Consumers

PUC wants to turn up the heat for Pennsylvania's competitive gas marketplace



Pennsylvania’s competitive electricity marketplace has received a lot of attention in recent months, mostly due to a bitterly cold winter that sent prices in variable rate plans through the roof.

Yet, despite a few setbacks, the marketplace is robust. Data shows 37.9 percent of all customers participate in the marketplace and it carries 66.9 percent of the state’s electricity load, earning Pennsylvania the ranking of second-best marketplace, according to Distributed Energy Financial Group LLC, a Washington, D.C., management consulting firm.

Meanwhile, the state’s competitive natural gas marketplace has yet to ignite.

Just 13.5 percent of natural gas consumers have switched from their default gas utility — such as Peoples Natural Gas or Columbia Gas of Pennsylvania — to a competitive supplier. While that number includes commercial, industrial and residential customers, the level of acceptance by residential customers alone is even lower — 12.5 percent.

Like the electricity marketplace, the natural gas market was deregulated in 1999 to give consumers more choice. Consumers can buy the commodity from a new supplier, although the traditional gas utilities still distribute the product and still receive about half of the bill.

The Pennsylvania Public Utility Commission is an advocate for consumer choice, based on the idea that competition leads to better service and prices. A small marketplace threatens those goals. 

In September, when the competitive gas marketplace accounted for just 13 percent of all subscribers, the PUC began an investigation. Commissioners Pamela Witmer and James Cawley called the marketplace “dismal.”

That investigation — the second the PUC has initiated into the struggles of the state’s competitive natural gas marketplace — is ongoing. “Given the tremendous natural gas resources that exist in the commonwealth, there is great excitement over the potential to grow the use of natural gas,” Ms. Witmer and Mr. Cawley said in a news release.

This isn’t the first time that American consumers have seen a transition from an approved monopoly to a competitive utility market. Americans have become accustomed to shopping for phone service or cable service, for example.

Yet they are still warming up to the idea of shopping for energy.

“Energy choice is one of those things that seems daunting at first to consumers,” said Frank Caliva, spokesman for the American Coalition of Competitive Energy Suppliers, a trade organization in Washington, D.C.

And the natural gas market is different than the electricity market in that not every Pennsylvania resident has access to natural gas, Mr. Caliva said. About half of the state’s residents use heating fuels or electricity instead.

Companies haven’t marketed the gas competition as aggressively as electric, and the PUC has not invested as much in educating consumers about gas choice.

The PUC’s PAPowerSwitch.com website is sophisticated, with educational videos, color-coded buying options, a frequently-asked-questions section and a page devoted to helping consumers understand their bills. By comparison, PaGasSwitch.com is more rudimentary and at various points over the past month, including as recently as last week, was offline because of technical issues.

Prices offered by competitive suppliers range from $4.59 per Mcf (thousand cubic feet) of natural gas to $6.99. Peoples Natural Gas charges $4.82 per Mcf. Peoples Natural Gas’ Equitable division, whose customers were inherited from an acquisition of the EQT Corp. utility, charges $6.51 per Mcf.

Columbia Gas, which reports consumption differently, charges 48.61 cents per therm, while competitive suppliers offer plans that range from 44.9 cents to 99.9 cents per therm. 

As is the case with the electricity marketplace, plans are available in fixed and variable rates. 

Though the competitive gas marketplace has struggled to lure residential consumers, it is wildly popular among industrial customers. A majority — 68.1 percent — of the state’s approximately 5,000 industrial customers have enrolled, according to the PUC. Those consumers account for 99.1 percent of the industrial load.

“I think companies that use energy as a major input, they’re aware of their costs and they have whole purchasing and procurement departments,” Mr. Caliva said.

Industrial customers who use a lot of gas closely monitor the market to limit their costs as much as possible. With such heavy industrial enrollment, about 57.7 percent of the statewide gas load is serviced by the competitive marketplace.

Despite the slow growth, Mr. Caliva said Pennsylvania still has one of the most active natural gas marketplaces in the country. He applauded the PUC for taking a proactive role in helping the marketplace develop and encouraged consumers to visit PaGasSwitch.com or www.CompetitiveEnergy.org, the American Coalition of Competitive Energy Suppliers’ website for more information about switching. 

Mr. Caliva acknowledged there is room for growth, especially in Western Pennsylvania, which sits atop the largest source of natural gas in the United States but has some of the lowest enrollment numbers in the competitive marketplace.

“We already are seeing a shift in consumer awareness about the value of natural gas and what it can mean,” Mr. Caliva said.

Michael Sanserino: msanserino@post-gazette.com, 412-263-1969 and Twitter @msanserino.

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