Subsidies for compressed natural gas (CNG) in Utah continued to gain ground Wednesday when Gov. Jon Huntsman signed into law a bill allowing the state Public Service Commission to continue to authorize a gas rate for natural gas vehicles (NGV) that is below the actual cost of service.
The measure specifically stated the commission could allow costs that rose above the allowed rate to be spread to other gas customers. The Utah commission had approved a settlement in late 2008 setting an end to the near-20-year subsidy for CNG for July 1, 2009 with the rationale that the price of CNG vehicle fuel should not be subsidized by other utility customers, especially since CNG sales are not a traditional utility service (see Daily GPI, Jan. 2).
That decision was being undermined before the ink was dry as citizens of the natural gas-rich state, who had been converting vehicles to CNG at a rapid rate to get around high-priced gasoline, immediately launched protests. The turnaround came when Huntsman announced in his January state of the state speech a plan to increase Utah's NGV fuel infrastructure, designating the I-15 highway across the state from Idaho to Arizona as an NGV corridor, with additional fueling stations and compression in existing stations to double the fueling capacity in some locations.
The legislature quickly followed up with a joint resolution calling on the state government to encourage the formation of public and private partnerships to increase the states' refueling infrastructure for natural gas-powered vehicles, and urging changes in Environmental Protection Agency (EPA) regulations to speed conversions of existing vehicles from fueling with gasoline to burning natural gas (see Daily GPI, Feb. 2).
"It makes sense -- working with Questar, a great local company -- to encourage the use of natural gas, which emits almost no pollution, is more affordable and most importantly, is a domestic fuel found right here in our own backyard; getting Utah, and the nation, one step closer to breaking our addiction to foreign oil," Huntsman said. "This will require adding infrastructure, looking differently at our regulatory approach and demanding that we look beyond the here and now."
The legislature's EPA resolution outlined a course of action. As a start, the EPA needs to streamline its regulations for testing and certifying conversion kits, particularly for small-volume manufacturers. The conversion process itself is not difficult, but currently each vehicle converted must be individually tested and certified. EPA should allow small vehicle manufacturers to include vehicles and engines in a single engine category to improve the cost efficiency of emission testing of converted vehicles, the resolution stated.
Not to be outdone, the state commission in March announced a compromise on the subsidy question, allowing the CNG rate to go from the current 69 cents a gallon of gasoline equivalent to 97 cents effective April 1. Thereafter the price will float with the commodity price. Originally the Questar settlement would have allowed the price to rise July 1 to reflect the actual costs of the fuel plus infrastructure, which the commission has estimated at a gasoline-equivalent price of about $1.43 per gallon. The latest bill signed by the governor underlines the authority of the public service commission to allow other gas customers to subsidize the lower CNG rate.
It also appears that the NGV corridor will pick up some funding from the recent federal stimulus package. A Questar spokesman said they have received some inquiries from Wyoming and Colorado about the possibility of corridors in their states.
The lower CNG rate had originally been set in a 1989 case to recover some of the costs of compressing the fuel and had not been reexamined until the recent Questar rate case, which initially determined to set cost-based rates. That determination ran smack into the increased use of CNG last year to combat the high price of gasoline.
Last summer Questar, which operates 21 refueling stations (19 in Utah and two in Wyoming) had trouble providing enough fuel for the NGV fleet, which includes both legally and illegally converted vehicles. There is only one dedicated NGV, the Honda Civic GX, which is currently manufactured in limited numbers. It was recently estimated that there are 6,000 natural gas-powered cars in Utah, although it is difficult to pin the number down because of the number of vehicles that have been converted illegally, using kits that are available.
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