Press Release

PUC Chairman Joins State House leaders to Offer Proposals to Stem Natural Gas Rate Increases and Provide Incentive to Repair Aging Infrastructure

Published on 10/16/2007

Filed under: Gas

HARRISBURG -- The chairman of the state’s Public Utility Commission today threw his support behind two powerful state House leaders calling on the legislature to establish a mechanism for natural gas infrastructure improvement, a move that will minimize spiking base rate increases by natural gas companies across Pennsylvania as they try to replace aging pipelines. A companion proposal would ask voters to approve a $1 billion bond issue so that utilities could apply for state grants to help pay for pipe replacement.

In a press conference at the state Capitol, Wendell F. Holland, chairman of the PUC joined Appropriations Chairman Dwight Evans, D-Phila., and Consumer Affairs Chairman Joseph Preston, D-Pittsburgh, to promote the two bills. The first would establish a Distribution System Improvement Charge, or DSIC, on customer bills to pay for improvements to gas lines. The second piece of legislation would create the Natural Gas Infrastructure Public Safety and Environmental Protection Act.

Both bills will be introduced this week as part of the special session on energy, Evans said.

Pennsylvania’s natural gas utilities have used a variety of materials for natural gas pipelines during the last 150 years, including wood which still exists in some communities in the state. There are 13,000 miles of crumbling cast iron and steel pipes. These account for 95 percent of all natural gas leaks in the commonwealth.

 “The deteriorating state of this infrastructure has a real financial cost and a human cost as well,” Preston said. “At best, natural gas leaks in our communities cause people to be inconvenienced; at worst, the leaks lead to explosions that destroy property, cause injury and even deaths. I believe these two proposals are significant in terms of protecting consumers.”

A decade ago, the general assembly established the DSIC as a way for water companies across Pennsylvania to begin to replace aging water pipes. Without the DSIC, the water companies would not have been able to replace infrastructure without seeking significant rate increases.

“DSIC is one of the most important regulatory tools of the past decade,” Holland said. “DSIC has had substantial impact on accelerating water infrastructure remediation and I believe a similar improvement charge for natural gas would have a similar impact. If ever there were a regulatory tool recognized as a best practice around the country it is the DSIC and should be extended to other utilities such as natural gas. I look at these needed repairs for our aging infrastructure just as a homeowner looks at replacing a roof or a furnace – these are not repairs that you want to make, but you know that you have to for the long-term health of your home.

Holland said the DSIC offers several benefits:

It is pro-environment because it decreases line loss, conserves natural gas resources and reduces greenhouse gasses.

It increases safety.

It promotes a major objective of the administration and legislature – fixing aging infrastructure.

It promotes economic development as it creates and maintains hundreds of jobs.

In addition, once a natural gas company uses a DSIC, it should reduce the need for the utility to seek base rate increases through the PUC for infrastructure replacement. In addition, with a DSIC mechanism in place, there are consumer protections such as a cap on the bill, annual audits and consumer notices.

The second piece of legislation would create the Natural Gas Infrastructure Public Safety and Environmental Protection Act which that establishes a fund from which the state would provide grants to natural gas companies to replace corroding pipes in the ground. The fund would be created through a $1 billion bond issue which voters would have to approve. The grants would be competitive and no single gas company would be eligible for more than 25 percent of the total funding or $250 million.

“It’s clear to all of us that we’ve reached the critical stage with regard to our infrastructure,” Evans said. “We can’t pretend that this problem will go away because it won’t. As with our roads and bridges, the situation will only get worse if we don’t take action.”

The Pennsylvania Public Utility Commission balances the needs of consumers and utilities to ensure safe and reliable utility service at reasonable rates; protect the public interest; educate consumers to make independent and informed utility choices; further economic development; and foster new technologies and competitive markets in an environmentally sound manner. For recent news releases, or more information about the PUC, visit our Internet homepage www.puc.state.pa.us.

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