NRRI Cllquium Denver, Clrad Lst and Unaccunted-fr Gas: Practices f State Utility Cmmissins Ken Cstell Principal Researcher, Energy and Envirnment Natinal Regulatry Research Institute
Gas Flws frm Receipts t Deliveries Receipts Black Bx (LAUF Gas) Deliveries Measurable Adjustments Receipts (LAUF Gas + Adjustments) = Deliveries, r LAUF Gas = (Receipts Deliveries) Adjustments LAUF% = LAUF Gas/Receipts NRRI and K. Cstell 2
Pipe leaks Surce Prblem Mitigative Actin Measurement errr Temperature and pressure difference Heat value cnversin Meter inaccuracies Accunting errr Third party damage Cycle billing Stlen gas Blwdwn Surces f LAUF Gas and Mitigative Actins High levels r dramatic change in LAUF gas might indicate a safety threat Inaccurate gas vlumes at custmer meters Inaccurate calculatins and misinterpretatin f meter data Imprper accunting fr gas receipts and deliveries All custmers paying fr gas lsses and repairs Safety threat leading t incidents Timing mismatch between gas receipts and deliveries All custmers subsidizing delinquent custmers Safety threat fr lcal cmmunity Released gas int the atmsphere during maintenance, inspectins r emergency prcedures Cntinuus mnitring f leaks Detailed leak surveys Repair r replace at-risk pipes in a timely fashin Testing and calibratin f meter accuracy Replacement r maintenance f malfunctining meters Installatin f autmated meter-reading devices t cmpensate fr temperature and pressure differences Peridic internal audits Prper staff training Well defined standard practices Practive prgram that infrms the public f the dangers f digging and calling 811 befre digging Strict penalties (usually impsed by a state agency) fr the guilty party Charges t the guilty party fr gas lsses and repairs Mre frequent meter reads (e.g., mnthly) Less accunting lag Inspectin f meters fr signs f tampering Fllw-up investigatin Strict penalties fr delinquent custmers Inject blwdwn gas int lw-pressure mains by adding piping frm cmpressrs t the mains NRRI and K. Cstell 3
Regulatry Cncerns The incentive prblem One cncern is weak incentives fr utilities t manage LAUF gas Typically a marginal area f review by cmmissins Higher purchased gas csts fr custmers Cmmissins typically cnsider LAUF-gas csts as part f a utility s cst f service Cmmissins have a duty t evaluate the prudence f utility actins r nn-actins in determining whether custmers shuld pay fr thse csts Safety cncerns frm excessive pipe leaks Gas leaks typically d nt pse a safety threat Cmmissins have particular cncerns ver upward trends in LAUF gas, since they might red flag a pipeline safety threat Other factrs may accunt fr this trend, but it is hard fr a utility t knw if the prblem is gas leakage, an increase in measurement errr r smething else NRRI and K. Cstell 4
Definitin Majr Challenges fr Cmmissins N single definitin f LAUF gas acrss utilities, even thse lcated in the same state Measurement Little empirical evidence n the effects f individual factrs n LAUF gas Multiple Causes Several causes accunting fr LAUF gas Annual Variability High year-t-year variability fr sme utilities NRRI and K. Cstell 5
Majr Challenges fr Cmmissins cntinued Unique Determinants Large differences in LAUF gas, as a percentage f sendut, acrss utilities Degree f Cntrl Sme factrs f LAUF gas within the cntrl f a utility, thers are nt Recgnitin f Patterns Difficulty in frecasting LAUF gas fr an individual utility, as year-t year levels can fluctuate widely NRRI and K. Cstell 6
Current Regulatry Practices NRRI sent ut 14 survey questins t state utility cmmissins in mid-january 2013 inquiring int their plicies and practices n LAUF gas We received 41 respnses The questins cvered: The incentive they give utilities t manage their LAUF gas The imprtance they place n LAUF gas Their perceptins n the effectiveness f utilities in managing LAUF gas, and Hw they evaluate LAUF-gas levels and what criteria they apply NRRI and K. Cstell 7
Highlights f respnses Current Regulatry Practices cntinued Cmmissins nrmally review LAUF gas as part f an audit f a utility s gas purchasing practices, either in a rate case review r PGA recnciliatin Several cmmissins expressed cncerns when LAUF gas dramatically increases frm ne year t anther The strngest incentive fr utilities t manage LAUF in mst instances appears t lie with the increased likelihd f a pipeline incident if they ineffectively repair r eliminate leaks Almst all state cmmissins allw the recvery f LAUF-gas csts in a PGA mechanism Many gas utilities have recently embarked n accelerated pipeline replacement prgrams that shuld lwer the amunt f LAUF gas in the future While the vast majrity f survey respndents expect utilities t reasnably manage their LAUF gas, few have an pinin as t whether utilities culd d a better jb Utilities generally d nt break dwn LAUF gas by surce, at least in quantitative frm Several cmmissins mnitr LAUF gas in a rate case, r a PGA filing NRRI and K. Cstell 8
Regulatry tls Mnitring Regulatry Optins t Manage LAUF Gas Utility reprts t the cmmissin, wh reviews the infrmatin and takes apprpriate actin Target setting Cmmissin sets a standard that triggers (a) further investigatin, (b) a utility explanatin r (c) a direct penalty Incentive mechanism Cmmissin rewards r penalizes a utility based n actual perfrmance relative t a prespecified benchmark NRRI and K. Cstell 9
Cnsideratins fr Cmmissins Fr benchmarking, tracking an individual utility s LAUF percentage ver time may ffer the best metric Cmmissins might cnsider taking a practive stance in assessing the perfrmance f utilities in managing LAUF gas, especially in making sure that utilities are expliting all prudent actins t manage LAUF gas Cmmissins shuld cnsider requiring utilities t cmpile better infrmatin n the individual surces f LAUF gas Utilities can influence LAUFgas levels in different ways (a majr pint in the paper) An effective cmmissin tl is t mnitr and assess utilities LAUF-gas levels NRRI and K. Cstell 10
Future Prjects Gas/Electricity Interdependency Gas Infrastructure Needs Updated Natural Gas Vehicle Study Specific Ratemaking Issues Blstering Demand fr Natural Gas High Pipeline ROEs NRRI and K. Cstell 11