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National Energy Marketers Association

National Energy Marketers Association. Commissioner Donald L. Mason, Esq. Vice Chairman NARUC Gas Committee March 31 st ,2004. Consumers need accurate price indices.

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National Energy Marketers Association

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  1. National Energy Marketers Association Commissioner Donald L. Mason, Esq. Vice Chairman NARUC Gas Committee March 31st,2004

  2. Consumers need accurate price indices • As states begin to implement Choice Programs it is necessary to address gas cost recovery (GCR) or purchase gas adjustment (PGA) formulas. • Many states have annual or quarterly filings of GCR and PGA rates. • If the GCR/PGA does not represent the market then the marketers are disadvantaged.

  3. Choice needs accurate indices • Marketers attempt to enroll customers against the LDC rate. The LDC rate is the price to beat. • If the LDC heads into the winter with a price that is under recovering, the marketer will not be able to attract customers. • LDCs have no money at risk because in the spring they can file for an under recovery. • The downside is a consumer to a fixed GCR price does not realize that the price quote in the fall is not a firm price. It is subject to adjustments

  4. Marketers offer products based on price indices • The product of the leading Ohio marketer uses a fixed price contract adjusted annually against the NYMEX. Therefore it is important that the marketer and customer are relying on accurate information.

  5. Alternative Regulation • Dayton Power and Light—(1990’s)Fixed price contracts to secure a portion of capacity, another portion used one year blocks locked in against the NYMEX index. • Presently Vectren Energy Ohio (VEDO) and Cincinnati Gas and Electric (CG&E) adjust the expected gas cost (EGC) monthly based on NYMEX index so that the GCR reflects the real market. This reduces “recoveries” and adds clarity for customers. • Marketers are not disadvantaged.

  6. Indices affect small LDC customers • Small LDC without “choice” programs can lock the EGC in for 24-30 months to guarantee price stability. • Pike, Eastern, and Southeastern gas companies locked prices in for 18 months and then again for 30 months • Savings at a time of high price volatility for the 15,400 total Pike, Eastern, and Southeastern customers was $2.837 million

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