Press Release

PUC Releases Investigative Report on Natural Gas Competition

Published on 10/6/2005

Filed under: Gas

HARRISBURG – The Pennsylvania Public Utility Commission (PUC) today adopted and submitted its report to the General Assembly on competition in Pennsylvania’s retail natural gas supply market.  The Commission determined that “effective competition” does not exist in the retail natural gas supply market statewide, and that the PUC should convene the stakeholders in the natural gas industry to examine avenues, including legislative, to increase competition.

“The Competition Act requires the Commission to reconvene the stakeholders in the natural gas industry in this Commonwealth to explore avenues, including legislative, for encouraging increased competition,” said Commissioner Kim Pizzingrilli in her statement.  “I look forward to working with all of the stakeholders in the discussions as to how we can enhance the competitive environment of natural gas supply services in Pennsylvania.”

The Commissioners voted 5-0, with Commissioner Bill Shane concurring in part and dissenting in part.  “While I agree with the conclusion of the report that there is no effective competition in the natural gas industry for residential and commercial customers,” stated Commissioner Shane, “I dissent from the report’s recommendation to reconvene the stakeholders group.  I believe that the Natural Gas Choice and Competition Act should be repealed as useless ‘dead letter’ law.  Another collaborative would be a futile exercise.” (Commissioner Shane’s Statement)

The 1999 Natural Gas Choice and Competition Law allows customers to purchase gas from independent suppliers, while still having their gas physically delivered by PUC-regulated distribution companies. The law directed the PUC to investigate the level of competition five years after the law went into effect and to report its findings to the General Assembly. 

The Commission opened the investigation in May 2004, and asked natural gas distribution companies (NGDCs), natural gas suppliers (NGSs) and interested parties to comment on the level of competition in the market.  On Sept. 30, 2004, the PUC held an en banc hearing for further exploration.  After an extensive review of the investigation’s evidence, the Commission determined that there is not effective competition in the retail natural gas supply market at this time.

Through the investigation, the Commission found that:

• The record demonstrates a lack of participation by natural gas suppliers and buyers in the retail natural gas supply services market on a statewide basis.
• According to suppliers, substantial barriers to entry in the retail natural gas market exist because of differing security requirements among NGDCs.
• According to suppliers, substantial barriers to entry and continued participation by NGSs exist as the result of the omission of procurement, administrative and other costs from the NGDC’s price to compare.
• According to suppliers, substantial barriers to supplier participation exist because of penalties placed on suppliers that vary among NGDC systems which are not cost-based.
• The marketplace lacks accurate and timely price signals; as a result, the market cost of natural gas supply service offered by natural NGDCs is not communicated immediately to customers.

Since the investigative report concluded that natural gas competition does not exist at this time, the Commission will reconvene a stakeholder group in the natural gas industry to explore avenues, including legislative, for encouraging increased participation in Pennsylvania’s retail natural gas supply service market.  The collaborative will examine the issues and develop recommendations regarding changes that need to be made to the market structure and operation.  Also, the first stakeholders meeting should be held by the end of 2005.

The Report to the General Assembly on Competition in Pennsylvania’s Retail Natural Gas Supply Market was released today to the Governor, the General Assembly, the Office of Consumer Advocate, the Office of Small Business Advocate, the Energy Association of Pennsylvania, all jurisdictional natural gas companies, all licensed natural gas suppliers and all other participants to this proceeding.

In a related matter, the Commission denied a petition by the PUC’s Office of Trial Staff to commence an investigation into competition for customers among jurisdictional NGDCs with overlapping territories.  The issues that the Office of Trial Staff proposed for investigation may be better addressed in other Commission rate proceedings and through the stakeholder group that is reconvening to increase competition in the retail natural gas supply market.

The Pennsylvania Public Utility Commission ensures safe, reliable and reasonably priced electric, natural gas, water, telephone and transportation service for Pennsylvania consumers, by regulating public utilities and by serving as stewards of competition.

For recent news releases, or more information about the PUC, visit our website at www.puc.state.pa.us

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Docket No. I-00040103

Contact:

• Cyndi Page
  Sr. Communications Specialist
  717-214-5434
  cypage@pa.gov