BGE launches gas brokerage to fight for largest customers

November 12, 1994|By John E. Woodruff | John E. Woodruff,Sun Staff Writer

Baltimore Gas and Electric Co. will test its wings in the fast-growing gas brokering business next month, offering to buy and transmit natural gas for big industrial and commercial customers in a nine-month trial authorized by the state Public Service Commission.

The move is part of the company's response to a growth of competition that is restructuring the gas business nationally.

Growing numbers of big customers are using their buying leverage to win price breaks through middlemen who purchase directly at the wellhead and arrange pipeline transmission across the country.

More than 200 of BGE's big industrial customers are already buying through brokers, and about 40 percent of the gas now moving through its delivery lines is broker-purchased.

That delivery service gives the utility a fraction of the revenue stream it receives from customers who buy gas from BGE itself in the traditional way.

Those 200 customers represent only a small part of the business the company would lose if it didn't move quickly to get into the brokering business, Mark Case, BGE's director of gas management, said yesterday. By next year, as many as 2,500 of the utility's 535,000 customers may be buying through brokers, he said.

"A number of our customers have asked us to provide a gas brokering service, and others contacted expressed positive interest," said Edward A. Crooke, BGE's chief operating officer.

"Gas brokering will become a very important piece of our competitive strategy for natural gas."

BGE is one of a handful of utilities in the country that have won permission to try their hand at gas brokering.

To win that permission, BGE promised to share its gas brokering revenues with its other ratepayers, allocating 70 percent against general gas rates and 30 percent to the company's earnings, Mr. Case said.

The industry may be heading for a day when even residential customers will buy gas through brokers, though a period of experimentation will be needed to discover if they would benefit, he said.

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