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What are we auctioning, anyway?
• Auction probably not the best name
• NOT about selling the company, or assets or customers
• We won’t make money
• Marketers bid on the right to supply Columbia Gas of Ohio with the gas it needs to serve its sales customers
• Lowest bidders win
What is the SSO?
• The Standard Service Offer
• Replaced Gas Cost Recovery (GCR) charge
• It’s the price COH charges its sales customers for natural gas
• Adjusted monthly, based on market price
• Just like the GCR, it’s a dollar-for-dollar pass through of gas costs at zero profit to COH
What changes for customers?
• Very little
• If you’re a sales customer, you’ll automatically become an SSO customer
• If you have a contract with a CHOICE® marketer, you’re not affected
• If you’re part of your community’s aggregation pool, you’re not affected
SSO Price = Market Price + Retail Price Adjustment
Market Price
• Changes monthly
• Covers cost of the gas commodity
• Based on New York Mercantile Exchange monthly closing price
Retail Price Adjustment
• Set once a year by the auction
• Covers marketer’s non-gas costs– Interstate pipeline transmission &
storage– Administrative costs– Marketer profit
Will the bill look different?
• If you’re a sales customer, the term Standard Service Offer (SSO) will appear on bill
• The bill will still come from Columbia
• Customer won’t see a marketer’s name on the bill
Are customers still free to choose?
• YES. All options remain for customers
• SSO customers may choose to sign up for a CHOICE® plan with a marketer
• CHOICE® customers may switch to the SSO
• Aggregation customers may opt out of their community’s plan and become SSO customers, or sign up for a CHOICE® plan
What will this mean for prices?
• April SSO Rate = $0.58 per 100 cubic feet (Ccf)
• SSO = market rate ($0.384) + Retail Price Adjustment ($0.193)
• Comparisons with GCR are not apples-to-apples
• Recent GCRs (Jan-Feb-Mar) historically low
• July 2005-December 2008: 35 of 42 GCRs were over $1 per Ccf
• April 2009 -- $0.77; April 2008 -- $1.21; April 2006 -- $1.08
What will this mean for prices?
• Longer-term: Very difficult to predict
• Prices will be tied more directly to the market
• Could attract more marketers to Columbia’s service territory
• Increased competition and options could lead to better prices
• PUCO will monitor the process closely, as it has with the GCR
What’s the impact on Columbia?
• The process we use to acquire and price the gas we provide to our sales customers has changed
• Safe, reliable gas delivery remains our core business
• COH still builds and maintains the distribution system, responds to emergencies, reads meters, issues bills, offers payment plans and answers customer calls
Why is COH making this change?
• We’re being responsive to the PUCO and the Ohio Consumers’ Counsel, which support it
• Dominion East Ohio Gas and Vectren Energy Delivery of Ohio have already done so
• It’s a less-complicated, easier-to-explain price which more directly reflects the market
Timeline
• February 23 – Gas Supply Auction
• April 1 – Gas flows under SSO system
• April 1, 2010 – March 31, 2011: First SSO period
• February 2011 – Second Gas Supply Auction
• April 1, 2011 – March 31, 2012: Second SSO period
What’s Next? The SCO
• SCO = Standard Choice Offer
• SCO Auction tentatively scheduled for February 2012
• Similar to SSO, but winning SCO bidders are assigned to specific customers
• Customer will see the SCO marketer’s name on the bill
• All SCO customers pay the same, regulated gas price regardless of which marketer is assigned to serve them
• SCO customers will pay state sales tax at their county’s prevailing rate