OCC signs settlement to protect residential natural gas customers

The Office of the Ohio Consumers' Counsel (OCC) reached a settlement with Columbia Gas of Ohio, the staff of the Public Utilities Commission of Ohio (PUCO) and natural gas marketers today.

The settlement protects residential consumers' ability to purchase natural gas at a standard rate through Columbia at least until April 2017.

The standard rate has been very beneficial to consumers for reducing their cost to purchase natural gas. The settlement supersedes one filed on Oct. 4, 2012, that OCC opposed because it catered to eliminating the option of a standard rate for residential consumers. The standard rate also functions as a price to compare that consumers can use when considering offers from other suppliers.

OCC appreciates that the parties who signed the October 4th settlement worked cooperatively with OCC in complicated negotiations to replace that settlement with this new one that achieves important consumer protections. OCC also appreciates that the PUCO staff supported the further dialog between OCC and those who signed the October 4th settlement, which led to the new settlement.

As background, the majority of Columbia's residential customers purchase their natural gas supply through the utility at a standard rate determined through a competitive auction. The remaining customers "shop" for natural gas either from a certified independent supplier or through a government aggregation program.

"The competitive auction has given consumers a great option that can save them hundreds of dollars a year on their natural gas bills," said Bruce Weston, Ohio Consumers' Counsel. "This revised settlement will help to preserve that option and consumer savings."

Recently, comparison data (known as "shadow-billing") from Columbia showed that customers paid less for natural gas, since 1997, when they chose the standard rate. Given the value of shadow-billing for analyzing the costs and benefits of consumer choices for natural gas, it is good for consumers that today's settlement has Columbia continuing this practice.

The October 4th settlement stated "that Columbia will exit the merchant function [meaning end the standard offer] if participation in Columbia's CHOICE program meets specified thresholds." This sentence has been removed in the new settlement.

Additional consumer benefits in the new settlement include:

Residential customers are protected from the elimination of the standard rate for natural gas until at least April 2017;

Columbia is not required to propose an end to the residential standard rate. Columbia is prohibited from proposing to end the standard rate for consumers unless:

At least 70 percent of Columbia's residential customers have purchased natural gas from an independent supplier or government aggregation for three consecutive months;

There first has been an elimination of the non-residential standard rate; and

At least 22 months have passed after Columbia has eliminated the standard rate for non-residential customers.

Six local public hearings across Ohio (for testimony by consumers) must be held, if Columbia some day seeks an end to the standard rate for residential consumers;

Terms that could result in consumers having a greater share of up to $7.5 million or more during the next five years due to improvements to the formula for determining Columbia's profits from selling excess natural gas capacity (referred to as off-system and capacity release sales);

A reduction in a proposed security deposit charged to some natural gas suppliers that will mean consumers on the standard rate will likely pay about $3.2 million per year less during the next five years than they would have otherwise paid under the Oct. 4 settlement; and,

Consumers that shop for their natural gas will be protected against having to pay twice for a charge that could have added up to $27 annually to a typical residential consumer's retail bill.

Also, OCC did not join the part of the settlement that could lead to an end of the auction-based standard rate for non-residential customers.

The settlement is now under consideration by the PUCO. Today's settlement, OCC's testimony (and other records) can be viewed on the PUCO's case docketing system under Case Number 12-2637-GA-EXM. Customers can also use the PUCO website's docketing system to send comments to the PUCO regarding the case.

About the Office of the Ohio Consumers' Counsel

The Office of the Ohio Consumers' Counsel (OCC), the residential utility consumer advocate, represents the interests of 4.5 million households in proceedings before state and federal regulators and in the courts. The state agency also educates consumers about electric, natural gas, telephone and water issues. For more information, visit the OCC website at www.pickocc.org.