For suburban Philadelphia heating customers unable to tap
into the shale-gas boom because they live beyond the reach of natural gas
mains, help may be on the way.
Peco Energy Co. has joined a growing movement of
Pennsylvania utilities that are devising new ways to bring down the cost of
extending gas mains into underserved neighborhoods.
The company last week filed an application with the
Pennsylvania Public Utility Commission for a pilot project to reduce the cost
that customers are asked to pay to extend gas mains. Typically, the costs are
so onerous that few customers can afford the up-front payment.
The utility proposes to allow customers to finance the
cost of extending a gas main into their neighborhood over 20 years, rather than
pay it all up front. And it will spread the cost over more customers in the
neighborhood, including those who later convert to natural gas.
Peco says it can justify recalculating the payback period
because the Marcellus Shale boom is projected to produce an abundance of gas
for decades. Gas prices are expected to maintain a big advantage over oil and
propane. Gas prices currently are 61 percent less than fuel oil, and 68 percent
less than propane, Peco said.
"This change in the economics of natural gas service
has generated greater interest among prospective customers in obtaining natural
gas service and makes it more likely that a customer will stay with natural gas
service for the long term," Phillip T. Eastman Jr., Peco's manager of
economic development, said in the utility's PUC filing.
Peco serves 503,000 natural gas customers in the four
counties surrounding Philadelphia, but many subdivisions built during times of
gas scarcity don't have any gas service. As a rule, it costs $500,000 to $1
million a mile to extend gas mains.
The proposal would make $10 million available over three
years for gas-main extensions. If the PUC approves, it would go into effect in
2016.
For Melinda Taylor, a Wayne resident who heats her
60-year-old home with fuel oil, the change can't happen soon enough.
"A lot of people are incensed that we have all this
natural gas in the state and it's not benefiting everybody who lives
here," she said.
Taylor and 120 neighbors attempted to organize a gas-main
extension two years ago, but Peco came back with an estimate that it would cost
each household $6,400 for the service. Combined with the cost of new furnaces,
the price was too high for many to pay.
Peco's proposed Neighborhood Gas Pilot Program attempts
to resolve a perverse disincentive in the current rules for customers to
switch.
Peco now allocates the cost of extending a gas main only
to customers who initially sign contracts to tie in. Customers who later
connect to the gas main their neighbors paid to build become "free
riders."
Peco will now calculate the cost of a gas main extension
assuming that 75 percent of customers in any sector will connect to the service
over 20 years. It will require only 20 percent of the customers to sign up
initially.
Combined with allowing customers to pay the costs in
monthly installments on their bills, the new changes should dramatically reduce
the up-front cost.
"Those were the two issues our neighborhood group
objected to the most - that they needed the full payment up front, and that
some neighbors could be free riders," said Taylor.
Peco is the fourth Pennsylvania utility to respond to
calls from the PUC and legislators to extend access to natural gas service to
more residents.
The PUC in February approved UGI Utilities' GET Gas pilot
program. The company, which serves 570,000 customers in eastern and central
Pennsylvania, broke ground last month on its first new gas main in a
neighborhood near Lancaster.
UGI allotted $75 million over five years for its pilot
program. It has already received more than $200 million in qualified requests,
said UGI spokesman Keith Dorman.
"There's a tremendous amount of pent-up demand
there," he said.
The PUC held out UGI's program as an example to other gas
companies.
"I challenge other natural gas utilities operating
in underserved or unserved areas to also begin thinking creatively on how they,
too, can bring a homegrown fuel to more Pennsylvania businesses and
homeowners," PUC Commissioner Pamela A. Witmer said when the program was
approved.
Columbia Gas of Pennsylvania and Leatherstocking Gas Co.,
a new utility that began service in 2012 in Marcellus-rich Susquehanna County,
have also filed with the PUC for programs to encourage gas-main extensions.
A second part of Peco's proposal would allocate $3
million over three years between Bucks, Chester, Delaware and Montgomery
Counties to build gas mains to "critical public facilities" such as
911 call centers or water-treatment plants. The service would enable the
installation of gas generators to provide backup power in case of electrical outages.
In an added effort to expand market share, Peco is also
proposing to reduce the cost for thousands of customers who live along existing
gas mains to connect to the service.
Peco spokesman Ben Armstrong said a typical residential
customer currently pays about $1,600 for a service installation to an existing
main.
Under the proposed plan, the same customer would pay
nothing.
Source: Philly.com
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