The battle of the telcos for the long-distance market may well look like a minor skirmish compared to the war that’s heating up on the residential side of the deregulated natural gas market.

Sunoco and Consumersfirst, a new subsidiary of Consumers Gas Energy, have recently thrown their hats into the ring – and there are more players waiting in the wings.

Several of these players are related to or ultimately owned by provincially regulated utility companies that are required to sell gas to consumers and businesses at cost. Their entry into the unregulated consumer market means they will be aiming to make a profit on gas supply.

While the natural gas industry has, in fact, been deregulated for 10 years, Sunoco, Consumers Gas Energy and many other large and small companies have limited their unregulated activities to supplying natural gas to industrial clients.

Another of those companies, TransCanada Gas Services, a wholly-owned subsidiary of TransCanada PipeLines, is also investigating the residential market.

TransCanada recently hired Toronto agency Grey Direct but David Annesley, the company’s director of government relations and public affairs, says at this point, the company is only kicking the tires of the residential market.

Annesley says, ‘Selling gas at arguably a million cubic feet to a client and then going down to 1,000 cubic feet for a residential customer, do we really want to do that?

‘It’s just a question of whether TransCanada wants to do that kind of consumer product style of business. Potentially it’s very easy but it doesn’t necessarily mean we want to be in it.’

Some large u.s.-based energy supply companies also moved into Canada to sell to the industrial segment and could be making the shift to residential.

One of those is Enron Capital & Trade Resources Canada, a subsidiary of Enron Corp. of Houston, Tex., North America’s largest purchaser and marketer of natural gas and non-regulated marketer of electricity.

Earlier this month, Calgary-based Petro-Canada Oil and Gas signed an agreement with Enron Canada that will help Petro-Can market its natural gas in North America.

As in the u.s., it is expected that the goal of these natural gas marketers is to eventually become energy brokers as other utilities, such as electricity, are deregulated in the future.

New residential natural gas retailers will also be entering a marketplace where numerous small abms, or agent/broker/marketers, have been going door to door for several years offering consumers savings on their natural gas bills.

It is estimated that nearly 40 of these companies are already doing business in Ontario, the first market to be targeted by the majors, primarily because it has over two million residential natural gas customers.

No provinces east of Quebec have natural gas yet.

As in the long-distance telephone market, natural gas brokers will not only provide consumers with savings but also with more purchasing options such as short-term or long-term arrangements and fixed or variable price programs.

Deregulation affects only about one-third of a consumer’s total gas bill, the natural gas supply charge. The gas distribution and gas transportation charges will continue to be paid to the utility company operating in a specific residential area, which in Ontario could be Consumers Gas, Union Gas or Centra Gas.

The utility companies will still be supplying natural gas but it is much more attractive for companies like Consumers Gas to form new deregulated retail operations.

Utilities are regulated provincially and in Ontario the companies must report in detail all their activities and transactions to the Ontario Energy Board.

Utilities buy and resell natural gas but are not allowed to mark up the price to consumers. They supply gas based on the estimated cost of the gas.

The new unregulated entities buy in bulk, ideally when gas is at a low price to be able to offer cost savings to consumers. They can also profit on the sale because they are able to add a margin to the cost.

Those consumers choosing a variable rate plan from a broker will be gambling that gas prices remain low. If natural gas prices rise, they could find themselves paying more to the broker than they would through their utility.

Consumers can expect to be bombarded with direct response campaigns as companies come into the market.

Sunoco was the first to enter and timed its launch so it could have a major presence at the National Home Show in Toronto from April 4 to 13.

The company launched a newspaper campaign in Toronto just prior to the event and has since started advertising in London, Windsor and Ottawa, Ont.

Other media will follow and will likely include radio or television advertising, billboards, pop at gas stations, direct mail, and inserts in the bills of existing utility providers.

BAM Creative Directions of Toronto handles Sunoco’s advertising.

Consumersfirst chose Genesis Media to take it into the marketplace.

Genesis Direct Response is the lead agency on the business and has brought in MC Direct, a company specializing in direct response creative, telemarketing and program management.

A mixed-media campaign is expected this spring.