The Tribune Democrat, Johnstown, PA

January 24, 2013

Many consumers want gas, can’t get it

John Finnerty
CNHI

HARRISBURG — More than 18,000 customers have switched to natural gas in the past two years, as consumers scramble to take advantage of historically low gas prices, but almost half of Pennsylvanians live in areas that are not served by gas utilities.

Sen. Gene Yaw, chairman of the Senate Energy committee, said he hopes to soon unveil legislation that will encourage gas utilities to expand service so that more Pennsylvanians can switch to use natural gas as a heating source.

The expansion of drilling in the Marcellus shale region has driven down the price of natural gas, but almost half of Pennsylvania residents live in areas that are not served by gas utilities, a study by the Center for Rural Pennsylvania found.

“In the past five years, the price of natural gas has dropped 67 percent,” said Yaw, a Williamsport Republican. “It’s cheaper than heating oil. We think Pennsylvania should be able to take advantage of that.”

Gas industry officials said they are certainly interested in expanding to meet any increase in demand, but they are wary of any plan that would make them absorb costs that would either drain money that could be used to maintain existing and aging infrastructure or force them to pass along rate increases to current customers.

Terry Fitzpatrick, president of the Energy Association of Pennsylvania, a trade group, noted that gas companies are being pulled in two directions: Some argue that they ought to be spending more money on expansion while there is also public interest in utilities stepping up their efforts to safely maintain infrastructure.

Thursday, the PUC voted to fine gas utility UGI Corp. $500,000 for a 2011 natural gas explosion that killed five people in Allentown.

The settlement also requires the Reading-based company to replace all its cast iron pipelines within 14 years and to expand and enhance its testing and monitoring programs.

Fitzpatrick said that if the push to expand access to natural gas creates a conflict in which existing customers are subsidizing the costs of adding new customers, it would create problems.

“You need balance,” he said. “We need to see the details.”

In a letter to other lawmakers about the plan, Yaw and Senate Majority Leader Dominic Pilegi said that their Natural Gas Expansion and Development Initiative would include encouraging governments to switch to natural gas to heat their office buildings; offer incentives to school districts, colleges and hospitals to switch to natural gas; and create funding alternatives to help extend natural gas into underserved areas.

Extending a gas main can cost between $500,000 and $1 million a mile, Fitzpatrick said.

Currently, when the gas company considers whether to extend service, it will do a calculation to determine whether there are enough customers to make the effort worth the cost. Creating incentives for government and other large nonprofit customers to switch to gas could be significant by creating anchor customers to make it feasible to extend gas lines into new areas.

In most cases, it only makes sense to extend gas lines into new areas where there is a large commercial or industrial customer setting up shop, then nearby residential customers can hook onto the line, as well.

Otherwise, there typically is not enough revenue generated by residential customers to offset the construction costs.

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