New Report Details Policy Implications of Natural Gas Utility Obligation to Serve
WASHINGTON – The American Gas Association (AGA) announced the release of a new report, The Current State of Natural Gas Utility Line Extension Policies, which examines the regulatory framework that guides the provision and expansion of essential utility services, including natural gas utility line extension policies governing the responsibilities of regulators, customers, and utilities in expanding natural gas infrastructure to accommodate new customers.
“The natural gas utility industry has a legal and ethical responsibility to provide service to customers,” said AGA President and CEO Karen Harbert. “This report provides crucial insights for stakeholders and policymakers to inform decision-making when considering policy changes that could have a profound impact on access to affordable energy, including for low-income or rural households.”
The report provides a comprehensive analysis of the existing complementary obligations between and among regulators, customers, and public service companies and how new public policy initiatives affect those obligations. Line extension is defined as the expansion of gas utility service to new natural gas customers where the utility must install additional facilities to connect a customer.
The report highlights the critical role of line extension policies in expanding natural gas infrastructure to new customers, helping ensure fair access, and maintaining economical pricing for essential services. In particular, the report discusses how line extension policies follow directly from the “obligation to serve,” a key legal principle dictating that local distribution companies have a legal duty to provide service to their communities, charge reasonable prices, and provide non-discriminatory service in a safe, reliable, and resilient manner in return for fair compensation and a defined service territory.
Key Findings from the Report:
- Utilities Have an Obligation to Serve
- The report provides extensive detail on the historical and legal precedent behind the obligation to serve, particularly as it applies to natural gas utilities.
- Under this legal framework, it becomes the legal duty of essential life services providers, like a local distribution company, to perform the duties of the state, including by extending access to potential customers where practical, rather than where most profitable.
- The legal framework for evaluating when and how this obligation applies rests on settled law that thoroughly defines utility responsibilities to customers.
- The Obligation to Serve Maintains Equitable Energy Access and Affordability
- The report documents potential changes to these policies as regulators respond to evolving public policies aimed at reducing greenhouse gas emissions while maintaining safe, reliable, and resilient energy systems.
- The report finds that “Line extension allowances, which offset the costs of connecting new customers to the gas system [by eliminating long-term subsidies between different customer classes], are vital for equitable access to natural gas services. These allowances help distribute the benefits of new connections fairly between new and existing customers. Removing or otherwise limiting line extension allowances may result in additional upfront costs for new customers and a shifting of the benefits of new gas connections from new customers to the existing customer base.”
- Impact of Policy Changes:
- The report documents the changes, or potential changes, to policies as regulators in some jurisdictions begin to contemplate changes in longer-term planning for gas utilities in response to evolving public policy to reduce greenhouse gas emissions while also addressing expanding energy requirements and the need to maintain the save, reliable, resilient energy systems that provide non-discriminatory service at reasonable cost.
- Per the report, “Climate change concerns have sparked an interest in limiting the public’s access to new natural gas services in favor of substitute fuels, namely electricity. Most jurisdictions have yet to change traditional obligations to serve and the line extension policies associated with that obligation, though… a few jurisdictions have either made decisions concerning line extension policies or are addressing those policies in formal proceedings.”