US natural gas utilities want to keep research money flowing after the government phases out a pipeline surcharge program that expires in 2005.
Speaking for the American Gas Association, Craig Matthews, vice-chairman and chief operating officer of KeySpan Energy Corp., urged state utility regulators last month to support a new $65 million industry program that would replace the Gas Technology Institute research and development fund. The fund is collected by surcharges approved by the Federal Energy Regulatory Commission, the agency that oversees wholesale gas markets.
Over the past 20 years, the FERC system has been a major R&D funding source. As much as $212 million/year has been spent on research that benefited all industry segments, including local utilities. But utilities historically have relied on the FERC surcharges more than anyone else.
Matthews warned that if utilities allow FERC-approved surcharges to end without any alternative, "a bleak future" could result.
Already the annual FERC program from 2002-04 is a quarter of historical budget amounts, AGA notes. Yet a stronger collaborative research program is needed more than ever, given the growing concerns about the safety and security of the country's aging pipeline system.
Draft bill
To keep research going, AGA is drafting legislation for Congress to consider next year that would create an industry "check-off" program.
Under the proposal, two thirds of local utilities would have to approve the concept. Assuming there was enough industry support, a fee would be assessed on all firm industrial, commercial, and residential customers. Under the proposal, residential customers would be charged about $1/year and industrial users no more than $250/year on a 1¢/Mcf basis.
Gas industry professionals approved by the utilities would administer the funds, with the Department of Energy playing an oversight role.
AGA sees many benefits for consumers from a check-off program. Past research has already helped utilities lower operating and maintenance costs for ratepayers.
Continuing research should soon help utilities locate buried non-metallic pipe, build stronger plastic pipes for larger volume flow, and detect leaks faster.
Soon or never
Luckily for AGA the association's timing of the issue is fortuitous: residential gas prices are expected to stay low over the next year and that will make a check-off program an easier sell on Capitol Hill.
Another point in AGA's favor is that Congress approved check-off programs for home heating oil and propane in recent years, although with much smaller budgets than the one envisioned for gas utilities.
With the legislative stars now aligned, utilities can't afford to wait.
AGA is wisely urging its members to educate Congress now, or risk losing important research projects later.
So far, 11 states have approved voluntary funding and 24 investor-owned utilities agree with AGA's proposal. But more consensus is needed for the proposal to be taken seriously.
