ECO 436

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ECO 436

• Natural Gas

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Natural Gas Unbundling in IL for Small Customers

• What are benefits to unbundling?
• What are the costs?
• How is it done?

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Why Small Customers?

• All Large Commercial and Industrial customers
  have the option of purchasing natural gas from
  suppliers other than LDCs.
• Small volume commercial customers and residential
  customers do not have choice.

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What are the Benefits?

• Lower prices
• consumer choice
• new products and services
• more responsiveness to consumer preferences
• greater cost efficiency initiatives

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What are the Benefits? (contd)

• reduced regulatory oversight
• less cost shifting
• more innovation
• more accurate price signals
• LDCs - questioned if cost savings significant
  because of competitive gas supply

6
What are the costs?

• potentially greater price volatility
• addl supply risk (less reliability)
• new billing system costs
• addl supplier of last resort costs
• potentially higher prices

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What are the costs? (contd)

• consumer exploitation
• new admin. transactions costs
• potential stranded costs
• higher consumer risk
• public information and education costs
• loss of consumer protections
• marketer-questioned significance of these

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Features of unbundling

• most fundamental principle of small customer
  unbundling is aggregation concept
• marketer buys gas for many customers within a
  group w/ no separate accounting for utility
  provided daily balancing or storage services.

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Possible Unbundling

• transportation
• balancing
• standby
• storage
• metering
• emergency services
• gas supply

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Remaining Questions

• Should local utility retain the option of
  providing fully bundled service?
• Can reliability be maintained?
• Do marketers have to use firm capacity?
• Should ICC regulate or license marketers?
• Should LDC be required to release customer
  information?

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Remaining Questions (contd)

• What will be the impact of electric restructuring
  on gas industry?
• Should LDCs be required to release capacity to
  marketers?
• Is PBR preferable to residential unbundling?

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Residential Pilot Programs

• ThermQuest CILCO 5 year program started in
  1996
• Customer Select NICOR Gas 3 year pilot
  started in 1997
• Peoples Gas program 2 year program started in
  November 1997and extended through June 30, 2000

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Eligible in IL Pilot Programs
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Participation in IL Pilot Programs
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Customer Select in Bloomington/Normal

• Started Jan. 6, 2000
• Enrollment ended March 31, 2000
• NICOR expanded program to all customers effective
  3/1/02

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Customer Select in Bloomington-Normal
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Other States (March 2000)
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Participation in Other States
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Participation in Other States
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Participation in Other States