Lots of capital is “sitting on the sidelines,” making now a very good time to build energy and other infrastructure in the United States, according to Richard Cortright, a managing director at Standard and Poor’s Rating Services (S&P).

Speaking at the National Association of Regulatory Utility Commissioners (NARUC) summer meeting in Los Angeles last Wednesday, Cortright called for Wall Street to be tapped to help U.S. infrastructure catch up after years of under-funding. There was some caution from the regulatory side, however, stressing that the need and how the money is spent require strong oversight from state regulators.

“If ever there was a time to tap capital markets, it is now,” Cortright said. “There are so many stars aligned; the timing is right.

“About 7% of the nation’s gross domestic product needs to be spent on energy and water infrastructure; it is a profoundly high number,” said Cortright, adding that the question everyone focuses on is whether there is sufficient capital to meet this need over the next 20 years. “From what I understand, there is a tremendous amount of capital sitting on the sidelines right now waiting to be spent. The money is there and has been there in very difficult times.

“Given the right regulatory structure and national strategies, I don’t see why the capital should not be there. It is daunting, but the (utility) industry has traditionally appealed to large segments of the investment community. It will come down to how well the regulators and companies are able to structure methods by which the funds will be invested.”

NARUC called its final session “The Money Pit: How Do You Finance the Future and Who Pays for It?” Moderated by North Dakota Public Service Commission Chairman and the current NARUC Chair Tony Clark, other panel members speaking with Cortright included Allan Bradley, Questar Pipeline CEO and chair of the Interstate Natural Gas Association of America (INGAA); and John Somerhalder, AGL Resources Inc. CEO and current American Gas Association (AGA) chairman.

Speaking for the interstate natural gas pipeline industry from the wellhead to citygate distribution systems, Bradley said U.S. pipeline operators are in the process of “reinventing” the nation’s gas pipeline grid. He attributed the big changes to the shale gas boom, citing a recent INGAA study of the pipelines spanning the United States and Canada.

“We are talking about hundreds of billions of dollars needed to upgrade the gas grid,” Bradley said. “The average annual gas pipeline investment identified is $8.2 billion/year over the next 25 years, or a little more than $200 billion.” According to INGAA, the U.S. pipeline industry will be adding an average of 1,400 miles of gas pipelines annually, including both new mainlines and laterals needed to serve the power generation market and new gas plays.

INGAA’s study looks at adding about 43 Bcf/d capacity in North America during the next 25 years.

Somerhalder cautioned that on the distribution pipeline side, the needs and projects vary greatly by region. In addition, there are various risks associated with the significant infrastructure work facing the gas industry, and one of the biggest risks cited by almost all the panelists is the “politicization” of the regulatory process.

“If I had to select one risk, it would be the injection of the political establishment into the ratemaking process,” said Cortright, citing Illinois and Florida as states where he feels this has happened in the past few years. “Ninety-five percent of the time it [politicization] is not a good thing.”

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