Natural Gas Infrastructure Improvements: Mid-Year Meeting Highlights
In the natural gas sector, there is a growing awareness of aging infrastructure and the need for proactive replacement programs. State regulators are encouraging regulatory mechanisms to accelerate the replacement of vulnerable pipelines. The industry is focusing on pipe replacement progress, targeting the replacement of materials like bare steel, cast iron, and vintage plastics within the next 20 years. Various initiatives and resolutions are shaping the safety landscape transformation by federal and state regulators in addressing pipeline safety and storage regulations. Development of replacement programs is crucial, but notable issues such as regulatory lag and stakeholder alignment must be addressed.
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Presentation Transcript
2017 Mid Year Meeting Denver, CO Natural Gas Infrastructure Improvements - PHMSA and Infrastructure Trackers J une 6, 2017
National Awareness of Aging Infrastructure San Bruno, CA Kansas City, MO February 2013 Distribution Missouri Gas Energy September 2010 Transmission PG&E Allentown, PA February 2011 Distribution (Cast Iron) UGI Ewing, NJ March 2014 Distribution PSE&G Sissonville, WV December 2012 Transmission Columbia Gas Pipeline East Harlem, NY March 2014 Distribution Consolidated Edison
Safety Landscape Transformation by Federal & State regulators: Reactive Replacement (Monitor, repair, maintain) Proactive Replacement (Risk-based Prioritization) 2013 NARUC Resolution encouraging: State Commissions to consider adopting alternative rate recovery mechanisms to accelerate replacement of vulnerable pipelines. State and local agencies understand the need to replace aging infrastructure In 2011, 35% of the nations distribution mains were of pre-1970 vintage Pipeline safety and storage regulations continue to evolve
Development of Replacement Programs Incumbent upon State Regulators to address proactive infrastructure renewal programs with utilities. Infrastructure characteristics vary for each utility. If any significant increase in capital investment is warranted, notable issues must be addressed: Regulatory lag under traditional ratemaking poses a barrier to incremental capital investments Seek alignment with stakeholders on: Pace of progress Reporting & regulatory review
Pipe Replacement Progress Distribution Miles Transmission Miles 600 75 -125 annually 120 450 -550 annually 105 103 470 470 96 500 100 400 374 80 346 295 300 60 50 50 40 200 20 100 0 0 Other Risk-based Replacements Industry Identified Materials
Industry Identified Materials 7,500 6,400 1,100 5,000 miles replaced 1,500E miles replaced Bare Steel, Cast Iron and Vintage Plastics projected to be replaced within the next 20 years.
Remaining Miles of Cast Iron Mains Cast Iron Inventory (Miles) 700 596 600 562 450-500 500 350-400 400 275-325 300 175-225 200 100 0 2015 2016 2017E 2018E 2019E 2020E Cast Iron Mains to be Eliminated by 2023
Value of Natural Gas Provide safe and reliable natural gas to customers at a fair and reasonable price Atmos Energy Monthly Residential Bills US Monthly Utility Bills * Average Customer Bill Remains Affordable $70 $43 Natural Gas $58 $58 $60 $82 $50 Cable TV $43 $40 Electricity $114 $30 $20 Water & Sewer $140 $10 $0 Mobile Phone $144 * - For natural gas, Atmos Energy average residential bill for 2016. For all other utilities, these are national averages (citations available). Page 9
2017 Mid Year Meeting Denver, CO Natural Gas Infrastructure Improvements - PHMSA and Infrastructure Trackers J une 6, 2017
2017 Mid Year Meeting Denver, CO Natural Gas Infrastructure Improvements - PHMSA and Infrastructure Trackers APPENDIX
Financial Impact These unrecovered costs = Regulatory Lag $1,000,000 Investment Revenues Return on rate base = $92K Coverage of $44K expenses Year 1 3 0 4 2 $44K $32K $44K $44K Expenses Installation of PE Main in jurisdiction with Next Rate Case Result in Year 4 Page 12
