OCC: Duke Ohio Residential Customers On Competitive Gas Supply Paid $11 Million More Than Default Service In 2018 ($0.59/Mcf Higher)

OCC Asks PUCO To Place Notice On Customer Bills, Apples-to-Apples Shopping Site Of Difference In GCR vs. Marketer Rates

OCC Seeks Competitive Auction To Procure Duke Default Service Gas Supplies

September 5, 2019

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The Ohio Consumers' Counsel said in testimony filed with the Public Utilities Commission of Ohio that, in 2018, residential customers on competitive natural gas supply at Duke Energy Ohio paid $11 million more than if they had paid Duke's GCR default service rate.

OCC's testimony was filed in a proceeding examining Duke's GCR.

OCC said that through discovery Duke provided 2018 information on residential GCR and marketer customer commodity costs. The data relates to customers billed under consolidated billing

OCC took the total amount charged to residential marketer customers in 2018 and divided that by total volumes billed to marketer customers, resulting in the average price marketers in Duke’s area charged customers.

OCC performed the same calculation with Duke’s residential GCR customers.

OCC said that, in the aggregate that Duke’s residential GCR customers paid less for natural gas than marketer customers by $11.3 million

OCC said that the average marketer cost to residential customers was $5.25/Mcf

OCC said that the average cost to Duke's GCR customers was $4.67/Mcf, or about $0.59/Mcf less than the average marketer cost (values reflect rounding)

OCC said, "in 2018 marketer customers paid about $11 million more than Duke’s GCR customers. That is even worse for consumers than in the previous audit period where marketer customers paid $7 million above Duke’s GCR. Part of this difference can be attributed to more customers shopping in 2018 than during the previous audit period. This one year equates to roughly $48 per customer that shopped in 2018."

"It is very concerning that the discrepancy between marketer and GCR customers has increased by 57% since the last audit period. This information should be provided to customers looking to shop for a supplier. The discrepancy in cost between marketers and GCR is easily calculated and provides customers information that would be helpful in choosing a supplier. This information demonstrates that most shopping (marketer) customers are paying more than if they were to stay with the GCR," OCC said

"The cost discrepancy could easily be placed on the PUCO’s Apples to Apples page or as a line item on customers’ bills," OCC said

PUCO should require Duke, "to place Duke’s GCR price on customers’ bills to inform customers of the potential that they may be paying additional costs above the GCR for their natural gas if provided by a marketer," OCC said

OCC noted that, "The PUCO currently has a docket open in Case No. 19-1429-GA-ORD concerning the Minimum Gas Service Standards ('MGSS') embodied in Ohio Adm. Code 4901:1-13. These rules involve the minimum content of customer bills provided by natural gas utilities, including bill messages to consumers. This open docket affords the perfect opportunity a [sic] for the PUCO to address what information should be provided to consumers regarding comparison prices and savings gained or lost by customers participating in competitive choice programs."

OCC also said that the PUCO should require Duke to provide aggregated shadow-billing data which calculates the amount marketer customers pay above or below the amount they would have paid for gas service on the Duke’s standard offer (GCR). The shadow-billing should be similar to that performed by Columbia Gas, OCC said

Turning to the procurement of Duke's supplies for non-shopping customers, OCC said that Duke should be required to transition to the use of a competitive auction, similar to those used at the other large Ohio natural gas utilities, to procure supplies

"The PUCO should order that change [an auction] unless Duke can affirmatively show that its GCR process is in the customers’ interest optimal pricing standards contemplated in ORC 4905.32 (C)(2)(b) and would benefit consumers," OCC said

"My recommendation is that the PUCO retain an intendent [sic] consultant to conduct an evaluation of Duke’s current procurement process and compare it against a competitive process similar to those conducted by the other large Ohio natural gas utilities. Also, a competitive auction would eliminate the need for Duke to continue its hedging activities (and the associated costs to consumers). The findings from this evaluation by the consultant should be reported to the PUCO within nine months of the Order in this proceeding, with a timeline of transitioning to a competitive standard offer within eighteen months if there is convincing evidence that a competitively bid standard offer would deliver the optimal pricing standards contemplated in ORC 4905.32 (C)(2)(b) and would benefit consumers," a witness for OCC said

OCC said that a consultant reviewing the GCR purchases found that, from 2016 to 2018, the cost that Duke GCR customers paid averaged $0.684/Mcf more than the standard offer prices at the other major gas utilities in Ohio

"Some might assert that including Dominion East Ohio ('DEO') is unreasonable due to DEO’s large on-system storage and close proximity to the Marcellus Shale gas reserves and, therefore, that it should not be included in the comparison ... however, even if DEO is removed from the comparison there is still a difference between Duke and the standard offer’s of Vectren Energy Delivery Ohio ('VEDO') and Columbia Gas of Ohio, that average [sic] $0.225/Mcf more for consumers to pay during the three-year period," OCC said

OCC said that the consultant found that Duke’s hedging activities averaged approximately $0.40/Mcf as a cost to GCR consumers. The costs associated with hedging would be unnecessary if Duke transitioned from the GCR to a competitive auction process similar to the COH and DEO SCO, OCC said

Case No. 18-0218-GA-GCR

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