Staff Opposes Termination of Columbia Gas Choice Program

Termination of Columbia Gas of Maryland's choice program may be short sighted, Maryland PSC Staff said in comments on Columbia's recommendation to end the choice program.

Columbia's recommendation was exclusively reported by Matters. Citing its small customer base of just over 30,000 customers, the compliance cost of COMAR 20.59, limited customer migration, and uneconomic rates offered by competitive suppliers to date, Columbia proposed ending choice for residential and most commercial customers, leaving only transportation service available for large customers (3/30).

PSC Staff conceded that the decision facing the Commission is either ending the choice program, or allowing compliance costs of COMAR 20.59, which includes Purchase of Receivables, standard electronic transactions, and similar market enhancements, to be recovered from all choice-eligible customers through distribution rates. The Commission has previously ordered that any costs of COMAR 20.59 shall only be recovered from competitive suppliers, through a POR discount rate or other mechanism, and not all eligible customers.

However, Staff agreed with Columbia that any cost allocation that imposes costs solely on competitive suppliers will result in discount rates that are unacceptably high (at a minimum, 7%, assuming a 10 year amortization, and three to four times that amount under shorter amortization periods). Such discount rates (or alternatives using a direct fee imposed on suppliers) will only cause suppliers to either use dual billing, or exit the service area altogether, leaving the costs to be recovered from all distribution customers in any event.

"Staff believes that notwithstanding the small number of customers that currently shop in the Columbia service territory (2.3% residential and 5.0% C&I) termination of Columbia's choice program may be short sighted. Staff is concerned that nullifying the option to shop for Columbia's retail customers may have a broader impact on these customers in the future; because it is unlikely that the Company's gas commodity costs will always be lower than those of the retail suppliers. It is also possible that retail suppliers will offer shopping customers other service options not available from the Company. The fact is that even those gas customers that do not shop may still benefit from having the option to shop, as long as that option remains available," Staff said.

Staff recommended an option maintaining choice and implementing all previously ordered provisions of COMAR 20.59, which will result in $372,000 in implementation costs. Based on a two year implementation cost recovery period, allocating these costs to all choice-eligible customers would result in a rider of $0.48 per month for 24 months.

"Staff believes that imposing a rider to recover the COMAR 20.59 implementation costs over a two-year period would perhaps be the most efficient, least costly, and least impactful on customers. A monthly charge of $0.48 for each choice-eligible customer would amortize costs quickly, and the revenue impact on each customer's bill would be relatively small. Spreading out these costs over a three or five year period would lower the monthly charge but the savings would be not significant and this would only increase the total costs of the implementation program," Staff noted.

Staff noted that, for electric choice, much of the implementation costs (other than POR) now being addressed in COMAR 20.59 for gas choice were recovered from all distribution customers.

The Commission is currently scheduled to address Columbia's filing at its April 27 meeting; however, the Retail Energy Supply Association and Maryland Energy Marketers Coalition have asked that the issue be deferred to a later administrative meeting, to provide more time to review Staff's just filed recommendation. Staff and Columbia do not oppose a deferral.