Pennsylvania Issues Guidance to Suppliers on Commercial Customers Classified as Residential

The Pennsylvania PUC has issued a secretarial letter to clarify questions about whether a natural gas supplier (NGS) must be licensed to serve residential customers in two sets of circumstances.

Specifically, the secretarial letter addresses:

1) A situation where a natural gas distribution company (NGDC) classifies a customer as residential for rate purposes but the customer is by all other accounts clearly a commercial customer, and

2) Mixed meter scenarios

The PUC explained that, in some situations, NGDCs give commercial entities, such as non-profit organizations, the opportunity to take service under a residential rate schedule for reasons that benefit the customer. Under the NGDC's tariff and in the NGDC's system, the customer is considered "residential" even though it is clearly a commercial entity.

The question is whether an NGS needs to have a license to serve residential customers simply because the NGDC classifies the customer in that manner for tariff or rate purposes.

The PUC reported that some NGDCs have refused to process enrollments in these situations if the NGS's license does not include authority to serve residential customers. The examples that have been presented include:

• A church with no living unit;

• An office building associated with a hospital system; and

• An overnight cottage at a golf course.

"We do not believe it is appropriate for the NGDC's classification of the customer to be controlling for purposes of determining whether the NGS must amend its license to serve residential customers," the PUC said.

"Rather, it is the nature of the customer that is determinative for licensing requirements," the PUC said.

"Moreover, allowing NGDCs to decline to process enrollments in these situations where they believe an NGS needs a different class of license from the Commission essentially places the NGDCs in a 'gatekeeper' role, which we have refrained from doing in similar situations. Of course, while we do not wish to place NDGCs [sic] in a gatekeeper role for purposes of Commission licensing requirements and monitoring enrollments, it is incumbent upon NGSs to adhere to the NGDCs' operational tariff rules, such as those governing operational flow orders, balancing and curtailment," the PUC said.

The PUC said that if an NGDC becomes aware of a situation where it appears that an NGS is attempting to serve or is serving types of customers who are not covered by the NGS's license, the NGDC is encouraged to raise that issue with the NGS. If the matter cannot be resolved by the NGDC and NGS, it should be brought to the attention of the PUC Office of Competitive Market Oversight.

With regard to mixed meter scenarios, the PUC adopted for the gas market its previously issued guidance with respect to the retail electric market.

Specifically, the PUC said that the guidance issued in its March 25, 2011 secretarial letter on electric mixed meter scenarios is equally applicable to natural gas suppliers.

"In summary, an NGS licensed to serve commercial, industrial or governmental customers must also apply for and obtain authority to serve residential customers in mixed meter scenarios," the PUC said.