ÓÈÊU "
&
ENERGY
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“The most significant factor driving
oil-to-gas conversions in the competitive
marketplace today is the low cost of natural
gas. The Order refers to this price advantage
in its opening paragraph and mentions
the potential cost savings to customers
as a reason to search for additional ways
to entice customers to convert. However,
relying on price disparities for established
long-term policies and practices would be
unwise.
“Long-term oil and gas price forecasts
have been historically unreliable. At present,
natural gas, as a commodity, is cheaper
than heating oil. …There is no guarantee
that the price difference between oil and gas
will continue and no foolproof manner to
predict future prices. However, basing con-
version policies on current prices could be
detrimental to customers in the long run.”
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“Electricity, natural gas, heating oil,
propane and renewable energies all vie
for heating customers in New York State’s
energy marketplace. Liquid fuels distribu-
tors and others must compete against their
own industry members as well as the
monopoly utilities.
“The market inherently favors the public
utility because they have defined service
territories and do not have to devote time,
money and resources to compete against
other utilities for customers, at least in the
transmission and distribution market.
“The public utility’s name in the energy
market also gives it an advantage. No inde-
pendent small business has the same name
recognition as the local public utility. This
name recognition must be considered when
assessing the impact on competitors of any
proposed recommendation on policy.
“Some gas utilities already possess
substantial ratepayer funded promotional
budgets to encourage oil-to-gas conver-
sions. In the case of KeySpan New York and
KeySpan Long Island, those promotional
amounts are massive. When last checked,
these amounts were $15 million and $17
million annually, respectively. No marketer
can compete with this level of promotional
funding.
“In addition, gas utilities have ratepayer-
funded energy efficiency programs that
offer high-efficiency equipment as incen-
tives to potential conversion customers.
The amount of money that is generated by
each utility’s system benefit charge, which
is committed to energy efficiency improve-
ment, total in the tens of millions of dollars.
…There is no need to provide further
incentives in the competitive marketplace.”
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The free operation of the energy
marketplace without government bias
favoring any energy source over another
should be a guiding principle of the state’s
energy policy. Government interference in
the marketplace carries with it a legacy of
limitation on consumer choice and harm to
competitors.
“Market forces, rather than artificial
government constraints, stimulation or
incentives, should determine consumer
preferences in the energy marketplace.”
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“Maintaining a diversity of fuel sources
is of paramount importance. Having an
appropriate fuel mix prevents an overreli-
ance on one fuel that could lead to difficul-
ties in times of peak demand.
“The heating oil industry acts as
the backup fuel provider for gas utility
interruptible customers. At times of peak
demand, these gas customers must inter-
rupt gas service and rely on their backup
fuel, which is usually heating oil.
“Converting up to one million heating
customers to natural gas not only means
a loss of heating oil customers, it means
increasing firm demand. In certain ser-
vice territories this could result in more
frequent interruptions to non-residential
customers and greater reliance on heating
oil marketers. However, the petroleum
distribution industry cannot survive only
as a backup fuel provider. Similar to the
natural gas industry, petroleum marketers
must rely upon full-time customers in order
to thrive in the business world.”
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“There is a notion inherent in this pro-
ceeding that conversions to natural gas will
undeniably benefit customers. We urge the
Commission to be mindful that improve-
ments to a heating system could be more
beneficial to an individual customer than
converting. Energy efficiency upgrades to
existing oil heat systems may often be a
more economical choice for the heating
customer than fuel switching.
“Oil heat efficiency upgrades can reduce
fuel use anywhere from 25% to 40%, often
with a payback time to homeowners in the
range of one to five years. … It must be noted
that sometimes the overlooked expenses,
when combined, can increase the conver-
sion from oil heat to natural gas by $4,000
to $7,000, bringing the entire cost for fuel
switching to as high as $11,500 to $15,000.”
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“We understand the state’s desire
to enhance its electric and natural gas
infrastructure for safety, reliability and eco-
nomic development reasons in New York.
However, we do not believe that such a path
to growth should be pursued to the detri-
ment of the heating oil industry, a vital and
needed segment of the energy industry.
“We respectfully request that the
Commission take into account the informa-
tion provided in these comments and to
act in a manner that strengthens, rather
than influences, the competitive energy
marketplace. Such an approach will benefit
the state’s entire energy sector and all of its
energy consumers.”
