The House Consumer Affairs Committee Wednesday held a hearing on House Bill 107 (Godshall-R-Montgomery) which would authorize a new Distribution System Extension Charge on all natural gas ratepayers bills to pay for service line extensions to new customers.
The bill addresses a concern legislators in the Senate and House have that it is difficult to expand existing natural gas service into unserved or underserved areas because the full cost of that expansion is typically borne by the new customers.
Sen. Gene Yaw (R-Lycoming) introduced Senate Bill 140 to address this issue in a different way.
The latest U.S. Energy Information Administration data shows 51 percent of Pennsylvania households use natural gas as their primary home heating fuel, 21 percent electricity and 19 percent heating oil.
Gladys Brown, Chairman of the Public Utility Commission, told the Committee the Commission has no formal position on the bill, but supported making any system expansion charge separate and distinct from the existing Distribution System Improvement Charge which addresses the significant problem of deteriorating service pipelines.
Brown, in her personal opinion, said authorizing recovery of costs for system expansion rebates or buy downs for in-house piping or furnaces on the customer side of the meter equipment offers no discernable benefit for existing customers.
Tanya McCloskey, Acting PUC Consumer Advocate, noted the wholesale price of natural gas has declined significantly since 2008, but that it will not stay low forever. She said the price of heating oil has also declined.
She said House Bill 107 could be a tool to extend service, but recommended clarifications and consumer protections to improve the bill and said the 2.5 percent cap on the new fee in the bill should be reduced. An utility wishing to take advantage of the fee should be required to submit a plan for the extension of their mains to the PUC.
McCloskey also recommended the bill should clarify the difference between the economically feasible portion of the main extension and the uneconomic portion and set clear standards for sharing costs.
John Evans, PUC Small Business Advocate, offered support for the bill, but said the bill should be revised to allow more protections for existing customers and eliminate the “one size fits all” nature of the new charge. He said some of the risk for extending new service should be borne by the utilities instead of entirely on ratepayers.
Terry Fitzpatrick, President & CEO of the Energy Association of Pennsylvania (representing natural gas distribution companies), said getting new natural gas service to customers can cost as much as $1 million per mile to build and that current decisions on extensions are made only if there will be a payback to the distribution company in a reasonable period of time.
He offered his support for the legislation saying the bill establishes a reasonable balance between the interests of those requesting service extensions and existing customers.
Ronald Bradley, Vice President for PECO (a natural gas distribution company), offered his support for House Bill 107 and underlined the high cost of providing natural gas service to new customers.
Morgan O’Brien, President & CEO of Peoples Natural Gas, Robert Stoyko, Vice President for UGI and Patrick Cicero, Executive Director of the PA Utility Law Project all expressed their support for the bill.
Rep. Bob Godshall (R-Montgomery), Majority Chair of the Committee, concluded the hearing by saying even some urban areas like his do not have natural gas service.
“We have to look at the abundance of natural gas we have” and how we can expand natural gas service to unserved and underserved areas of the state. Chairman Godshall can be contacted by sending email to: rgodshal@pahousegop.com.
Rep. Thomas Caltagirone (D-Berks) services as Minority Chair of the Committee. He can be contacted by sending email to: RepCaltagirone@pahouse.net.
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