Washington, DC – Buoyed by a long-term record of stability, natural gas is poised to play a key role as part of the solution to the energy challenges that our nation will face in the coming years, an industry executive told the National Association of Regulatory Utility Commissioners (NARUC) at their winter meeting today.
David McClanahan, president and chief executive officer, CenterPoint Energy and chairman of the American Gas Association’s (AGA) board of directors told NARUC that the future for natural gas distribution is very bright. “Just as natural gas utility companies helped grow our country by building a pipeline network and connecting communities across America, our industry is well positioned to take the lead in solving our nation’s environmental and energy challenges,” he said.
“We are in the midst of a seismic shift in how our nation views the issue of climate change, the impact of carbon emissions on our environment, and the way we use energy resources. We must consider not only the importance of protecting our environment but also technological realities, economic impacts, U.S. competitiveness in the global market place, national security concerns and the basic tenets of supply, demand and price elasticity.”
An overall solution to greenhouse gas emissions may be years away, but the energy industry is working on these issues today and natural gas will be the bridge fuel to the future, McClanahan said.
“There is no question that natural gas is the cleanest burning fossil fuel and produces the least amount of greenhouse gases. The electric industry is expected to turn to it as a bridge to when clean coal and additional nuclear power generation is available,” McClanahan said.
He noted how the industry has established a number of priorities to ensure it can accomplish this role. This includes:
- Encouraging the direct use of natural gas where possible. Natural gas is the most efficient source of energy for heating homes, offices, hospitals and providing hot water for all uses.
- Stressing the importance of conserving energy and using it efficiently. Over 80 percent of AGA members have programs in place to assist customers in using energy more efficiently.
- AGA and its members will work with regulators to ensure the interests of the industry and customers are as closely aligned as possible. Historically, natural gas utility rates have been volume based. Around the country decoupling initiatives are taking hold. Decoupling and other non-volumetric rate designs allow natural gas utilities to grow and prosper while stressing conservation and energy. These efforts add to the well deserved reputation natural gas companies have for stable earnings.
- Addressing the issue of high and volatile natural gas prices. Increasing the use of natural gas for electricity generation will put upward pressure on natural gas prices – a result of the laws of supply and demand. More supply will be the moderating factor in this equation. Growth can come from liquefied natural gas, tapping shale tight sands/coal bed methane, and the domestic reserves that lie untouched and untouchable around the country and the offshore continental shelf. These areas must be opened to exploration and development in the near term so they will be available to meet demand.
- Investing in the infrastructure necessary to deliver natural gas to customers and to replace aging infrastructure. The federal government can support this investment by extending the 15 percent dividend tax rate currently set to expire in 2010. If that tax expires, the cost of capital to the natural gas industry will increase and customers will be required to pay more at a time when commodity prices are expected to remain high.
- Continue to advocate for and support Low Income Home Energy Assistance (LIHEAP), a program that helps customers pay their bills. Since its creation in 1981, the number of eligible households has increased by 78 percent while LIHEAP funding has increased by just 17 percent. AGA and its members will remain a loud voice for low income and fixed income customers most impacted by higher prices.
“Our industry has great opportunities before it,” McClanahan concluded. “We can play a significant role in the energy challenges our nation will face, and we are indeed an industry that can bring solutions to this issue – both in 2008 and in 2028.”