NOTICES
PENNSYLVANIA PUBLIC UTILITY COMMISSION
Requirements for Natural Gas Suppliers--Guidelines Under Chapter 22 Natural Gas Choice and Competition Act Section 2208; Doc. No. M-00991248F0002
[29 Pa.B. 3685] Commissioners Present: John M. Quain, Chairperson; Robert K. Bloom, Vice Chairperson; David W. Rolka; Nora Mead Brownell; Aaron Wilson, Jr.
Public Meeting held
June 24, 1999
Tentative Order By the Commission:
I. Introduction
On June 22, 1999, Governor Thomas J. Ridge signed into law the Natural Gas Choice and Competition Act, P. L. xxx, No. xxx effective July 1, 1999, 66 Pa.C.S. § 2201--2211 (act). Under the act, beginning on November 1, 1999, retail customers will have the ability to choose their natural gas supplier. Previously, consumers procured their natural gas supply requirements as a package from the jurisdictional public utility. The package, mentioned above, included what are now the basic components of competitive natural gas service, commodity, capacity and storage, balancing and aggregation services of the natural gas utility. The focus of this Tentative Order is the requirements for natural gas suppliers under section 2208 of the act and other issues regarding licensing of natural gas suppliers. The act, at section 2202, defines a natural gas supplier as:
An entity other than a natural gas distribution company, but including natural gas distribution company marketing affiliates, which provides natural gas supply services to retail gas customers utilizing the jurisdictional facilities of a natural gas distribution company. The term includes a natural gas distribution company that provides natural gas supply services outside its certificated service territories. The term includes a municipal corporation, its affiliates or any joint venture, to the extent that it chooses to provide natural gas supply services to retail customers located outside of its corporate or municipal limits, as applicable, other than:
(i) as provided prior to the effective date of this chapter, pursuant to a certificate of public convenience if required under this title;
(ii) total natural gas supply services in de minimis amounts;
(iii) natural gas supply services requested by, or provided with the consent of, the public utility in whose certificated territory the services are provided; or
(iv) natural gas supply services provided to the municipal corporation itself or its tenants on land it owns or leases, or is subject to an agreement of sale or pending condemnation, as of September 1, 1999, to the extent permitted by applicable law independent of this chapter.
The term excludes an entity to the extent that it provides free gas to end-users under the terms of an oil or gas lease. Notwithstanding any other provision of this title, a natural gas supplier that is not a natural gas distribution company is not a public utility as defined in section 102 (relating to definitions) to the extent that the natural gas supplier is utilizing the jurisdictional distribution facilities of a natural gas distribution company or is providing other services authorized by the Commission.
As used in the above definition of a natural gas supplier, the term natural gas supply services includes (i) the sale or arrangement of the sale of natural gas to retail customers; and (ii) services that may be unbundled by the Commission under section 2203(3) of the act, (relating to standards for restructuring of the natural gas utility industry). Natural gas supply service does not include distribution service.
II. Requirements for Natural Gas Suppliers
A. License Requirements
In accordance with section 2208(a) of the act, all natural gas suppliers including a natural gas distribution company that provides natural gas supply service outside of its chartered or certificated territory, must hold a license issued by the Commission. A license shall not be required for customers who make de minimis incidental sales or resales to themselves, an affiliate or to other nonresidential retail gas customers.
B. Entities Currently Operating as Natural Gas Suppliers
Section 2208(a) of the act states that no entity shall engage in the business of a natural gas supplier unless it holds a license issued by the Commission. We believe this requirement is applicable to all entities currently operating as natural gas suppliers, in gas pilot programs, as well as all entities yet to engage in such practices. Each entity currently doing business as a natural gas supplier, as defined in the act, should apply for a Natural Gas Supplier's License from the Commission no later that Monday, August 2, 1999. This will provide staff sufficient time to perfect the applications prior to the November 1, 1999, implementation date.
C. License Application and Issuance
Natural gas suppliers shall submit, in writing to the Commission, under section 2208(b) of the act, an application for a license. The application shall be verified by oath or affirmation. Attachment A to this Tentative Order contains the Commission's natural gas supplier license application. The application may also be downloaded from the Commission's webpage.1
A license shall be issued to any applicant, authorizing the whole or any part of the service covered by the application, if it is found that the applicant is fit, willing and able to perform properly the service proposed and to conform to the applicable provisions of the act and the orders and regulations of the Commission, including those concerning standards and billing practices, and that the proposed service to the extent authorized by the license, will be consistent with the public interest. Otherwise, the application shall be denied.
D. Financial Fitness
We place a high priority on maintaining the safety and reliability of the current natural gas supply service in this Commonwealth, therefore, no natural gas supplier license shall be issued or remain in force unless the applicant or holder of the license complies with each of the following:
(i) Furnishes a bond or other security in a form and amount to ensure the financial responsibility of the natural gas supplier. The Commission shall periodically review the criteria upon petition of any party. The amount and form of the bond or other security may be mutually agreed to between the natural gas distribution company and the natural gas supplier or the alternate supplier of last resort or failing that shall be determined by criteria approved by the Commission.(ii) Provides the Commission with the address of the participant's principal office in this Commonwealth or the address of the participant's registered agent in this Commonwealth, the latter being the address at which the participant may be served process.Failure of a natural gas supplier to comply with any provision of the act, or the rules, regulation, orders or directives of the Department of Revenue or of the Commission, including, but not limited to, engaging in anticompetitive behavior, shall be cause for the Commission to revoke the license of the natural gas supplier.
E. Transferability of License
Under section 2808(d) of the act, a licensed natural gas supplier may not transfer its license without prior Commission approval. The Commission requires the licensee to provide this notice at least 90 days in advance of the transfer.
F. Form of Regulation of Natural Gas Suppliers
The Commission may forbear from extending its regulation of natural gas suppliers, except where a natural gas supplier serves as a supplier of last resort, beyond licensing, bonding, reliability and consumer services and protections, including all applicable portions of 52 Pa. Code Chapter 56, relating to standards and billing practices for residential utility service.2 Subject to section 2207 of the act (relating to obligation to serve), nothing in this section shall preclude a natural gas supplier, upon appropriate and reasonable notice to the retail gas customer, supplier of last resort and the natural gas distribution company, from canceling its contract with any customer for legal cause, subject to the customer's right to have continued service from the supplier of last resort. After receiving notice the customer could then attempt to repair their relationship with the natural gas supplier, seek a new natural gas supplier, or default to the natural gas distribution company, at current tariffed rates or to the provider of last resort. The customer would only be disconnected from the distribution system under Chapter 56 if the customer failed to meet his obligations to the utility of the provider of last resort.
G. City Natural Gas Distribution Operation License Application and Issuance
The act defines a City Natural Gas Distribution Operation at section 102 as follows:
A collection of real and personal assets used for distributing natural gas to retail gas customers owned by a city or a municipal authority, nonprofit corporation or public corporation formed pursuant to section 2212(m) (relating to city natural gas distribution operations).Section 2212(p) of the act states that a city natural gas distribution operation may apply for a license under the procedures under section 2208 (relating to requirements for natural gas suppliers). Subject to the requirement that it qualify for and obtain a natural gas supplier license under section 2208, a city natural gas distribution operation is authorized to engage in the business of a natural gas supplier outside its municipal or corporate limits.
H. Open and Nondiscriminatory Access
A municipal corporation shall, before it is permitted to provide natural gas supply services as a licensed natural gas supplier, demonstrate, and the Commission shall determine, that by the date of the issuance of the license, it will provide other natural gas suppliers open and nondiscriminatory access to its gas distribution system under standards that are comparable to the act, taking into consideration the particular circumstances of the municipal corporation's ownership and /or operation of its gas distribution system.
III. Other Issues
A. Publication of Notice of Filing
Commission regulations at 52 Pa. Code § 54.35 address the publication requirements regarding notice of filing as follows:
(a) Notice of filing an application shall be published in newspapers of general circulation covering each county in which the applicant intends to provide service as required by § 5.14(a)(2) (relating to applications requiring notice). Applicants may contact the Commission's Press Secretary3to confirm the identity of the newspapers of general circulation in which notice shall be published.(b) The notice shall be written in plain language and include the name, address and telephone number of the applicant, a description of the proposed services to be provided and the geographic area to be served. The notice shall include the application docket number and a statement that protests related to the technical or financial fitness of the applicant shall be filed within 15 days of the publication date of the notice with the Commission's Secretary, Public Utility Commission, P. O. Box 3265, Harrisburg, PA 17105- 3265. The notice in an acceptable electronic format shall be submitted to the Commission's Secretary for posting on the Commission's Internet web site.B. Protests to Applications
Commission regulations at 52 Pa. Code § 54.36 address the requirements regarding protests to applications as follows:
(a) Consistent with § 5.14(b) (relating to applications requiring notice), a 15-day protest period commences on the date notice of the application filing is published in newspapers. An interested party may file a protest to an application in compliance with § 5.52(a) (relating to content of a protest to an application) and shall set out clearly and concisely the facts upon which challenge to the fitness of the applicant is based. An applicant may file an answer to the protest within 10 days of when the protest is filed. Protests that do not fully comply with § 5.52(a) will be rejected.(b) Protests may challenge only the applicant's financial and technical fitness to provide the service for which a license is requested. Consistent with the requirements of due process, sanctions, such as revocation or suspension of a supplier's license or the imposition of a fine, may be imposed on parties who intentionally misuse the protest process by repeated filing of competitive protests.(c) A protest to the applicant's technical or financial fitness to provide service will be assigned to Commission staff for review. Staff will determine if the protest fully complies with § 5.52(a) and sets out clearly and concisely the facts upon which the challenge to the fitness of the applicant is based. Staff will determine if the protest is sufficiently documented. If a protest is not sufficiently documented, Commission staff will prepare a recommendation for Commission consideration dismissing the protest and granting the application. If a protest is sufficiently documented, the application will be transferred to the Office of Administrative Law Judge for hearings or mediation as deemed appropriate.C. Technical Fitness
The Commission issued a policy statement addressing the fitness of a natural gas marketer or broker (including a natural gas distribution company's affiliate), which has been published at 52 Pa.C.S. § 69.195. In this policy statement the phrase marketers or brokers, or both, includes all natural gas distribution company affiliates, subsidiaries, parents, divisions, and the like providing natural gas supply to respective natural gas distribution company's customers. The Commission will be interpreting the terms marketer and broker as contained in 52 Pa.C.S. § 69.195 et. seq. as applying to natural gas suppliers as defined in the act.
The Commission seeks to insure that natural gas suppliers operating in this Commonwealth possess the financial or technical, or both, fitness necessary to meet their obligations consistent with the public interest in system reliability and gas supplies. Assurance of the continuation of reliable service and secure supplies is a prerequisite for opening Pennsylvania's gas markets to full retail competition.
Gas suppliers that wish to deliver gas to retail customers should demonstrate that they have the requisite financial and technical fitness to meet their obligations consistent with the public interest in system reliability and natural gas distribution company's underlying supplier-of-last-resort obligation. The financial and technical fitness is expected for any natural gas supplier that wants to serve any or all retail commercial, industrial or retail classes. Financial and technical fitness is aimed at ensuring that a marketer or broker has the requisite ability to offer service to the public.
Under the act, ''a license shall be issued to any applicant, authorizing the whole or any part of the service covered by the application, if it is found that the applicant is fit, willing and able to perform properly the services proposed and to conform to the applicable provisions of this title and the orders and regulations of the Commission, including those concerning standards and billing practices, and that the proposed service, to the extent authorized by the license, will be consistent with the public interest.'' Applicants who are currently providing natural gas services in Pennsylvania will be presumed to have demonstrated technical fitness.
D. Financial Fitness--Bond or Other Security
To ensure the safety and reliability of natural gas supply services, section 2208 of the act, states that no natural gas supplier license shall be issued or remain in force unless the applicant furnishes a bond or other security in a form and amount to ensure the financial responsibility of the natural gas supplier.
The criteria used to determine the amount and the form of these bonds or other securities are to be set forth in the natural gas distribution company's restructuring filings. Furthermore, the amount and form of the bond or other security may be mutually agreed to between the natural gas distribution company and the natural gas supplier or the alternative supplier of last resort and the natural gas supplier.
The license applicant must supply the Commission with proof that it has obtained the necessary bond or other financial security for each natural gas distribution company in whose service territory the license applicant will provide service to retail customers. The license applicant must demonstrate that they have met the criteria required by the applicable Commission restructuring Order or that they have arrived at a mutually agreed alternative. The license applicant shall provide the Commission with a copy of the bonds, other financial security or other negotiated alternatives.
E. Nontraditional Natural Gas Service Marketers
The definition of ''natural gas supplier'' at section 2202 of the act is very broad. This section also defines ''natural gas supply services'' to include the sale or arrangement of the sale of natural gas to retail gas customers. As the competitive natural gas market place develops, we anticipate that there may be certain community-based organizations (CBOs), civic, fraternal or business associations, common interest groups and other entities that work with a licensed natural gas supplier to market services to their members or constituents. We believe that it may be unnecessarily duplicative to require these nontraditional natural gas service marketers to obtain their own licenses under certain circumstances. We therefore will not require nontraditional marketers to be licensed if they meet the following criteria:
* The nontraditional marketers must conduct their transactions through a licensed natural gas supplier.
* The nontraditional marketer:
(1) May not collect revenues directly from retail customers due to the provision of natural gas services.
(2) May not require its members or constituents to obtain their natural gas service through the nontraditional marketer or the licensed natural gas suppliers with which the nontraditional marketer arranges retail services.
(3) Is not responsible for the scheduling of natural gas supplies, the payment or remission of taxes due from the sales of natural gas services and are not responsible for the payment of the costs of the natural gas to its suppliers or producers.
Additionally, the licensed natural gas suppliers who provide services to retail customers through the activities of a nontraditional marketer must retain responsibility for these sales under the act. The licensed natural gas supplier must maintain the appropriate bonding requirements for the sales. The licensed natural gas supplier must meet the same supply reliability requirements with the natural gas sales as it is required to provide for its own retail sales. The licensed natural gas supplier is also responsible for the nontraditional marketers activities and will be held responsible for any violations of the act, the Commission's regulations, including Chapter 56, or the Public Utility Code, committed by the nontraditional marketer.
Each nontraditional marketer and each licensed natural gas supplier must provide Commission notification of their agreement to market natural gas services to retail customers prior to the nontraditional marketer engaging in any natural gas service sales activity.
F. Market Power Remediation--Standards of Conduct
The act addresses standards of conduct under section 2209. Under section 2209(a) of the act the Commission is required to provide interim guidelines for standards of conduct governing the activity of and relationships between natural gas distribution companies and their affiliated natural gas suppliers and other natural gas suppliers. The Commission is also required to monitor and enforce compliance with these standards. Section 2209(c) of the act requires that the standards of conduct provide:
(1) No discrimination against or preferential treatment of any natural gas supplier, including an affiliated natural gas supplier.
(2) No disclosure or preferential sharing of any confidential information to or with any individual natural gas supplier.
(3) Adequate rules prohibiting cross-subsidization of an affiliated natural gas supplier by a natural gas distribution company.
(4) Maintenance of separate books and records by the natural gas distribution company and its affiliated natural gas suppliers.
(5) Sufficient physical and operational separation, but not including legal divestiture to accomplish the preceding noted requirements.
(6) An informal dispute resolution procedure and a system of penalties for noncompliance with the final set of standards of conduct consistent with existing Commission regulations.
The Commission has addressed the relationship of the natural gas distribution company and their affiliates as the natural gas industry moved towards full competition through a policy statement at 52 Pa.C.S. §§ 69.191 and 69.192. The Commission is of the opinion that these policy statements, to the extent they are consistent with the requirements of the act, may form the basis for the interim standards of conduct for the natural gas distribution companies and their affiliates. Specifically section 69.192 states that the following policies should be applied by the natural gas distribution company or natural gas distribution companies (as defined by the act):
(1) The [natural gas distribution company] should apply its tariffs in a nondiscriminatory manner to its affiliate, its own marketing division and any nonaffiliate.(2) The [natural gas distribution company] should likewise not apply a tariff provision in any manner that would give its affiliate or division an unreasonable preference over other marketers with regard to matters such as scheduling, balancing, transportation, storage, curtailment or nondelivery.(3) If a tariff provision is mandatory, the [natural gas distribution company] should not waive the provision for its affiliate or division absent prior approval of the Commission.(4) If a tariff provision is not mandatory or provides for waivers, the [natural gas distribution company] should grant the waivers without preference to affiliates and divisions or non-affiliates.(5) The [natural gas distribution company] should maintain a chronological log of tariff provisions for which it has granted waivers. Entries should include the name of the party receiving the waiver, the date and time of the request, the specific tariff provision waived and the reason for the waiver. Any chronological log should be open for public inspection during normal business hours.(6) The [natural gas distribution company] should process requests for transportation promptly and in a nondiscriminatory fashion with respect to other requests received in the same or a similar period. The [natural gas distribution company] should maintain a chronological log showing the processing of requests for transportation services. Any chronological log should be open for public inspection during normal business hours.(7) Transportation discounts provided to the [natural gas distribution company's] or its marketing affiliate's favored customers should be offered to other similarly situated customers and should not be tied to any unrelated service, incentive or offer on behalf of either the parent of affiliate. A chronological log should be maintained showing the date, party, time and rationale for the action. Any chronological log should be open for public inspection during normal business hours.(8) The [natural gas distribution company] should not disclose any customer proprietary information to its marketing affiliate or division, and to the extent that it does disclose customer information, is should do so to other similarly situated marketers in a similar fashion so as not to selectively disclose, delay disclosure or give itself or its affiliate any undue advantage related to the disclosure. A chronological log should be maintained showing the date, time and rationale for the disclosure. Any chronological log should be open for public inspection during normal business hours.(9) The [natural gas distribution company] should justly and reasonably allocate to its marketing affiliate or division the costs or expenses for general administration or support services.(10) The [natural gas distribution company] selling surplus gas supplies and/or upstream capacity on a short-term basis (as defined to the Federal Energy Regulatory Commission) to its affiliate should make supplies available to similarly situated marketers on a nondiscriminatory basis. The [natural gas distribution company] should not make any gas supplies and/or upstream capacity available through private disclosure to the [natural gas distribution company's] affiliate unless the availability is made simultaneously with public dissemination in a manner that fairly apprises interested parties of the availability of the gas supplies and/or upstream capacity. The [natural gas distribution company] should maintain a chronological log of these public disseminations. Any chronological log should be open for public inspection during normal business hours.(11) The [natural gas distribution company] should not condition or tie agreements to release interstate pipeline capacity to any service in which the [natural gas distribution company] or affiliate is involved.(12) The [natural gas distribution company] should not directly or by implication . . . represent to any customer, supplier or third party that an advantage may accrue to any party through use of the [natural gas distribution company's] affiliate or subsidiary.(13) The [natural gas distribution company] should establish and file with the Commission a complaint procedure for dealing with any alleged violations of any of the standards listed in paragraphs (1) through (12), this paragraph or paragraphs (14) and (15), excepting for paragraph (9), which should be exclusively under the purview of the Commission. These procedures should be developed in consultation with interested parties during consideration of any tariff guided by this section and § 69.191 (relating to general). The Commission may expect establishment of a complaint procedure or other recordkeeping requirements if warranted by subsequent facts or circumstances.(14) The [natural gas distribution company] should keep a chronological log of any complaints, excepting paragraph (9), regarding discriminatory treatment of natural gas suppliers. This chronological log should include the date and nature of the complaint and the [natural gas distribution company's] resolution of it. Any chronological log should be open for inspection during normal business hours.(15) Parties alleging violations of these standards may pursue their allegations through the Commission's established complaint procedures. A complainant bears the burden of proof consistent with 66 Pa.C.S. (relating to Public Utility Code) in regard to the allegations.Additionally, the Commission would propose the following interim standards of conduct related to the activities of natural gas suppliers:
(1) Licensees shall provide accurate information about their natural gas supplier services using plain language and common terms. Where new terms are used, the terms must be defined again using plain language: Information should be provided in a format which will allow for comparison of the various natural gas supply services offered and the prices charged for each type of service.(2) Licensees shall provide notification of the change in conditions of service, intent to cease operation as an natural gas supplier, explanation of denial of service, proper handling of deposits and proper handling of complaints in accordance with Commission regulations where applicable.(3) Licensees shall maintain the confidentiality of customers' historic payment information and right of access to their own load and billing information.(4) Licensees shall not discriminate in the provision of natural gas supply services as to availability and terms of service based on race, color, religion, national origin, sex, marital status, age receipt of public assistance income and exercise of rights under the Consumer Credit Protection Act, 15 U.S.C. §§ 1691--1691f; Regulation B, 12 CFR 202--202.14.(5) Licensees will be responsible for any fraudulent deceptive or other unlawful marketing or billing acts performed by their agents or representatives. Licensee shall inform consumers of state consumer protection laws that govern the cancellation or rescission of natural gas supply service contracts. 73 P. S. § 201-7.To facilitate public comment to these proposed interim natural gas supplier licensing requirements, a 14-day comment period is established. We urge that all interested persons file comments as soon as possible. Note that reply comments will not be permitted; Therefore,
It Is Ordered That:
1. The Requirements for Natural Gas Suppliers--Guidelines under Act 21-1999 Section 2208 as set forth in this tentative order are issued to the public for comment.
2. A comment period ending 14-days after the entry date of this order is hereby established.
3. Written comments, an original and 15 copies, shall be submitted to the Secretary, Pennsylvania Public Utility Commission, P. O. Box 3265, Harrisburg, PA 17105-3265. No reply comments will be permitted. A diskette containing the comments in Microsoft Word 6.0 electronic format must also be submitted. Comments should specifically reference the above-referenced docket number.
4. A copy of this order, any accompanying statements of the Commissioners and the appendices be served upon all jurisdictional natural gas distribution companies, the Office of Consumer Advocate, the Office of Small Business Advocate, the Office of Trial Staff, Legislative stakeholders, and shall be made available to all other interested parties and posted on the Commission's web page.
5. The Commission's contacts for this matter are Patricia K. Burket, of the Law Bureau, (717) 787-3464, and Thomas Maher, Fixed Utility Services, (717) 787-5704, e-mail Maher@puc.state.pa.us, fax (717) 772-1933.
6. A final Opinion and Order shall be issued subsequent to the receipt and evaluation of any comments filed in accordance with this tentative order.
7. All natural gas suppliers as defined in 66 Pa.C.S. § 2201 wishing to provide natural gas supply services to retail gas customers utilizing the jurisdictional facilities of a natural gas distribution company, or aggregate residential, commercial and/or industrial natural gas load in this Commonwealth shall first apply for a license from this Commission under the licensing instructions and procedures established herein.
8. A copy of this order without Appendix A be submitted to the Legislative Reference Bureau for publication in the Pennsylvania Bulletin.
JAMES J. MCNULTY,
Secretary
[Pa.B. Doc. No. 99-1114. Filed for public inspection July 9, 1999, 9:00 a.m.] _______
1 The Commission's home page address is: http://puc.paonline.com; click on the natural gas icon then select ''Natural Gas Supplier Licensing and Information'' to access the natural gas supplier License Application form.
2 52 Pa. Code Chapter 56 may be purchased from Fry Communications by calling (717) 766-0211, ext. 2339.
3 Pa.P.U.C. Communications Office (717) 783-9970, or FAX (717) 787-4193.
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