GAO: few gas consumers opt for supplier choice

Customer Choice Particiation Chart [107,397 bytes]

U.S. consumers have been slow to participate in "customer choice" programs that allow them to choose their natural gas suppliers.

The General Accounting Office, a U.S. congressional watchdog agency, reports that 43 gas utilities in 16 states have customer choice programs for residential and small commercial gas customers. Utilities in 11 other states and the District of Columbia are beginning or considering similar programs.

GAO surveyed utilities with residential customer choice programs as of July 31, 1998, and found 553,000 residential customers were participating-only about 4% of those eligible.

Wide variations

"While overall participation in residential customer choice programs is generally low, participation rates vary dramatically among programs," the agency said.

"For example, in Nebraska, the local gas utility sponsoring the state's single program estimated 70% of eligible residential customers had selected a gas marketer, while in New Mexico, a local gas utility sponsoring one program reported that no residential customers has selected a gas marketer."

GAO said that customer participation rates are determined by a variety of factors, such as the customers' potential to save money by buying gas from a marketer rather than a utility, how well the programs are advertised, and limits on participation.

Marketers' participation is influenced by their profit potential and program rules, such as a requirement that marketers must use transportation that the utility has arranged to deliver gas to the utility.

Benefits

GAO said that utilities report customers are saving money and gaining service options with no apparent reduction in reliability. "While gas utilities reported few problems with the reliability of gas marketers' deliveries, some noted that, since customer choice programs are less than 3 years old, the reliability of gas marketers' deliveries has yet to be tested."

GAO said customers are saving 1-15% on their gas bills, mostly due to lower transportation and storage costs, lower gas costs, and savings on state and local taxes.

"Most gas utilities in our survey have set up independent gas marketers, called marketing affiliates, to sell gas as a separate service to residential and small commercial gas users.

"In several customer choice programs we surveyed, these marketing affiliates have large market shares, raising concerns among some state regulators about how competitive these programs can be and, thus, their potential to reduce prices."