The Public Utilities Commission of Ohio has reformed the natural gas industry to give customers a chance to shop for lower natural gas rates. Customers at Dominion East Ohio, Columbia Gas, Duke Energy and Vectren Energy Delivery have the ability to choose an alternative supplier for their natural gas supply service. Their gas supply will still be delivered by the local utility, but customers will be buying their gas supply from a new company.
A customer's natural gas bill has been separated into two parts:
• Regulated distribution of gas, which is still only provided by the utility, and
• Supply of the gas commodity, which is open to competition.
Customers can choose to receive their gas supply from their utility, or an alternate gas provider.
Traditionally, local utilities arranged for gas supply for their customers and charged a supply rate known as a Gas Cost Recovery (GCR) rate. The rate could be compared to the rates charged by alternate suppliers.
However, most of the local utilities are transitioning away from arranging for gas supply for customers who don't choose an alternate provider, and are doing away with the GCR rate. Under this process, utilities are exiting what is called the "merchant" function of gas supply service, and instead will merely bill for gas supply that is arranged by another company.
Utilities are engaged in a multi-step transition away from this merchant function, with the first step being auctioning off customers' supply needs to competing suppliers, rather than the utility procuring the supply needs itself. Under the new process, the utility no longer charges a GCR rate, but instead charges something new called a "Standard Service Offer" rate, or SSO. The SSO is similar to the GCR in that it is a supply price which customers should use to compare offers from competitors. However, the SSO rate is set by competing suppliers in the market via an auction and is based on the NYMEX price for natural gas, unlike the GCR which was based on a utility supply portfolio.
Currently, Columbia Gas uses an SSO auction to set prices.
Dominion East Ohio and Vectren Delivery have actually moved beyond the SSO to another process called the "Standard Choice Offer." This is an auction very similar to the SSO, but instead of buying wholesale gas in an auction, the utilities "sell" the right to serve their customers to competing retail gas suppliers for a period of 12 months. The winning suppliers win the right to serve these customers for one year, and have their name appear on the customer's bill. However, at the end of the 12 months, the customer may be re-assigned to another supplier based on the next annual SCO auction, unless the customer affirmatively chooses a different supplier by shopping for their gas supply.
Columbia is also in the process of moving to an SCO auction.
The SCO, SSO, and GCR rate all change monthly, which means customers are exposed to volatility. Choosing an alternative gas provider permits customers to lock-in a cheap rate before the more expensive winter season.
No matter who you choose to buy energy from, your local utility will continue to deliver your gas and respond to service interruptions and outages. You will still pay your utility for these services. Depending on your area, you can choose to receive a single bill from your utility listing your utility delivery charges and competitive supply charges, or separate bills from the utility and alternate energy provider.
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