The Obligation to Serve: A Key Responsibility for Natural Gas Utilities
In our ever-evolving energy landscape, it’s important not to lose sight of the fundamental principles that guide our industry. AGA recently released a new report, The Current State of Natural Gas Utility Line Extension Policies, that delves into the historical and legal frameworks underpinning one of the most important but frequently overlooked responsibilities: the obligation to serve. Below is the first entry in a two-part series that will explore the key findings of the report, focusing on the significance of this obligation and its implications for equitable energy access and affordability.
Natural gas utilities are bound by a robust legal framework that mandates them to extend their services to potential customers where practical and economically feasible. This means that utilities have an obligation to serve customers on a non-discriminatory basis, even if it would be more profitable not to, as long as serving those customers does not result in long-run subsidies from other customers.
The report highlights that this obligation is not a recent development. It is deeply rooted in legal and policy decisions that go as far back as the 19th century, which define utilities’ responsibilities to their customers as regulated monopolies. For example, in 1876 the Supreme Court explicitly allowed State regulation of public goods “when necessary for the public interest.” This extensive legal precedent ensures that all customers are able to access essential natural gas services, promoting a fair and just energy system.
The obligation to serve, abetted by thoughtful line extension policies, requires that natural gas utilities carefully evaluate the practicality of extending services to new customers. This evaluation considers the broader benefits of providing equitable energy access but is unconcerned with utility profitability. In essence, natural gas utilities have a duty to serve all communities on a non-discriminatory basis, provided currently existing customers are not charged with subsidizing their service. However, the report also warns that removing or limiting these allowances could result in higher upfront costs for new customers, as they are forced to unfairly subsidize existing customer rates going forward.
The obligation to serve is more than a legal requirement; it is a commitment to equitable and inclusive energy access. In the next part of this series, we will explore how evolving public policies and climate change considerations impact these longstanding obligations and what this means for the future of natural gas services. Stay tuned for part 2!