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Cooperatives and Gas Distribution Companies in Ohio

Cooperatives and Gas Distribution Companies in Ohio. Robert E. Burns, Esq. Retired Research Specialist The National Regulatory Research Institute @ The Ohio State University burns.7@osu.edu

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Cooperatives and Gas Distribution Companies in Ohio

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  1. Cooperatives and Gas Distribution Companies in Ohio Robert E. Burns, Esq. Retired Research Specialist The National Regulatory Research Institute @ The Ohio State University burns.7@osu.edu Note: The opinions of the author are his own and, although based on previous research at The Ohio State University, do not reflect the views or positions of OSU, NRRI, SERC, CESE, the OSU Extension, or the OSU Alumni Association.

  2. Cooperatives and Gas Distribution Companies in Ohio • Who can sell natural gas in Ohio? • To sell natural gas in Ohio, one must either be a public utility registered/certified with the Public Utility Commission of Ohio (PUCO), a marketer registered/certified with the PUCO, or an exempted entity.

  3. Cooperatives and GasDistribution Companiesin Ohio • The advantage of purchasing from a public utility is the bundle of consumer rights that come from commission approved tariffs and commission regulations • Foremost among these rights are the rights that flow out of the utility obligation to serve • A utility cannot terminate and abandon service with approval of the PUCO. • The special problem of an economic breach of contract.

  4. Cooperatives and Gas Distribution Companies in Ohio • End users can also buy natural gas from marketers who are registered/certified with the PUCO. • Greater flexibility on negotiating prices, terms, and conditions • They sell the commodity of natural gas • The local distribution company delivers the gas and still has an obligation to serve and can act as a provider of last resort in case the marketer fails to perform or the contract is terminated

  5. Cooperatives and GasDistribution Companies in Ohio • Cooperatives and Municipal utilities can also sell gas to end users • Ohio Revised Code section 4905(A)(2) defines a cooperative as: A public utility, other than a telephone company, that is owned and operated exclusively by and solely for the utility's customers, including any consumer or group of consumers purchasing, delivering, storing, or transporting, or seeking to purchase, deliver, store, or transport, natural gas exclusively by and solely for the consumer's or consumers' own intended use as the end user or end users and not for profit; • Ohio Revised Code section 4905(A)(3) defines a municipal utility as: A public utility that is owned or operated by any municipal corporation;

  6. Cooperative and GasDistribution Companiesin Ohio • For municipal utilities, the governing principle is political accountability • There is no requirement in Ohio for a cooperative utility to operate in accordance with the Rochdale cooperative principles. You need to be especially cautious about underlying governance documents. • Make certain that the cooperative really is a cooperative. Your protection is operation according to the cooperative principles. • See http://communitymarket.org/wp-content/uploads/2010/04/rochdale.pdf

  7. Other Exempt Entities • The Ohio Revised Code section 4905.03(E) defines a natural gas public utility as “A natural gas company, when engaged in the business of supplying natural gas for lighting, power, or heating purposes to consumers within this state. Notwithstanding the above, neither the delivery nor sale of Ohio-produced natural gas or Ohio-produced raw natural gas liquids by a producer or gatherer under a public utilities commission-ordered exemption, adopted before, as to producers, or after, as to producers or gatherers, January 1, 1996, or the delivery or sale of Ohio-produced natural gas or Ohio-produced raw natural gas liquids by a producer or gatherer of Ohio-produced natural gas or Ohio-produced raw natural gas liquids, either to a lessor under an oil and gas lease of the land on which the producer's drilling unit is located, or the grantor incident to a right-of-way or easement to the producer or gatherer, shall cause the producer or gatherer to be a natural gas company for the purposes of this section. “

  8. Other Exempt Entities • Specifically, Substitute S.B. 315 created (or re-created) several exempt entities that can sell gas to end users. • Producers can sell Ohio-produced natural gas or Ohio-produced raw natural gas liquids to a lessor under the lease under which the producer’s drilling unit is located or grantors of rights-of-way or easements. • Gathers can sell Ohio-produced natural gas or raw natural gas liquids to grantors incident to rights-of-way or easements • Also PUCO exemptions

  9. Other Exempt Entities • For other exempt entities, the governing principle is contract law. Period end. Remedies are according to contract law. • Again, ask key questions. • See Dale Arnold’s presentation. • The problem of economic breach.

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