On Wednesday, the House Consumer Affairs Committee held a briefing for members on retail natural gas distribution services in the Commonwealth.

Rep. Robert Godshall (R-Montgomery), Majority Chair of the Committee, opening the meeting by noting development of MMarcellus Shale natural gas has increased the supply of natural gas in Pennsylvania and prices are currently very low and said all Pennsylvanians should be able to benefit from this development.

Terry Fitzpatrick, President, Energy Association of PA, explained Energy Association member companies own the natural gas distribution system, but do not own production wells or transmission lines.

He provided an overview of how natural gas moves through the system and of the interstate pipeline system, pointing out the infrastructure issues related to extending service throughout the commonwealth.

Fitzpatrick provided policy considerations for the expansion of natural gas service and urged the legislature to consider all the facts, consider the rationale of existing policies, weigh benefits and costs of new policies, consider the drawbacks, consider innovative tech developments, and consider environmental benefits.

He indicated it is best to handle expansion through the PUC-approved gas utility tariffs and remarked the goal is to ensure gas service is available to as many as possible without unduly burdening current customers.

Fitzpatrick reviewed barriers to expansion, noting that utilities face the increasing cost of putting in new infrastructure at a time when consumers are consuming less per person.

Russell Miller, Vice President of Gas Supply and Marketing for Leatherstocking Gas Company, provided an overview of the brand new company and its service territory, which includes 13 municipalities in Susquehanna County and is in the process of developing design and engineer plans for an anticipated build of five miles of system in Bridgewater.

He said as Leatherstocking looks to expand, it is seeking anchor customers and highlighting the cost savings that could result from converting to natural gas.

He suggested the committee could explore options to create a process that allows funding to be extended to medium size energy users, such as high schools or hospitals, that could benefit by switching to natural gas but cannot afford the upfront costs of conversion.

He proposed a surcharge model to pay down the rate base, ideally over ten years on a project or municipal base.

Bryan McConnell, Environmental Program Manager Tenaska, Inc, testified on behalf of the Marcellus Shale Coalition. He said, “It is clear that development of natural gas from the Marcellus Shale presents an unprecedented opportunity to provide sustainable and broad based economic benefits to our region... The challenge is connecting those dots to keep our momentum going.”

Tanya McCloskey, Acting PUC Consumer Advocate, commended the Committee for exploring options to extend natural gas service and discussed the current affordability of the resource. She provided data demonstrating that the cost to heat with natural gas can be more than 50 percent lower than heating with oil.

McCloskey explained rural areas do not have natural gas service because the cost of building pipelines to serve those areas is so high compared to more densely populated areas. Additionally, a utility has no assurance that potential customers in the area will choose to change their heating system, which can come at a substantial upfront cost.

She explained a utility’s obligation to extend service is set forth in the utility’s Main Extension Tariff and the outlined “economic test” and said her office works has worked on cases customers have been asked to make significant upfront contributions in order to obtain service.

She argued it is critical for the test to be revisited in order to ensure all the tests and assumptions are reasonable and noted initiatives have been taken in other states to share the burden between customers, communities, and government.

Robert Powelson, Chairman, Public Utility Commission, observed access to natural gas service is not simply a rural issue as many believe. He stated several suburban areas and cities do not have service and reported Pennsylvania is well positioned to take adv of the new natural gas supply and consumers can enjoy significant savings in household expenses.

He said the PUC is ready willing and able to help advance the expansion of natural gas service to underserved areas and highlighted a meeting held recently with the Chamber, at which he learned there is no single solution but are a number of options that should be explored.

He particularly reviewed low cost third party financing, anchor tenant participation, economic development grants, on-bill financing by the utility, municipal funding assistance, gas producer participation, and riders or surcharges on customer bills.

Rep. Peter Daley (D-Washington) serves as Minority Chair of the Committee.

3/18/2013