PURA: PURA Issues Draft Ruling on Natural Gas Expansion Plan

November 6, 2013

PURA Issues Draft Ruling on Natural Gas Expansion Plan

Goal is 280,000 conversions by 2023
Connecticut's Public Utilities Regulatory Authority (PURA) today issued a draft ruling approving broad expansion of natural gas service throughout the state.
The proposed expansion plans filed by Connecticut's three investor-owned gas companies seek to convert 280,000 customers to natural gas over a ten-year period. The plans target customers who currently have gas available on their street but have not yet connected (on-main customers) as well as those potential customers interested in gas service, but not close enough to existing gas facilities to connect (off-main customers).
To facilitate natural gas expansion, PURA's draft ruling would ease the criteria the gas companies use to evaluate the economics of new projects, aimed at reducing upfront costs required from new customers connecting to the gas distribution system.
PURA's preliminary ruling would also establish new rate and recovery mechanisms. "New" customers added after January 1, 2014, would be charged a premium over current rates to offset incremental costs of expansion, in lieu of making an upfront payment. After the initial ten years of service, the "new" customer would return to standard rates.
Recent legislation directed Connecticut's investor-owned gas companies: Connecticut Natural Gas, Yankee Gas Services Company, and the Southern Connecticut Gas Company, to file the infrastructure expansion plans consistent with goals articulated in the Department of Energy and Environmental Protection's 2013 Comprehensive Energy Strategy.
CNG and Southern propose to convert 29,500 low-use (non-heating) customers to heating, add 113,700 new on-main customers and 54,000 new off-main customers by 2023. Yankee proposes to convert 10,000 low-use customers to heating, add 41,296 new on-main customers and 31,125 off-main customers by 2023.
Non-firm margin "credits" - revenue earned through interruptible and off-system sales - will be used to offset expansion costs for current natural gas customers rather than returned to customers as a bill credit. If the new customer surcharge and non-firm margin revenue prove insufficient to cover ongoing expansion costs, a system expansion reconciliation charge on existing customer bills would be used to make up the difference.
Today's draft ruling notes that rate impact to current customers should be kept to a minimum, while the companies work to expand the current gas system infrastructure to serve new customers. The gas companies will continue to be required to demonstrate that expansion activity reflects prudent and efficient management on their part.
The draft decision would also direct the gas companies to develop a process review approach to identify cost savings opportunities at each major expansion process step, such as service installations. The draft ruling notes that an incremental ‘business-as-usual’ approach would not achieve break-through improvements that could significantly affect overall project costs and customer rate impacts. The ruling finds that defining standardized consistent process approaches among the three companies can drive best practices, enhance measurement and comparison, and maximize overall efficiency.
Lastly, today's ruling would deny the gas companies' request for pre-approval to enter long-term capacity agreements as well as their request for additional financial incentives to meet customer conversion targets and other policy objectives.
Gas prices have declined in recent years due to enhanced domestic shale basin recovery technologies. PURA's draft ruling acknowledges societal benefits, including increased or retained employment, local economic development, environmental benefits and transit-oriented development goals that may be enabled by the gas expansion plan.
The balance of the schedule calls for interested parties to file written exceptions to PURA's draft by November 12th. PURA's three Commissioners will hear oral arguments on the case on November 14th, and are scheduled to issue a final ruling November 21st.