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Retail Suppliers To Seek Retail Market Improvements, Utility's Exit From Merchant Function, In Case Reviewing Utility Merger

January 22, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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Retail suppliers will seek various retail market enhancements, including seeking a utility exit from the merchant function, in the Pennsylvania PUC proceeding reviewing the previously reported (see story here) acquisition of the Peoples Natural Gas LDCs by Aqua America, Inc.

The Natural Gas Supplier Parties (NGS Parties, including Dominion Energy Solutions and Shipley Energy) and the Retail Energy Supply Association (RESA) (collectively, NGS/RESA) said in a joint prehearing memo that they intend to raise the following issues, and solutions to the barriers resulting from the current practices listed below, to improve the retail natural gas market at the Peoples Natural Gas distribution companies (NGDCs)

• that the cut-off for participation in the Peoples NGDC purchase of Receivables (POR) program is currently 300 mcf annual usage, which NGS/RESA said, "is arbitrarily low and should be increased significantly."

• that the Peoples NGDCs do not provide Choice suppliers with heat load and baseload factors for their Choice pools;

• that the Peoples NGDCs do not provide Natural Gas Suppliers (NGS) serving customers on their systems with the temperature used to predict Choice demand for an upcoming day;

• that the Peoples NGDCs do not send informational announcements via email;

• that the number of rate codes currently available for a single pool is 20 and should be increased

Furthermore, NGS/RESA intends to raise the issue of having the Peoples LDCs exit the merchant function

"The last issue on the NGS/RESA list at this juncture is more structural and therefore more fundamental. Specifically, NGS/RESA believe that a significant public benefit could be realized if as a result of this transaction, the Peoples NGDCs would exit the merchant function; that is, no long [sic] provide supplier of last resort service, and instead use market-based solutions to provide the service. Aqua is an infrastructure company, and in its purist form, the distribution of natural gas is very similar. The major difference between the two, apart from the product, is the need to obtain and sell the commodity, which exposes the NGDC to market risk, even with dollar-for-dollar recovery," NGS/RESA said

In a separate prehearing memo, Direct Energy Business Marketing, LLC and Direct Energy Small Business, LLC also raised the potential for removing the Peoples LDCs from the default supplier role.

Direct Energy said in the memo that it has current procedures/operations of Peoples Natural Gas Company and/or Peoples Gas, "that frustrate the ability of Direct Energy to offer competitive service."

Direct Energy said that these procedures include:

• the manner of reporting the total number of individual customer burns that make up the aggregate burn pool

• the timing of Peoples' target (daily delivery requirement) requests and capacity requests

• the system used by Peoples Natural Gas to identify billing cycles

• customer rebilling procedures, and

• the content of Peoples' daily billing.

"As the Commission considers whether the proposed merger is in the public interest, a review of these currently lacking competitive processes is important to determine whether operational improvements could be implemented as part of the approved merger to further advance the statutory goal of enabling retail gas customers to obtain the benefits of a properly functioning and effectively competitive retail natural gas market," Direct Energy said

"Moreover, to the extent a review of these processes results in the inability of the merged entity to satisfy these statutory requirements, then serious consideration must be given to whether Peoples' should continue to have the role of the default service provider post-merger," Direct Energy said in the memo

Direct Energy also identified the following important operational processes and procedures of Peoples Natural Gas Company and/or Peoples Gas that must be maintained or enhanced as a result of the proposed change in ownership of Peoples: the Pool Tracking system, Peoples' Electronic Bulletin Board process for nomination changes, the content of local production pool invoices, and process for communication between NGSs and Peoples.


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