It shouldn’t come as a surprise that I agree with consumer advocates who say a proposed state bill could unfairly raise prices on natural gas.
I told that directly to the bill’s sponsor, State Rep. Kristina Roegner, R-Hudson, and one of the bill’s industry supporters.
If you missed the news story last week about the bill, you can read it online at www.ohio.com/betty.
House Bill 102 would allow the Public Utilities Commission of Ohio to assess extra fees to what is called the Standard Choice Offer (SCO) or default rate that utilities charge customers.
The SCO is the monthly variable rate based on a state-approved formula and the result of a yearly competitive auction among marketers. SCO customers are randomly assigned to marketers who bid on or agree to charge the SCO rate.
The bill says SCO providers are receiving a “subsidy” since suppliers who get SCO customers don’t have to spend money to market to them, so they have an unfair advantage.
The bill proposes having the PUCO determine how much of a “subsidy” the companies are getting and assess that money to the SCO suppliers. The money collected then would be distributed to all customers and would create a more level pricing field, said Roegner, though she did not have details about how or to whom the money would be distributed.
Consumer advocates say the bill will unfairly raise the low SCO and that the bill is designed to help natural gas marketers who haven’t been able to compete with the SCO. Roegner said it would move the industry to a fully competitive market.
Dominion’s current SCO rate for March is $4.03 per thousand cubic feet (mcf). That compares with fixed rates in the $5 and $6 range and monthly variable rates from $3.82 (from a marketer that offers the first month below the SCO) to $5.99 from competitive marketers, according to PUCO research in what it calls its “Apples to Apples” chart. In the last year, the SCO has had a low price of $2.64 (in May) and a high of $4.30 (in December).
I have a dual role in reporting and commenting on this topic.
As a reporter, I research and write news stories that represent both sides of an issue without any opinion.
As a consumer columnist, my job is to have a point of view on an issue and offer advice to readers on what I think they should do.
When I interviewed Roegner and Donald Mason, president of the Ohio Gas Suppliers Association, last week, I explained my roles.
After I finished my interview for the news story, I told them I wanted to ask questions from the point of view of a consumer columnist.
They welcomed that. I also told them they would not be surprised to read in this column how I felt because I would tell it to them up front.
I told both Roegner and Mason, a former PUCO commissioner, that I just don’t get this bill. I don’t see how it helps foster competition and I certainly don’t see how it helps consumers, particularly myself and my readers, who have chosen the SCO price for our natural gas supply.
I have always encouraged readers to shop the market and take advantage of good competition from the marketers. My goal was to find a good fixed rate for about a year’s term with a low cancellation fee during periods when the industry was seeing monthly variable rates that had huge fluctuations. Frankly, there have been times when even the fixed rates had big swings.
At the time, the market worked well. My readers and I were able to save money and protect ourselves from the wild swings in the market.
But natural gas prices began going down because of plentiful supplies that includes increased production of shale gas in our part of the country. So things changed for consumers. The marketers, in my opinion, have not done well with competition. Locking into fixed rates that are too high, given the low wholesale prices, did not make sense.
And because marketers did not have competitive monthly variable rates, I changed my view.
I have advocated the SCO price because it is transparent and based on a state-approved formula of the settlement price of the New York Mercantile Exchange (NYMEX) from the previous month and a charge called an “adder” of 60 cents/mcf — a price that is determined each year by a competitive auction of the marketers themselves.
So I don’t understand how Roegner and her bill supporters can say that House Bill 102 is good for consumers.
I would compare this bill to two burger joints having the same food, but one charges 90 cents and one charges $1. Instead of encouraging the $1 place to be competitive in the free market and lower the price to 90 cents, the $1 place is going to try to change the law to force the 90 cent place to go to $1 to “make it a level playing field.”
Roegner said incrementally raising the price of the SCO to better align with competitive offers would bring the market closer to full competition.
“If that [SCO] choice becomes more expensive, they would be encouraged to shop on the market for natural gas. It’s encouraging more people to go shop,” she said.
When I asked Roegner how the change she proposes would be fair to people getting the SCO rate, she hesitated.
“I am totally willing to work with people like you who know the industry and [make] amendments and suggestions,” she said. “If this bridge or Band-Aid we’ve designed isn’t exactly right, I’m totally open to amending it,” she said.
Roegner acknowledged she was approached by former state representative and Assistant Speaker of the House Lou Blessing Jr., now an independent lobbyist, and the Ohio Gas Suppliers Association, about sponsoring this bill.
Mason’s Ohio Gas Suppliers Association represents four natural gas marketers — IGS, Integrys, Ohio Natural Gas and Direct Energy.
When asked why the marketers would argue against the SCO while two of those companies (IGS and Integrys) agreed recently to serve as SCO suppliers, Mason said the companies still offer the SCO as an opportunity to try to market to customers in the long run to move off the SCO to their own supply.
Mason said he believes although natural gas prices are low now, they are on the upswing and the bill would encourage people to start locking in.
Energy is an industry where the economics can change quickly. But the U.S. Department of Energy’s long-term reports still predict prices to stay low.
If I had a crystal ball and looked back on this time, is it possible if I locked into a fixed rate now, which seems at a high premium, that it’ll beat a fixed rate I could get later? Sure. But I don’t feel like I need to lock in now. Rather, I’ll enjoy the low prices now.
It seems to me that the marketers aren’t happy that consumers are avoiding fixed rates, so they’re trying to change the system — but in an unfair manner.
Mason insists that the proposed bill does not mean SCO prices will increase, but it would create a process for the PUCO and stakeholders to study the disparities.
That’s splitting hairs. Although the bill might not actually raise prices, if passed, the result would be the same.
I hope Roegner is sincere that she’s open to reconsideration. Let your voices be heard. Contact Roegner, her co-sponsors and your own state representatives. The bill is still in its infancy, but that doesn’t mean you can’t express your displeasure with it.
Roegner’s co-sponsors are: Reps. Andrew Brenner, R-Powell; Matt Lynch, R-Bainbridge, which includes parts of northern Portage County; Anthony DeVitis, R-Green, who represents southern Summit County; Andy Thompson, R-Marietta; John Adams, R-Sidney, and David Hall, R-Millersburg.
Contact information can be found, including email, at www.ohiohouse.gov or messages can be left by calling the Ohio Legislative Information Hotline at 800-282-0253 Monday through Friday from 8:30 a.m. to 5 p.m.