Loading…
Wednesday, September 17, 2014
Current Weather
Loading Current Weather....
HomeNews
Published: Sunday, 11/11/2012 - Updated: 1 year ago

Data shows deregulation a colossal money-loser for Columbia Gas of Ohio customers

BY DAN GEARINO
COLUMBUS DISPATCH

COLUMBUS — Natural-gas deregulation has been a colossal money-loser for Columbia Gas of Ohio customers, based on newly disclosed data.

People who selected their own gas provider paid $885 million more than they would have through regulated prices since 1997.

The dollar figure, a total since the “gas choice” program began, is part of a trove of data released in a regulatory case that could lead to the abolishment of regulated prices.

The numbers provide the clearest evidence to date that a system aimed to save money often has done the opposite. Consumer advocates say this is reason for alarm; gas companies say the numbers don’t tell a complete story.

“Customers don’t have enough information to make intelligent decisions in this marketplace,” said Ellis Jacobs, a Dayton-area lawyer who represents customers in utility issues. “You have to wonder whether the whole setup is ever going to be able to deliver the kinds of benefits for customers that were promised.”

The figures cover April, 1997, to September, 2012, with detail the public never has seen on this topic.

“Choice offers the opportunity of savings but not the guarantee of savings,”Columbia spokesman Ken Stammen said.

Customers fared the best in the late 1990s, when the concept of choosing a provider was new. Many people chose fixed-rate gas contracts, an alternative to the utility’s variable rate.

As the market evolved, customers did much worse, paying more than they would have under regulated pricing for every month since November, 2005.

The average annual deficit peaked in 2010 at $405 per choice customer, which includes residents and businesses, a Dispatch estimate found. So far this year, the average deficit is $224.

Columbia said it does not calculate the per-customer averages and could not confirm these estimates.

Since 2005, some individual customers might have found ways to save, but the group as a whole is on an 83-month losing streak. The monthly deficits are one of the only things to stay constant in a natural-gas market that has ranged from record-high prices in 2008 to the lows of the past year.

“What’s dangerous is you get the spike year, then people sign up for the fixed-rate contracts, and then you have several years of low prices when fixed-rate contracts are going to be losers,” said Matthew Lewis, an Ohio State University energy economist. “The contract was insurance against a price spike, and there was no price spike.”

He was especially surprised customers didn’t benefit during 2008’s record highs, when fixed-rate contracts should have brought aggregate savings.

Beneath the stats is a question: Why would customers make choices not in their financial interest?

Mr. Lewis thinks the answer is a mix of factors, including a fear of price spikes and then complacency when prices are low.

Deregulation’s supporters say the figures have limited value because they don’t show how the competitive market helped drive down prices for everybody, including regulated prices. They also note choice customers can get products not available at regulated prices, which makes it tough to make a comparison.

Before 1997, Columbia customers had no option but to buy gas at regulated prices. Legislators approved deregulation in hopes it would reduce government’s role and lead to savings.

“The general belief was that customers would save money,” said Clarence Rogers, Jr., of Cleveland, a Public Utilities Commission of Ohio board member from 2001 to 2006.

The results should be a concern to regulators, he said. The PUCO declined to comment because the data are part of a pending case.



Guidelines: Please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. If a comment violates these standards or our privacy statement or visitor's agreement, click the "X" in the upper right corner of the comment box to report abuse. To post comments, you must be a Facebook member. To find out more, please visit the FAQ.

Related stories







Poll