Gas competition could save customers money

Thanks to regulatory changes that took effect after a rate increase was granted to UGI Penn Natural Gas Inc. in August, the path has been cleared for more competition in the gas market that could save customers money, the company says.

“In the past, (regulations) required third-party suppliers to do a lot of things that made it non-economical,” said Jim Reino, a regional director of sales and operations at UGI Energy Services. “That’s all changed.”

Previous regulations, such as provisions for balancing customers’ delivery versus actual usage, created expenses greater than the profit margin on sales, Reino said.

Energy Services, the subsidiary of UGI Corp. that markets its energy-generation assets, is offering one-year contracts to non-residential customers that could save 8 percent to 15 percent, Reino said. “Part of that has to do with the fact that the natural gas market is down so low compared to historically,” he said. “We, as a third-party supplier, can buy it at any time when it’s economical for the customer; we don’t have to wait. So if we see a deal, like we’re seeing right now, we can lock that in for the customers for the year.”

The offer lasts for a year because regulations will change again in 2011 to allow utilities to charge customers who switch to third-party retailers for transportation costs, Reino said. For 2010, those costs will be administered by the retailers.

Gas retailers are able to save customers money compared to utilities because utilities are required to buy their gas at certain times and report their expected prices. Retailers then take that “price to compare” and survey the commodity markets until an offer for future delivery is lower than that price, Reino said.

Large corporations have been seeing such savings for about 20 years, Reino said, but it only became feasible for smaller customers thanks to the depressed gas market and the regulatory changes.

The company isn’t offering residential service, Reino said, because it isn’t set up to manage so many small accounts, but he expected that other companies will likely do so.

The offer goes into effect on Jan. 1, but customers interested in switching must do so 15 days before their next meter reading. “We basically have to have our side of it done probably by Dec. 10 because by Dec. 16, it has to be finished with the utility,” Reino said.

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