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House of Representatives
Session of 2015 - 2016 Regular Session


Posted: December 9, 2014 10:44 AM
From: Representative John D. Payne
To: All House members
Subject: Payne - Natural Gas Competition
In the near future, I intend to re-introduce legislation amending Title 66 to enhance natural gas competition in the Commonwealth. This legislation was previously introduced as HB 1188 (2013-2014.)

The Natural Gas Choice and Competition Act (Act 21 of 1999) restructured the natural gas supply market and provides an opportunity for consumers to shop and receive natural gas supply from a company other than their natural gas distribution utility. The Act also requires natural gas distribution companies to act as the supplier of last resort and purchase gas supply on behalf of customers who choose not to shop for a competitive supplier.

Section 1307 of Title 66 addresses how natural gas distribution companies recover their purchased gas costs; that is the actual cost incurred to purchase natural gas for non-shopping customers. Current law provides that “the legal rate of interest plus two-percent” attach to refunds to customers for over-collection and that recovery for under-collection include “the legal rate of interest.” The term “legal rate of interest” is subjective and this asymmetrical interest rate structure arguably provides an incentive for the under-collection of purchased gas costs, thereby increasing the dollar amount of quarterly reconciliations.

My bill eliminates the current interest rate structure and moves to a market based structure; the prime rate for commercial borrowing, for the accrual of interest when reconciling purchase gas costs. This will eliminate a confusing and asymmetrical interest rate structure, incentivize accurate rate projections to minimize over and under collections and make it easier for customers to make an “apples to apples” comparison between the gas supply rates offered by a natural gas distribution company and competitive suppliers.

My bill also eliminates the migration rider charged to customers who switch to a competitive supplier. Under this rider, a customer who switches to a competitive suppler may still be charged for one year for some of the natural gas distribution company’s gas supply costs, incurred prior to the switch but not fully recovered. In lieu of a migration rider, the bill permits a natural gas distribution company, upon approval from the PUC, to include a nonbypassable charge on all customer bills in the event that a large number of customers migrate to competitive suppliers all at once. This will ensure that the costs incurred by the natural gas distribution company to purchase gas supply to meets its projected supplier of last resort obligation is not borne by a small number of non-shopping customers.

Finally, my bill clarifies that a natural gas distribution company may recover all reasonable costs incurred to implement customer choice. This includes necessary operational and billing changes as well as customer education initiatives. This cost recovery is similar to that provided to electric distribution companies to implement the Electric Choice Act and Act 129 of 2008.

Introduced as HB57