submits that discontinuation of the Choice program is in the best interest of its customers. Columbia therefore respectfully recommends that it be permitted to close the Choice program for future enrollment, discontinue work on all additional modifications to the company's information systems and business practices, and to permit existing agreements to expire under their existing terms," Columbia said.
Columbia said that even if it were granted a waiver of some of the requirements of COMAR 20.59, cost recovery of previously incurred amounts from Choice customers would still prove prohibitive to Choice service. Furthermore, as Columbia is granted such waivers, Columbia's system will become more dissimilar from BGE and WGL, which account for 98% of Choice eligible customers in Maryland. "Suppliers will not desire to implement different procedures specific to Columbia when the market share of potential customers represents only about 2% of Maryland's total gas customers," Columbia said, stating that Choice participation will continue to decline.
"Simply put, Columbia submits that it is in the customer's best financial interest to close the [Choice] program for new subscribers, discontinue work on all additional modifications to the company's information systems and business practices, and to permit existing agreements to expire under their existing terms," Columbia said.
Specifically, the Choice program would end for residential customers, while, "participating nonresidential customers [are provided] the opportunity to move to the gas transportation program."
Based on Columbia's filing, it would appear the only small non-residential customers allowed to transfer to transportation service would be those making such election as of the end of the Choice program. For small non-residential customers on the Choice tariff wishing to continue competitive supply, Columbia would install daily metering equipment to permit such customers to take transportation service, and suppliers could "move" these non-residential customers to transportation service. There is no explicit provision for small non-residential customers not currently on Choice to take transportation service, so presumably these customers would not be granted such eligibility.
After the initial ability of Choice non-residential customers to move to transportation, if a small non-residential customer otherwise ineligible for transportation service (due to low volumes) wished to receive competitive supply, it would apparently not be able to do so. In other words, Columbia would not expand the current transportation program, but would only allow a one-time election permitting small commercial customers taking Choice service to take transportation service.
Columbia offered four other options for compliance with COMAR 20.59, including: implementing all required provisions with recovery through the POR discount rate; implementing all required provisions with recovery through a rider applicable to all distribution customers; foregoing any additional changes due to COMAR 20.59 and continuing the existing Choice program under its current design and mechanism; and implementing COMAR 20.59 with pro-rated partial payments instead of POR with costs recovered from Choice customers only.
Columbia said that all of these options were either cost prohibitive (leading to declining Choice participation if recovered from Choice customers), or contravene the PSC's direction to not include COMAR 20.59 costs in base rates.
If the PSC is committed to continuing the Choice program, Columbia recommended continuing the current program, including already completed tasks associated with COMAR 20.59, and charging such costs to Choice customers only. This option would not include POR, but would include standard electronic transactions. Even excluding POR and other changes (such as changing enrollment deadlines from the 15th day of each month to 12 days prior to the first day of each month), Columbia said that the cost per participating Choice customer for the costs of the changes would be $11 per month over two years. Even when recovered over 5 years, the cost is nearly $5 per month.
"Because of the lack of a POR program, the limited size of Columbia's customer base, the minimal supplier participation in Columbia's Choice program and the opportunities for suppliers in other utility jurisdictions within and outside of Maryland, it is very unlikely that customer and marketer participation will be maintained and more likely that it will decrease," under this alternative, leaving costs to be recovered from all distribution customers, Columbia said.
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