Overview: In January 2000, the Kentucky Public Service Commission (PSC) approved a pilot customer choice program for residential and small-volume commercial customers of Columbia Gas of Kentucky, Inc. (Columbia). The program, "Columbia Customer Choice," began on September 2000 and is available to all Columbia customers who consume less than 25 million cubic feet of natural gas per year. Columbia continues as the supplier of last resort and remains in the merchant business, both selling and transporting natural gas to consumers. In June 2003, Columbia stated that choice participants were not saving money and asked that the pilot be discontinued 7 months before its scheduled termination date of October 31, 2004. Interstate Gas Supply, Inc. (IGS), which supplies gas to most of Columbia's choice participants, disputed the claim, as did many other parties. Subsequently, the PSC determined that Columbia had used an inaccurate accounting procedure to evaluate the program. Instead, the PSC found that program participants, in the aggregate, have saved on their gas bills and ordered Columbia to extend the pilot through March 31, 2005. In April 2005 the PSC approved Columbia’s request to extend the program for another 4 years, from April 1, 2005, through March 31, 2009.

In October 2007, Columbia stated its intention to continue the choice program for an additional 2 years (through March 31, 2011), under the same terms stipulated in its most recent rate case (August 2007). Under terms agreed upon, the marketer's accounts receivable discount was reduced from 2.5 percent to 2.0 percent and the tiered marketer fee was replaced by a flat fee of $0.05 per thousand cubic feet. In November 2008, the PSC agreed to extend Columbia's choice program through March 31, 2011. The company must continue to file annual reports on the program by June 1 of each year. As of December 2008, about 27,000 residential customers were participating in the pilot, down substantially from the 45,600 participating in June 2002 although slightly more (2,722) than the number enrolled in December 2007.

On January 13, 2002, the PSC approved an agreement wherein marketers participating in Columbia’s choice program will “take assignment of minimum levels of the utility’s storage and transportation capacity and undergo a prospective capacity audit.” If a marketer does not meet its capacity requirements, the utility may assign capacity to meet the shortfall. As of December 2008, two marketers were participating in the pilot program. Larger volume customers throughout the State have had access to unbundled service since the 1980s.

Regulatory and Legislative Actions on Retail Unbundling

"An Act relating to natural gas retail competition," House Bill 542, introduced in February 2009, defines terms and requirements for eligibility and application. It specifies that the Public Service Commission has exclusive jurisdiction over choice programs and the regulatory authority to certify marketers, provide for consumer protections, and set mechanisms for recovery of stranded costs. The bill passed the House in March 2009.