States should seek to expand gas service: NARUC
Houston, 22 November (Argus) — States should be more open to natural gas expansions and work to mitigate the costs of installing new distribution lines, said a report from the National Association of Regulatory Utility Commissioners (NARUC).
Despite prolific supplies and their effect on gas prices, there are still many areas throughout the US that are either not served or are under served by natural gas distribution, the group said in its annual report, released last week. Logistical and financial obstacles to expanding distribution lines help explain why gas service is not more ubiquitous in the US.
Distribution companies must have adequate infrastructure to serve new customers, which includes considerable costs. In Pennsylvania these installation costs average about $1mn/mile, the report said. And these costs are on the rise because of increased municipal permitting, right-of-way and road restoration costs. Additional revenues from customers served are sometimes not enough to cover the costs of expanding service.
Distribution companies in some states also face competition for capital and labor to perform the work, which can increase costs further. In some cases, old pipeline replacement work competes with new expansion work for both capital and labor.
Shale gas has resulted in numerous benefits to the US, including shoring up the country's national security, and the environmental benefits and cost-competitiveness of natural gas relative to coal, NARUC said.
"Cheap natural gas for the business sector is important because, among other things, it can help attract manufacturing and other businesses," the report said. "At the same time, prices are low for residential customers as well."
With these benefits in mind, state public utility or service commissions should be more open to natural gas expansion programs that target all customers. This includes large commercial and industrial users and, where appropriate, should encourage the use of anchor customers to mitigate the conversion costs, the group said.
NARUC is an organization made up of governmental agencies that regulate utilities and carriers in the US. The group represents the interests of state public utility commissions.