Study: More choices for natural gas doesn't necessarily benefit customers

Requiring that consumers have more choices about who they can buy natural gas from is not necessarily a good idea, the state Public Service Commission said in a report issued Tuesday.

Residential customers in Kentucky buy their gas from companies that own and operate local distribution systems, such as Columbia Gas of Kentucky, Atmos Energy Corp. and Louisville Gas and Electric Co.

Those companies are not allowed to make a profit from the gas they sell to consumers; they can charge only what it costs them on a wholesale basis.

But PSC spokesman Andrew Melnykovych said some outside marketers that do seek to make a profit from natural gas have in recent years wanted the state to require that local distribution companies give residential customers the choice of buying from a third-party gas supplier, which would let them lock in a rate for an extended period. The local distribution company would still deliver the gas.

State law doesn't require that local distribution companies give residential customers that choice, and so far, just one — Columbia Gas — has done so.

The PSC found in its study that giving customers a choice might not save them money.

Customers in Columbia Gas' voluntary Customer Choice Program saved $11.4 million during the program's first five years by buying from a third-party supplier, but during the past five years, during which natural gas prices have fluctuated, those customers have paid $28.7 million more than they would have if they had bought from Columbia.

Marketers argued that customers benefit from the ability to choose a supplier and lock in a price with the chance of saving money.

Consumer advocates and local natural gas companies opposed mandatory competition. The consumer groups said consumers in some other states have been victims of deceptive marketing.

Regardless of whether the state requires competition, more safeguards are needed to protect consumers who choose to buy from a third party, the PSC said. The commission does not have the ability to adjudicate customer complaints against third-party gas marketers, revoke or suspend their ability to operate in Kentucky or require them to file their rates and terms and conditions of service with the PSC.

The Kentucky General Assembly directed the PSC to do a study on the issue.