Who are the Major Players in the Pennsylvania Natural Gas Market?

For consumers trying to set up their home or find a better energy deal, they face what first seems to be a tangled and twisted system with confusing information about price, supply, and delivery. There's a lot of misconceptions about how New York natural gas choice works and many don't understand the different roles played by the PUC, OCMO, NGDCs, or NGSs. To better understand how Pennsylvania's Natural Gas Choice works, it helps if consumers understand who is doing what. Let's start there.

Governance & Oversight:

The Pennsylvania Utilities Commission (PUC) balances the needs of consumers and utilities; ensures safe and reliable utility service at reasonable rates; regulates both Natural Gas Distribution Companies (NGDCs) and Natural Gas Suppliers, operates the natural gas choice website PaGasSwitch.com, and protects the public interest. The PUC is also authorized to enforce federal pipeline safety laws for natural gas pipelines, equipment, and facilities within the state. The PUC has 12 offices and bureaus, and is headquartered in Harrisburg.

The Office of Competitive Market Oversight (OCMO) was formed by the PUC, and it provides an informal forum for resolving disputes between local utilities and gas suppliers. Currently, it is exploring ways to expand competition and modernize regulations as shale gas production grows.

Natural Gas Distribution Companies (NGDC's)

There are 7 primary utility companies and their subsidiaries serving consumers in Pennsylvania. NGDCs (also referred to as "local utilities" or "local distributions companies" or LDC's for short) sell natural gas to their customers at their cost (they're prohibited from making a profit on the gas commodity itself). They collect a distribution charge for delivering the gas through their pipes from all customers - the gas lines that run down your street and into your home. They are also responsible for metering and maintaining gas lines, so if you smelled gas, you would call your local utility (one of these companies):

Pricing

Since each regulated local gas utility charges the market rate for natural gas it helps to know how their unit-pricing. Some utilities price natural gas in either cents per ccf (100 cubic feet) or dollars per Mcf (1,000 cubic feet). Some utilities price their gas in Dekatherms (DTH). For example, Peoples Natural Gas charges by Mcf while Columbia charges by the therm (1/10 of a dekatherm).

Natural gas volumes compare this way:

  • One therm = 100,000 British thermal units (Btu), roughly equivalent to 1 CCF
  • One dekatherm (DTH) equals 10 therms or one million Btu (MMBtu)
  • One dekatherm = about one thousand cubic feet. (Mcf)
  • Natural gas is sold on the commodity markets in dollars/MMBtu.

Customers who do not shop for a competitive natural gas supplier receive default supply service from their local utility. Customers pay a supply charge composed of a Purchased Gas Cost (the price of the gas itself), a Gas Procurement Charge (reflecting administrative costs for the utility to buy gas supplies), and a Merchant Function Charge (reflecting the utility's uncollectible accounts associated with gas supply service).

This price is also known as the "price to compare", meaning it can be used as a benchmark price to compare with offers from competitive gas suppliers in your area. The prices is set by the PUC and varies from month-to-month depending on the market price of natural gas.

Natural Gas Suppliers (NGS's)

An NGS is an entity that sells or arranges to sell natural gas to customers that is delivered through the distribution lines of a Natural Gas Distribution Company. Apart from supplying natural gas, many offer additional incentives and reward programs to their customers —something the old utilities rarely did. Gas suppliers competitively shop the natural gas market to find the best prices. Consumers who choose an NGS and lock-in a low rate in advance of winter can avoid the volatility of their local utilities' monthly variable pricing and save money during bitter winter weather. Longer term contracts can avoid utility rate increases altogether.

Because NGS rates are controlled by market prices, it's important to understand that prices, terms, and contracts vary between gas supplier companies and that these will effect your natural gas bill. Competitive suppliers must pay for gas, pipeline transportation, and storage many months before it is needed by their customers. While the PUC does not regulate the prices offered by NGS, PUC regulations require that retail suppliers must be well-capitalized and able to meet technical, managerial, and financial requirements to do business in Pennsylvania. All natural gas suppliers must be must be certified by the PUC.

Direct Energy meets all PUC regulations and has been a license natural gas supplier in Pennsylvania since December 2, 2004.


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