Commercial sector nonutility gas purchases rise, AGA says

By the OGJ Online Staff

HOUSTON, July 31 -- More small businesses and other commercial customers are purchasing natural gas from someone other than the local utility, the American Gas Association said.

The number of commercial customers who bought natural gas from nonutility suppliers rose 60% between 1998 and 1999, AGA said.

Because the actual volume of gas used by customers who buy gas supplies from a nonutility rose only slightly, Bruce McDowell, AGA director of policy analysis, said it appears an increasing number of small businesses now take advantage of the natural gas customer choice option.

The report found more than 80% of the total volume of natural gas consumed in the US in 1999 could be purchased from sources other than the local natural gas company under current or proposed programs. Based on programs operational or announced, 72% of commercial customers and 50% of residential customers will have the option of choosing a gas supplier in the future.

"During the last 10 years, the volume of natural gas that's being purchased from unregulated suppliers has doubled -- which shows that natural gas customers are becoming increasingly comfortable with the concept of purchasing their gas from someone other than the local utility," McDowell said.

AGA reported its updated analysis found 99% of gas consumed by electric utilities and 95% by industrial facilities is available from multiple suppliers. Nonutility suppliers provided 89% or 2,763 bcf of gas consumed by electric utilities, and 90% or 8,119 bcf of gas consumed by industrial customers in 1999.

Since relatively small cost savings per unit of natural gas can be significant, given the large volumes purchased, these customers frequently have professional staff to manage their energy supplies, the AGA noted.

In the commercial sector, more natural gas is becoming available under a customer choice option. About 72%, up from 69% in 1998, of all gas used in commercial facilities in 1999 was available for purchase from multiple suppliers. Roughly 35% of the commercial gas purchased in 1999 was actually bought from a nonutility supplier, the AGA report found.

More gas utilities have begun lowering minimum consumption requirements so more customers can qualify for transportation services, AGA said. Gas utility unbundling programs also are allowing small customers to aggregate consumption in order to meet minimum requirements.

In 1999, the number of residential natural gas customers with a "choice" option increased by 1 million to 26 million out of the nation's 57 million households with natural gas service. To date, about one in five of those eligible actually switched suppliers, according to a companion AGA report updated in June.

AGA reported the amount of residential gas volume under a customer choice option remained fairly small, just 5% of total residential volumes in 1999. Actual participation in residential natural gas customer choice programs is relatively low at this point, it said, because most customers are satisfied with the service and price offered by their local utility.

Customers are typically hesitant to take advantage of new options in a restructured industry, according to research by the National Regulatory Research Institute.