Consumer advocates are saying that a proposed state bill a local representative has sponsored would raise natural gas prices unfairly for consumers who pay the utility’s rate.
State Rep. Kristina Roegner, however, said it would accelerate the landscape to a fully competitive market.
House Bill 102, introduced Wednesday, would change state policy to allow the Public Utilities Commission of Ohio to assess extra fees to the Standard Choice Offer (SCO) or default rate currently being charged by utilities. 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 supply the SCO rate.
Dominion’s current SCO rate for March is $4.03 per thousand cubic feet (mcf). That compares to 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.
In a letter to fellow representatives a few weeks ago seeking co-sponsors to the bill, Roegner, R-Hudson, said the companies that currently provide the SCO do not have to incur the same costs associated with acquiring customers as their competitors offering fixed and variable pricing to the general public.
“In effect, it is a subsidy which hinders Ohio from enjoying the benefits of a fully competitive market. The proposed legislation would level the playing field by avoiding these artificial subsidies,” she said.
The bill proposes to have 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, she said.
In a phone interview Friday, Roegner said the bill was not the end goal of full-blown competition.
“When you have competition, prices go down and quality will go up,” she said.
Consumer advocates strongly disagree, saying the bill is an effort by natural gas marketers to raise the current rates that SCO customers enjoy.
“It’s the most anti-competitive bill I’ve ever seen in my life,” said Dave Rinebolt, executive director for the consumer group Ohio Partners for Affordable Energy. “The intention here is to impute costs that the marketers bear when they sell a contract into the SCO price so the marketers can better compete with what obviously is a superior method for procuring electricity and gas for small customers.”
Amy Kurt, director of public affairs for the Ohio Consumers’ Counsel, the state’s residential utility advocate, said Ohioans are benefiting from the current system using competitive bidding, and there’s no reason to change it.
“For many years, the utilities’ standard offer has been a great way for Ohioans to save money when purchasing their natural gas. But now energy marketers want legislators to increase what consumers pay for the standard offer. This proposal is not good for Ohioans,” she said.
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.
The number of people who choose a provider other than the SCO varies across the state. According to the PUCO, as of December, 80 percent of eligible Dominion customers had chosen their own provider, while 40 percent of Columbia customers were not with that regulated utility’s SCO.
Dominion officials said the number as of March is about 82 percent who are not on the SCO.
Donald Mason, president of the Ohio Gas Suppliers Association and a former PUCO commissioner, said his association supports Roegner’s bill, which on its own would not raise prices but creates a process for the PUCO and stakeholders to study the disparities, he said.
Kurt, with the consumers’ council, disagreed and said the bill would result in higher SCO prices.
“Currently, the standard offer rate is determined through a competitive bid. The proposed law directs the PUCO to increase charges to marketers who compete in the auction to provide natural gas. That would increase the auction price for natural gas. And that increased auction price would show up on consumers’ natural gas bills as an increase in the price of the utility’s standard offer,” she said.
Mason said he believes the SCO price will not remain low, as it has in recent years, and the bill would encourage consumers to move off the rate to competitive offers.
Mason’s organization 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 also said the bill is not intended to shortcut a settlement that would not open consideration of eliminating the SCO for residential customers before 2015. (Dominion nonresidential customers are losing the SCO as of April 1). Mason said his expectation is the proceedings for the proposed bill would take at least until 2015.
Roegner said she is open to changing and amending her bill as she and others learn more about the process.
“If this bridge or Band-Aid we’ve designed isn’t exactly right, I’m totally open to amending it. I want to work with all interested parties,” she said.