Rock-bottom prices for natural gas has utilities, regulators and lawmakers mulling over ways to extend natural gas service to households now burning oil, propane or even wood.
State Sen. Gene Yaw, R-23, Williamsport, has introduced a bill that would compel natural gas utilities to submit a three-year plan to extend natural gas service, and mandate the companies spread over 10 years the hook-up and extension fees borne by customers.
UGI Utilities, the dominant natural gas provider in the region, has asked the Public Utility Commission to approve a plan, similar to provisions in Mr. Yaw's bill, which spreads out over time the cost of extending a line to customers by imposing a monthly surcharge of $61.
The commission is also considering a similar proposal from Columbia Gas, which serves Western and South Central Pennsylvania.
Under current regulation, much of the cost of extending natural gas service is borne by the customers who will be served by the extended line. The company bears some of the cost too, but only enough to make it economically feasible for the company to do the work.
How much a customer pays varies based on the total cost of the extension project, how many linear feet of main is required, how many customers have committed to hooking up to it, and the distance of the laterals that will serve the customers. If a home has a main line in front of the house, UGI spokesman Joe Swope said the company will often pay entirely for the lateral hook-up, or require a fee that may be a few hundreds of dollars.
Others aren't as fortunate. Those who require a main extension will pay into the thousands. Neighborhood characteristics such as dense housing, the number of customers willing to hook up, shorter setbacks, or anchor customers such as a school or office building, could mitigate that price. Still, in some cases the cost per customer can be as high as $10,000 or more. Combined with money that would-be gas customers must pay to change or upgrade their heating systems, switching to gas becomes prohibitive.
"When you combine the cost of a new or updated heating system with $10,000 hook-up fee, it becomes prohibitive," said Adam Pankake, spokesman for Sen. Yaw. "It's frustrating, particularly for people in the Senator's district, who see the rigs, are aware of the gas drilling, but are unable to use the gas drawn from under them."
Under the proposals, that up-front payment could be spread out over a number of years.
UGI has done the math and made some assumptions about how many customers may hook up to a new gas line over time. Under the utility's Growth Extension Tariff, or GET Gas plan, the company would spend $15 million to extend gas mains in areas with a high likelihood of customers connecting. The company concluded that over 12 years, about 60 percent of potential customers will have hooked up. With an average annual fuel savings of $1,500 for someone switching from oil to gas, the $61 per month is an economical choice, said Mr. Swope.
"The problem we have is that someone on the street really wants natural gas, but his neighbors may not," he said. "One may have just got a new oil furnace, someone else may have had a financial setback. That one customer would have to shoulder all the cost up-front, but often doesn't because it may work out to $15,000 or $20,000. Under GET Gas, we figure that over time, most of those other people will eventually want to convert to gas, and we consider the sharing of costs for people who will covert over time, rather than at the moment of installation."
Extending a main costs between $500,000 and $1 million per mile, Mr. Swope said.
The main extensions would be installed over five years, the surcharge would last for 10, and UGI is giving the potential customer base 12 years to reach 50 to 60 percent conversion.
The plan requires approval from the regulators, but Mr. Swope said UGI in confident.
"Everyone recognizes you have a plentiful local supply of this fuel that benefits consumers and drives economic growth," he said. "The commission challenged the industry to come up with innovative approaches and we think we have one that has a lot of merit."
Now is a good time to have such proposals before the commission, which has examined ways to extend natural gas service to Pennsylvania households, said commission spokeswoman Jennifer Kocher.
"The commission has been supportive... and has had discussions of how to extend gas service, recognizing that natural gas is a less expensive fuel source and there is a wealth of it in Pennsylvania," she said.
Contact the writer: dfalchek@timesshamrock.com.