Columbia, competitors spar over fixed prices for natural gas

Columbia Gas of Pennsylvania Inc. wants to offer fixed-rate contracts for natural gas, but some of its competitors object that the move could stifle them.

Columbia makes money by delivering gas to customers but does not earn a profit on the commodity itself. If Columbia's plan is approved, the utility could compete on the price of the gas - a business that other natural-gas providers control.

Customers who choose a fixed rate would be better off if the price of gas rises and worse off if the price drops.

"But what it would provide is predictability," said Rob Boulware, a spokesman for Columbia Gas.

Shipley Energy of York and other competitive suppliers are asking the state Public Utility Commission to reject Columbia's plan, said Matt Sommer, manager of natural-gas supply and government relations with Shipley Energy.

Shipley welcomes competition, but Sommer said Columbia would have unfair advantages.

"That could deter future entrants to the market, or it could encourage someone who's in. ... to pull out," Sommer said.

Specifically, Sommer said that as the utility delivering the natural gas, Columbia has marketing clout and access to customer information. The utility could use its regular, adjusting-rate business to unfairly bolster the fixed-price business, he said.

As a utility, Columbia delivers gas to all customers, whether they buy directly from Columbia or from competitive suppliers such as Shipley.

Big users of natural gas easily can buy at fixed rates from such competitive suppliers.

There generally is much less competition for small customers, including small businesses, according to the state small-business advocate and consumer advocate. Shipley serves big businesses and smaller users.

But many of those small customers remain dependent on utilities such as Columbia, which pass on the changing cost of gas without markups or discounts.

Columbia serves York County and 26 other Pennsylvania counties, including Adams and Franklin. The Lancaster and Harrisburg areas are served by UGI Utilities Inc.

State Consumer Advocate Sonny Popowsky said the ability to offer fixed-price contracts is a key edge for smaller, competitive suppliers.

"That's one of the few things they have to offer customers," Popowsky said.

It is difficult for competitive suppliers to beat the utility on price alone, he said, because they all operate in the same wholesale market.

Popowsky and Small Business Advocate William Lloyd Jr. also have voiced concerns that Columbia could boost its fixed-price business at the expense of customers who stay on the regular, adjusting-rate plan.

For example, Popowsky said, a utility could buy some natural gas for one wholesale price and some natural gas for a lower wholesale price. It could divert the cheaper natural gas to its fixed-price customers, to make sure it earns a profit on that business. it could then pass on the more expensive gas to other customers, who must reimburse it for the wholesale cost.

The solution to that concern lies in complicated formulas, and Popowsky said his office was satisfied with the latest one Columbia has proposed. Lloyd said Columbia had made significant improvements to its plan, although his office would still like to see some more changes.

Meanwhile, businesses should brace for an expensive winter, Sommer said.

Prices could double over last winter, Sommer said, driven by a wholesale market that was already high before the Gulf Coast hurricanes struck.

"In the last month, the natural-gas prices have gone up astronomically," Sommer said.

Columbia gas instituted a major price increase Oct. 1, based on soaring wholesale costs.