Md:Natural-gas options vanish into the ether

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Natural-gas options vanish into the ether Some Md. suppliers abandon customers -------------------------------------------------------------------------------- By Dan Thanh Dang Sun Staff Originally published Nov 26 2000 As the cost of home heating continues to climb this winter, half of the alternative natural gas suppliers in Central Maryland have abandoned the residential market, leaving thousands of customers to contend with higher prices and fewer choices while searching for new contracts.

With full natural gas deregulation in only its second winter in the Baltimore region, at least six gas companies have stopped offering residential service and terminated what in most cases were supposed to be guaranteed yearlong, fixed-price contracts with customers. The Maryland Public Service Commission said one company declared bankruptcy and ended contracts with about 1,000 of its customers without warning.

"We're obviously concerned about the winter," said Catherine I. Riley, chairwoman of the PSC. "We think supply will be sufficient, but we have concerns about natural gas prices. Some suppliers have had problems with price spikes, and some weren't capitalized well enough to tighten their belts and live with those increases.

"We want everyone to understand that price is outside of our control or anybody's control," Riley said. "But we want people to also know that there's an automatic default system and that they won't be without natural gas service, even if their supplier does leave the market. We'll be monitoring this situation all winter long."

There is no count of how many customers have been abandoned as the cost of natural gas outstripped the price many suppliers had agreed to sell it for. About 105,600 of Baltimore Gas and Electric Co.'s 590,000 gas customers are signed up to purchase gas from an alternative supplier, as are about 86,000 of Washington Gas Co.'s 340,000 residential customers in Maryland.

The PSC and the Office of the People's Counsel said they know of about 2,000 residents across the state who signed contracts with alternative gas suppliers and have been sent back to their original utility for service. That number doesn't include about 4,500 BGE customers whose contracts expired or were sold to other suppliers, according to the PSC.

Both the PSC and OPC believe that many residents will not know they have been switched back to their old utility or had their contracts picked up by other suppliers until new energy bills arrive in the next several weeks.

Customers who have been dropped apparently have little recourse except to shop around. Contracts typically contained little-noticed clauses that allowed companies to terminate their agreements with either a 30- or 60-day notice.

"They're not required to do business here," said People's Counsel Michael J. Travieso. "Their price is not regulated. They can leave the market if they want to. They can terminate contracts, and no one can tell them to do otherwise.

"Basically, the company can dictate the terms, and the customer has no bargaining power," Travieso said. "We need to get some consumer alerts out there."

Customer turnbacks are an increasing trend across the country, state officials said, as prices have spiked more than 50 percent above last year's rates. That price spike caused many suppliers such as Virginia-based Old Dominion Electric Cooperative to stop offering residential rates.

"We're not large enough to buy a huge block of gas and sell it to residential customers," said Al Galindo, manager of marketing and energy sales for Old Dominion. "We decided not to pursue those customers, because we didn't believe we'd get the volume of customers we needed to support the effort."

The PSC has received many customer complaints about contracts that were terminated by Conectiv Energy and AGF Direct, which marketed gas in Maryland, said PSC spokeswoman Chrys Wilson.

Other companies that have left Central Maryland's residential market include GasMark, Metromedia Energy, Perry Energy Services and Total Gas & Electric.

Both Conectiv and AGF exercised termination clauses. But AGF, which declared bankruptcy and abruptly closed down its Web site and telephone number, did so without warning its customers, Wilson said.

The natural gas market was opened to the entire state last year after two years of pilot programs. Local utilities continue to charge for transporting the gas through pipelines and delivering it, but other companies supply - and charge for - the gas.

In contrast with electricity deregulation, which started in August, gas suppliers do not have to be licensed and monitored by the PSC to sign up customers - at least not until the PSC adopts new licensing procedures and rules for gas suppliers, expected to happen early next year.

Instead, alternative gas suppliers were authorized to enter the market by utilities such as BGE and Washington Gas if they met certain financial requirements.

However, with volatile gas prices, companies that entered into contracts in January to sell gas at 38 cents per therm for a year, for example, were locked into a money-losing deal. BGE's cost for October was 68.16 cents per therm.

Neither the PSC nor the attorney general's office has the authority to handle customer complaints.

But even when the PSC adopts licensing procedures next year, it will not stop companies from terminating contracts that aren't cost-effective, Riley said.

"If your supplier leaves the market, your service is protected, but you do lose whatever terms of the contract you had with the previous supplier," Riley said.

"That's part of the free market. To go to competition, you are trading off protection and regulation. It's too early to make a judgment about whether [deregulation] is working or not working, but we've been encouraged by the competition.

"This is a sort of blip on the screen," Riley said. "We hope that things will level off."

http://www.baltimoresun.com/content/news/story?section=news-business&pagename=story&storyid=1150510218457

-- Martin Thompson (mthom1927@aol.com), November 26, 2000


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