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Pennsylvania Agencies Ask to Pilot Directing RIK Funds to Low-Income Customers

A coalition of Pennsylvania state agencies has joined with utilities serving the state in lobbying to establish a pilot program in Pennsylvania to receive a share of natural gas collected as royalties by the federal government as an additional resource for helping low-income families this winter.

The Pennsylvania Public Utility Commission (PUC) issued a press release Monday outlining the request sent to the U.S. Department of Interior (DOI), whose Minerals Management Service (MMS) collects royalties on gas produced on federal lands and the federal offshore. Part of the royalties the agency collects consists of a percentage of the actual natural gas produced, known as royalties-in-kind (RIK), rather than cash. The MMS then auctions off the gas. Royalty revenues go to the U.S. Treasury.

"With the high prices of natural gas and the expectations of a cold winter, we are continuing to look for creative ways to help low-income families with their utility needs," said PUC Chairman Wendell F. Holland. "This is a unique opportunity for the federal government to work with the state, consumer advocates and the industry to assist low-income consumers before they are faced with the demands of paying high winter heating bills."

The new Energy Policy Act of 2005 established a permanent RIK program, and it allows the secretary of the Interior to direct RIK natural gas volumes to low-income energy assistance programs. An MMS spokesman said the agency has received two proposals from industry along these lines and is evaluating them.

The Pennsylvania coalition submitted a request to DOI asking for the agency to allow the use of RIK gas molecules grants to assist low-income customers. The grants means that instead of auctioning off the gas, DOI would sell the gas molecules to the state's natural gas utilities for a rate lower than the cost of natural gas on the wholesale market. The savings will then be passed on to low-income consumers through grants. The gas utilities are willing and able to provide the RIK grant to consumers quickly and efficiently, the coalition said.

So far this year, MMS said it sold a total of 630,000 royalty gas through two auctions. Its five-year RIK plan released in 2004 calls for volumes to eventually ramp up to 1.2 Bcf/d (see Daily GPI, Oct. 18).

Since this would be the first year for the RIK grants, the coalition asked the Interior Department to consider allowing Pennsylvania and its existing network of resources for low-income assistance to serve as a pilot RIK program.

State agencies in the coalition besides the PUC include the Department of Welfare, Office of Consumer Advocate, Dollar Energy Fund, Public Utility Law Project and Utility Emergency Service Fund. Pennsylvania LDCs supporting the proposal include Chartiers Natural Gas; Columbia Gas of Pennsylvania; Dominion People; Equitable Gas; Gasco Distribution Systems; National Fuel Gas Distribution; PECO Energy's Gas Division; PG Energy; Philadelphia Gas Works; PPL Gas Utilities; Public Service Electric and Gas; UGI Utilities' Gas Division; and Valley Energy.

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