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Residential, Small Commercial Markets to Remain Growth Areas For NatGas Utilities, AGA Says

Much of the current uptick in natural gas consumption in the United States could bypass local gas utilities, but simply focusing on demand volumes misses less obvious metrics of growth in the local gas utilities market, according to a report issued Monday by the American Gas Association (AGA).

"We looked beyond the simple metric of aggregate volume delivered in the national gas market and examined areas where we have seen dynamic growth in the gas utility sector," said AGA’s Chris McGill, vice president of policy analysis and one of the authors of thereport.

"Many volume-based natural gas supply and demand balance forecasts do not include other very tangible growth factors, such as efficiency gains and related dollar investments, system footprint outgrowth, customer totals, additions of burner tips and the growing benefits of CO2 [carbon dioxide] reductions. Natural gas systems, and growth in those systems, are the epitome of value, reliability and efficiency in energy use and that has been the case for many years."

The number of homes and businesses using natural gas has grown steadily for decades, AGA said. There were fewer than 40 million residential gas customers in 1970, a number that ballooned to more than 60 million in 2013.

Along with the growth in gas customers has come growth in the number of burner tips and residential natural gas appliances. The number of gas-fired appliances increased by more than 32 million over the past two decades, according to the report.

"The number of homes that receive natural gas service -- which includes the use of one or more applications for space heating, water heating, cooking and clothes drying -- has grown 22% from 1993 to 2013, or about 1% per year," AGA said. Continuing that trend could translate into more than 15 million more customers and 33 million more gas-fired appliances by 2040.

Ensuring reliable service to all of those residential customers has required additions to distribution pipeline infrastructure, growing it from 600,000 miles in 1970 to more than 1.2 million miles in 2013. And utility system expansion and modernization has spurred investment, which in turn has grown companies' enterprise value and financial strength.

Based on macroeconomic modeling, AGA estimated the economy-wide value of the natural gas distribution industry grew from $38.2 billion in 1993 to nearly $50 billion last year.

States are increasingly adopting innovative regulatory mechanisms to align utility incentives with policy goals of improving energy usage, providing access to natural gas and reducing emissions, AGA said.

Utilities in 20 states employ revenue decoupling, a rate adjustment mechanism that separates gas utilities' fixed cost recovery from the amount of gas they deliver, and 40 states have programs to facilitate accelerated replacement and modernization of obsolete gas distribution pipelines.

"Natural gas utilities have steadily invested more dollars in energy efficiency for homes and business, which has contributed to decreased usage per customer, growth in energy savings and increased cost savings for customers," AGA said. The average American home uses 40% less gas than it did 40 years ago.

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