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State Regulators, Utilities Urged to Find More 'Lost' Gas

The typical natural gas utility customer pays some small amount monthly for energy he or she never uses, according to a report by a veteran researcher at the National Regulatory Research Institute (NRRI), who urged state regulators and utility managers to pay more attention to the elusive problem.

Since leaking pipelines are a major part of what NRRI Principal Researcher Ken Costello dubbed as "lost and unaccounted for" (LAUF) quantities of natural gas, there are both safety reasons and economic incentives to pay more attention to how much of the product dissipates quietly into the atmosphere or otherwise escapes from the nation's pipeline network.

"Especially important for both state regulatory commission and federal safety regulators is measuring LAUF gas caused by leaky pipes," Costello said in his 109-page report, "Lost and Unaccounted-for Gas: Practices of State Utility Commissions." Costello concluded that utilities rarely make measurements of LAUF, and he said that it is a hard calculation to complete.

In the wake of recent pushes at the state and federal level to tighten natural gas pipeline safety programs and standards, utilities are beginning to push harder to reduce leakage through their transmission and distribution systems, and technology advances are helping, too (Daily GPIDec. 3, 2012).

Costello surveyed 41 state regulatory commissions around the nation on their policies and practices relating to LAUF gas. His 14 survey questions looked at rate treatment, oversight, evaluation criteria and incentives put in place for utilities to deal more thoroughly with LAUF.

The survey results revealed that the state regulators do not consider LAUF a top priority, although they all take the issue into consideration in general rate cases, gas cost proceedings and safety matters. Delaware, Georgia, New York, Pennsylvania and Texas have taken what Costello considers proactive approaches to LAUF.

The report, which looked at various definitions of LAUF, regulatory concerns about it, current practices and options for better managing the issue, identified alternate actions that regulators could take, and a "multi-step regulatory procedure" for assessing how well utilities do in addressing LAUF.

Costello challenged the assumption that any reduction in lost gas is desirable, noting that cost-benefits need to be weighed, raising the hypothetical question of how much customers should pay to lower a utility's LAUF gas. There are cost, environmental and safety benefits that need to be quantified.

Costello's recommendations for state regulators included avoiding comparisons of LAUF percentages across utilities, looking at each utility's LAUF percentage over time, exercising caution in establishing incentive mechanisms and requiring better information on the issue from each utility.

 "Utilities can influence LAUF-gas levels in different ways," Costello said, noting that regulators should stay proactive and that "the most effective tool might be monitoring and assessing utilities' LAUF gas levels."

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