This letter responds to the March 24 column by Betty Lin-Fisher headlined “Proposed state bill is ill-conceived.”
The transition in Ohio from a pure monopoly to a competitive retail natural gas market has been a 15-year evolution that has transcended changes in politics in the governor’s office and the General Assembly.
That is because Ohio’s political leadership over the past two decades has recognized the long-term value that competitive markets bring to consumers.
In fact, the Ohio Revised Code declares that it is the policy of the state to support competitive markets that are free of subsidies. That is because subsidies create an uneven playing field and hinder the development of true competition.
For those who have not selected a retail gas provider, they have experienced a transition from the former Gas Cost Recovery (GCR) to a competitive market through the use of a tool called the Standard Choice Offer (SCO).
The GCR was an impossible rate structure for even the well-informed to understand. For example, the utility would file a price in November as a projected rate for the upcoming winter heating season. However, consumers were not aware that this was not the final price, and many months later their bills would be adjusted up or down, meaning a customer’s bill would fluctuate without any certainty.
Within the past decade, the Public Utilities Commission of Ohio authorized a bid pool for those consumers who did not select a retail provider. They became part of a new class of customers that are served by the SCO provider. The intent was to create a monthly price in the hope of giving consumers more transparency in their gas bills.
The costs of putting the Standard Choice Offer together, which include staff members of the respective utility, outside consulting firms, notices to affected consumers, and many other costs, are being paid for by all natural gas consumers instead of just the SCO provider.
Furthermore, the marketplace is not a level playing field because SCO providers are able to avoid all the legal and regulatory expenses that competitive gas providers must bear, including switching fees, verification processes and many other consumer protection requirements.
Today, the market has shifted, and there are more than a million customers no longer taking the SCO but still paying those costs. In fact, for Dominion East Ohio, just 18 percent of the market is left on the SCO and have their price subsidized now by the majority.
Several state legislators would like to address this issue and have introduced legislation. House Bill 102 directs the Public Utilities Commission of Ohio to initiate a proceeding to determine how much the general natural gas ratepayer is subsidizing the SCO provider.
The bill grants the PUCO the authority to stop the shifting of costs to residential consumers when the costs should be borne by SCO providers.
H.B. 102 benefits the majority of natural gas consumers by placing the cost of the SCO where it belongs, on the SCO provider rather than on the entire class of residential customers, many of whom do not even take SCO service.
Furthermore, if costs are recovered from SCO providers, the payment will be issued to customers through a credit on their bill. Consumers could see a decrease in their gas bills should a credit be applied.
The legislation does not change state law but rather directs that a study be performed in order to bring the SCO programs into compliance with state law.
We urge legislators and interested citizens to support House Bill 102.
Donald L. Mason
Ohio Gas Suppliers Association