How Utility Gas Pipeline Infrastructure is Paid For
When a monopoly (energy Utility) wants to spend money, it normally follows a three step process:
- Submit details of cost expenditures and the corresponding consumer benefits
- Get approval from the state regulator; this requires public hearings
- After the monies were spent on what was approved, demonstrate the benefits were delivered
Think about that; the utility makes the case to spend money offering benefits such as improved reliability (less costs on emergency repairs) or lower costs of operation. Then once completed, the benefits must come; otherwise, they don’t get to recover their costs.
The utilities have to make reasonable and prudent recommendations. The regulators must carefully consider the costs and benefits. Once approved, the utilities must get the construction installed at the price quoted. After it’s constructed the utility must demonstrate the benefits.
Any short cut to this process and more than likely the consumer pays for it.
Many utilities (and utility regulators) are realizing that much of the installed pipelines are approaching their end of life. This will require digging them up and replacing them. Very expensive. So utilities and their regulators are proposing ways to reduce these costs.
However, regulators should not reduce their oversight. Too often lapses in regulatory oversight leads to costs overruns and shortcuts which all but eliminate benefits to consumers.
The following article is a great example of how a monopoly gas utility in Kansas and their regulators are dealing with it. It is very representative of the process occurring in every state.
Realgy Energy Services is a registered Retail Energy Marketer in the states of Illinois, Michigan and Indiana. We offer Service Plans that will provide electric and natural gas at wholesale pricing direct to customers without any utility markup. Our Service Plans work with the local utility to provide seamless service and annual energy savings. Service Plans include Guaranteed SavingsTM, ManagedPriceTM, ManagedGreenTM and Index, Fixed pricing.
Additional Information: