Investor Expectations on North American Natural Gas Utilities

The American Gas Association (AGA) and the Canadian Gas Association (CGA) engaged Guidehouse to understand current investor sentiment toward North American gas utilities and determine the current investor perceptions of gas utilities as investments. Guidehouse undertook industry-focused interviews and foundational research to develop this report’s findings. The scope of work focused on answering three key questions:

1) How are the gas utilities allowed return on equity (ROE) set under the current regulatory regimes; and
2) Across the US and Canada, are ROEs consistent with investor expectations?
3) What future business opportunities should utilities pursue to maintain investor attractiveness?

From our contextual and foundational research, the allowed rates for gas utilities are determined through a series of robust rate setting frameworks that ensure the services provided by gas utilities are safe and reliable, and at reasonable cost. The question of whether allowed rates balance the interests of utilities and ratepayers is a frequent area of discussion at rate hearings as new costs are proposed to maintain public safety, reliability, and resiliency. In Canada and the United States, utilities are reducing emissions through new technology solutions and low-emission gases (hydrogen and renewable natural gas).