The Oregon Public Utility Commission (PUC) on Wednesday approved Portland-based NW Natural's proposal to offer compressed natural gas (CNG) services for the first time. The service is restricted to business vehicle fleets.

The three-member PUC’s order allows NW Natural to offer a utility service by entering into contracts to build utility-owned compression equipment located on customer property. For the time being, the service option will not be available to residential customers.

In its filing last year to the PUC, the natural gas-only distribution utility said it would focus on nonresidential customers with fleets of 40 or more vehicles that return to the same location at night. To get the service, fleet operators must enter contracts of at least 10 years' duration.

NW Natural will "design, plan, engineer, permit, construct, install, inspect, test and maintain" the CNG facilities, according to the PUC. The utility has assured the state regulators that CNG use by fleet operators offers a combination of economic, environmental and safety benefits.

"Our next steps will be to work with interested customers operating vehicle fleets to help them through the process and understand the service option that NW Natural can now provide," said Barbara Summers, NW Natural business development director.

The utility assured the regulators that business customers will pay all of the costs of the compression services, and that none of the costs associated with the program will be spread to other utility customers.

As it had in California with a similar program being pursued by Sempra Energy's Southern California Gas Co., Newport Beach, CA-based Clean Energy Fuels Corp. opposed the utility's application. However, the proposal had the support of the state Citizens' Utility Board, Northwest Industrial Gas Users, PUC staff, and the state Energy Department.

The state Energy Department argued that the proposal should stimulate competition, not hinder it, in the alternative transportation fuel sector. The PUC said it will review the utility service in two years to determine how competitive it is, with the provision that contracts signed by fleet operators will be grandfathered to remain in place in case regulators alter or eliminate the program two years from now.

Summers said the program supports Gov. John Kitzhaber's goal of developing comprehensive alternative fuel programs, along with supporting state legislators' interest in expanding alternative fuels in transportation.