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AZ Regulators Urge Increased Natural Gas Infrastructure, Storage

AZ Regulators Urge Increased Natural Gas Infrastructure, Storage

Arizona regulators have urged the state's private-sector utilities to pursue new and traditional approaches to upgrading the state's natural gas pipeline infrastructure and storage, seeking to provide more diversity of both supplies and infrastructure. They outlined a gas framework as part of a policy statement released just before the holidays last month.

Separately the state regulatory commission set a series of five local briefings in different parts of the state beginning Wednesday and concluding Jan. 23 to discuss "pipeline safety and regulations" throughout the state. The sessions open in Tucson and move to Flagstaff (Jan. 21), Kingman (Jan. 22), Lake Havasu (Jan. 22) and Yuma (Jan. 23).

In an Arizona Corporation Commission (ACC) policy statement, the five elected commissioners acknowledged a "variety of factors" putting pressure on the state's gas system, including growing demand, a large crop of new gas-fired electric generation plants and "recent limitations placed on traditional Arizona shippers on the El Paso pipeline system." They expressly said the "monopoly" on the El Paso interstate pipeline system in central and southern Arizona hurts the state.

While stating a preference for traditional utility-funded infrastructure projects that are funded by ratepayers after the projects are finished, the regulators in their statement encouraged non-traditional proposals for funding the new gas projects.

"At this time the commission believes that the best method for the commission to address natural gas infrastructure matters is to encourage utilities to file applications, including requests for alternate cost treatment, in order that the commission can consider specific requests for cost recovery proposals appropriate to the circumstances for each individual application," the policy statement said under its recommendations for general regulatory approaches on the issue.

The regulators left no doubt that who is going to pay for the infrastructure additions, how and how much are all key questions going forward, noting that "traditionally Arizona entities have not sought, and the ACC has not granted, pre-approval of cost recovery from participation in infrastructure projects.

"This traditional approach to utility participation in infrastructure projects, including natural gas pipeline and storage projects, is still available to utilities that wish to continue using this method. This is the preferred method."

The regulators encouraged innovation, but at the same time they warned that "changing the dynamics of cost recovery" is something they intend to do "very carefully," since it can have a variety of impacts and many of them can be negative. Company and ratepayer needs will have to be balanced, and each case will be looked at individually, the ACC said.

The regulators said they want their latest policy statement to "send a clear signal" that the commission is addressing Arizona's natural gas infrastructure needs for the future.

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