Columbia Terminates Energy Max from program
Rising natural gas prices are beginning to take a toll on energy market players. In a sign of what could lie ahead, Friday Columbia Gas of Ohio said it terminated Energy Max of Northeast Ohio Inc. from participation in its Customer Choice program, after Energy Max failed to deliver gas to Columbia for transportation to Energy Max's 8,000 Ohio Choice customers for most of August. A spokesman for the pipeline company said it cost about $8,000/day to deliver the gas from its own system.
Rising natural gas prices are beginning to take a toll on energy market players. In a sign of what could lie ahead, Friday Columbia Gas of Ohio, an affiliate of Columbia Energy Group, said it terminated Energy Max of Northeast Ohio Inc. from participation in its Customer Choice program, after Energy Max failed to deliver gas to Columbia for transportation to Energy Max's 8,000 Ohio Choice customers for most of August.
Columbia said it made up for the shortfall in gas deliveries by the Youngstown-based natural gas supplier from its own supplies. Columbia Spokesman Steve Jablonski said it cost the pipeline company about $8,000/day to make up the shortfall. He said he was uncertain if the gas came from Columbia's storage or if it was purchased on the spot market.
By failing to deliver gas for its customers and forcing Columbia to serve as the supplier of last resort, Energy Max violated terms all suppliers must agree to before they are admitted to the Choice program, said Carol Fox, Columbia's director of marketer services.
"We regret taking this action, but we were obligated to do so in order to protect the integrity of the program and ensure the reliable delivery of gas to the customers,'' Fox said. "We attempted unsuccessfully to work through this issue with Energy Max, and took action as soon as we became aware that this was going to be a continuing situation."
Columbia said it is continuing to monitor the performance of Choice program suppliers and will take similar actions in the future if necessary.
With natural gas prices trading at $5Mcf, "we have seen some retrenching by different suppliers," Jablonski said. "Some marketers have sold their customers to other marketers or exited the program." But, he said, 29 marketers remain in the program. "By any yardstick, it's been a pretty successful program."
A letter notifying Energy Max customers of the company's termination from the Choice program has been mailed by Columbia to Energy Max customers. They may immediately enroll with another supplier, or stay with Columbia as their supplier at the utility's gas cost, Columbia said.
With prices in record territory, the market risks are rising. In August, MCN Energy Group Inc., Detroit, blamed a $9 million charge or 11�/share in the second quarter 2000 on potentially uncollectible account receivables in its energy marketing group.
Several marketers with which MCN did business "were short in this market," says spokesman Stewart Lawrence. When gas prices rose, some marketers were not able to deliver promised gas. The biggest players appear to be doing all right with a strategy of trading huge volumes at very thin margins, Lawrence says. Some industry experts expect a coming shakeout among smaller and weaker players.