Natural gas: cost of extending service

Natural gas is getting cheaper and is projected to stay cheaper than oil for the foreseeable future, due to reserves discovered in New England and new techniques for extraction (the infamous ‘fracking’).

Looking around in my town, Lexington, there are thousands of houses heated with oil and propane. The snug is that extension of gas service is very expensive, and a big portion of the cost for the extension is born by the end user initiating the extension. This is, however, not a Lexington centric problem.

Oil is dirty and causes much more pollution and CO2 emissions than natural gas. Propane is cleaner, but tends to be expensive. Using the online calculator at http://www.nstar.com/residential/home_calculators, I was able to estimate the difference in annual cost and in carbon footprint for oil, propane, heat pump and natural gas for my single family house.

I’d like to learn more about what can be done here – I am a town meeting member, but I bet this is not something solvable at the town level. My question is – what are the state regulations I should be looking at, which state agencies are involved with gas service extension, what reports have been published to your knowledge by state agencies and think tanks on this problem?

I’d really appreciate it if you could give me a start thread on this. I plan to write to my House and Senate reps with the same questions, but you have such a wonderful online forum that I thought I might as well start by asking the question here.

Thanks,
Andrei

3 replies on “Natural gas: cost of extending service”

  1. In answer to your question about any pending plans for promoting the expansion of natural gas use, I wanted to let you know that H3765, Representative Ehrlich’s bill relative to natural gas leaks, also contains a section, pasted below, requiring DPU to investigate exactly this issue. The bill was reported favorably by the Committee on Telecommunications on November 18 and has been referred to the House Committee on Ways & Means. It may be some weeks before W&M acts. I hope this is helpful.

    H3765: An Act relative to natural gas leaks

    SECTION 7. On or before January 1, 2015, the department of public utilities shall commence a proceeding to investigate new programs and policies that will facilitate and increase the availability, affordability, and feasibility of natural gas service for new customers.

    (a) As part of the investigation under this section, the department shall: (1) review each
    gas company’s process for determining if a main or service extension is economic; (2) review each company’s contribution in aid of construction policy and methodology; and (3) establish guidelines, if necessary, for alterative rate mechanisms or company project review methodology that facilitate access to natural gas service for new customers, including, but not limited to, new area surcharges for zones of new off-main customers; provided that natural gas distribution system expansion surcharges shall not burden existing customers. Guidelines established under this subsection shall outline the department’s methods and procedures for reviewing proposals, including factors the department will consider for program or policy approval.

    (b) The department of energy resources and gas companies may, as part of the investigation, petition the department to approve: (1) financing programs for customer natural gas conversion costs repaid on participating customer bills; (2) other financing programs as petitioned by a gas company; or (3) other cost effective programs that reasonably accelerate the expansion of and conversion to natural gas usage in the commonwealth; provided that such programs do not unreasonably burden existing natural gas customers.

    (c) The department shall complete its investigation under this section and shall issue an
    order by January 1, 2016, including final determinations on gas company expansion programs filed with the department pursuant to subsection (c). Gas companies shall file appropriate tariff changes and otherwise implement any gas expansion programs or policies approved under this section.

    (d) The department shall prioritize programs that are likely to accelerate the conversion to natural gas usage for low income consumers currently eligible for the LIHEAP program, including programs that exempt new residential low income heating customers from any new area surcharge developed under this section. Notwithstanding subsection (b) of this section, the department may approve alternative methods of cost recovery by a gas company for such low income programs, policies or exemptions.

    Barbara Miranda
    Chief of Staff

  2. Thanks, Barbara, and Will, for the quick response!

    I have posted information about natural gas service extension on the Lexington local wiki at http://lex-wiki.org/wiki/Local_Politics:Issues:Natural_Gas_Service. Here are some bits of interesting info I found:

    – According to NStar’s online calculator, natural gas is the least expensive heat energy source, and has the smallest CO2 footprint. (see http://groups.yahoo.com/neo/groups/lexington/conversations/topics/36536 for number estimates for my house)

    – While the state has set targets for reductions in CO2 emissions, little is being done in using actual measurements of CO2 emissions (or workable estimates thereof). If policy and regulations were driven by credible CO2 emission numbers, natural gas would probably emerge as the candidate of choice for home heating in the state. Right now MA has 55% of residences heated with natural gas, according to NGA statistics, so there is a lot of space for improvement.

    – Right now it would appear that gas utilities are not required to make public their policy for gas service extension. A search on their web site on the topic just gives a phone number – no documents, no description of policy, very skimp description of the process.

    – One concern people have when initiating a gas main extension on their street is that they bear a large part of the cost burden, while neighbors stand to benefit if they acquire gas service just after the gas main extension has been completed. One way to deal with this would be with regulations requiring the cost of the gas main extension to be baked into the gas bill for several years – and reduced if other neighbors get gas service subsequently. See for example “Line Extensions for Natural Gas:
    Regulatory Considerations” by Ken Costello at NRRI.

    – Builders have right now little incentive to bring gas service to the new construction, as the cost of heating falls on the shoulder of the buyer, who rarely takes heating bills into consideration when considering the purchase price.

    – Connecticut has just started tackling with these regulatory problems recently: see for example http://articles.chicagotribune.com/2012-10-19/news/sns-rt-us-column-kemp-connecticut-gasbre89i0pt-20121019_1_natural-gas-gas-companies-fuel-oil (which at this point is dated news)

Comments are closed.