When Atlanta Gas Light completes the expansion of its Cherokee County liquefied natural gas storage facility around 2025, the project will be the culmination of forward-looking decisions made more than four decades earlier. Long-term planning, after all, is woven into the DNA of an industry dedicated to the safe, reliable and efficient delivery of natural gas.
When it comes to reporting to regulators about plans, gas utilities including Atlanta Gas Light have always shared information about gas supply or infrastructure projects executed within a relatively short time frame—the three to five years dictated by the cadence of ratemaking and supply planning proceedings.
But now, more information extending out over longer periods of time is sought by commissions reviewing as planning decisions are made.
Starting this year, Atlanta Gas Light’s regulators at the Georgia Public Service Commission are requiring a more detailed and longer-range view of the gas supply and infrastructure needs of Atlanta Gas Light, the largest natural gas distributor in the Southeast, with more than 1.7 million customers throughout Georgia.
Atlanta Gas Light filed its first Integrated Capacity and Delivery Plan, or i-CDP, in April. The PSC is expected to approve it in November.
Georgia is one of only a handful of states now requiring local distribution companies to file long-term plans, but industry watchers expect more to follow. Several factors are fueling the need for utilities to provide regulators and other stakeholders with an extended view of what’s ahead:
Whatever the reasons driving the trend, distributors, regulators and industry watchers agree that more openness and transparency ultimately will benefit all stakeholders with an interest in natural gas.
“It gives the regulators some certainty around what we’re going to do and some certainty around what the rate impact is going to be, and it gives the utility some certainty around what the revenue might be,” said William S. “Billy” Horne, director of resource planning and economic development for Atlanta Gas Light and the company’s point person on the development of the i-CDP. “And the same holds true for customers. It’s going to give them some certainty around what they’re going to be paying over the next few years. Also, the information’s going to be available, so that if they want to, they can go and see why they’re paying what they’re paying. We’re telling them, ‘This is what we need to do, this is how it benefits you, and this is what it costs to do it.’”
Atlanta Gas Light’s Integrated Capacity and Delivery Plan is so named because it brings together for the first time the two key planning resources used to project the company’s future system needs.
One is the capacity supply plan, Atlanta Gas Light’s forecast of how much gas it will need to secure through contracts with interstate pipelines—the source of all natural gas distributed by the company in Georgia—to meet current and projected future load requirements. The other is Atlanta Gas Light’s detailed forecast of the capital it will take to complete infrastructure projects needed to deliver gas safely, accommodate growth and comply with new pipeline safety requirements.
“Access to natural gas has played a formative role in the development of Georgia’s burgeoning economy,” said Pedro Cherry, president and CEO of Atlanta Gas Light. “The Georgia Public Service Commission has helped ensure Georgia has the utility infrastructure to safely and reliably serve our customers while also helping attract business and jobs to Georgia. With growing residential, commercial and industrial demand, we want to maintain that same level of access by seeking PSC approval for many safety initiatives and intrastate pipeline and infrastructure expansion projects.”
The tool is innovative not only in the fact that it integrates the two planning resources but, just as important, it pushes out the forecast horizon significantly.
Previously, Atlanta Gas Light was required to submit its capacity supply plan every three years, and capital requirements were addressed separately through the PSC’s normal ratemaking process, which includes an annual rate adjustment mechanism. As part of the i-CDP, Atlanta Gas Light is now sharing with regulators 10-year forecasts for both gas supply and capital needs, and the plan will be updated every three years.
For example, the inaugural i-CDP filing in April includes 12 so-called system reinforcement infrastructure projects with target in-service dates ranging from 2022 all the way out to 2030. The projects, with an estimated price tag of more than $528 million over 10 years, will serve several goals, including improving system integrity and reducing emissions, enhancing resiliency and reliability, and accommodating growth and economic development. But the i-CDP’s 10-year projections also include the costs for projects such as the Cherokee County LNG facility expansion, other facility needs throughout the system, vehicle fleets, IT, and other operational requirements.
The estimated $225 million Cherokee County LNG project, with a 2025 target completion date, will expand system capacity and allow Atlanta Gas Light to double the facility’s storage capacity, ensuring the system can continue to meet firm demand on the coldest days of the year. This once-future and now current need was envisioned prior to the facility’s opening in 1988 when Atlanta Gas Light designed it to accommodate a second storage tank.
Atlanta Gas Light and its regulators are quick to point out that the i-CDP doesn’t replace either the capacity supply plan or the traditional ratemaking process. Tricia Pridemore, chairwoman of the Georgia Public Service Commission, describes the i-CDP as an additional “regulatory asset” that will inform decision-making and make existing gas supply and ratemaking proceedings more efficient, open and transparent.
Pridemore didn’t have to look far for a planning model when she began to realize Georgia needed a better way to manage the growing challenges of regulating natural gas. For years, the state’s electric utilities have been required to file integrated resource plans, or IRPs, that offer a long-range view of energy supply and capital needs similar to what the i-CDP provides.
“We wanted to have more of an integrated resource plan [for natural gas], which we have on the electric side,” Pridemore said. “Our current capacity-planning tool was only a three-year tool, and we’re seeing builds right now take as long as a decade, and a threeyear tool doesn’t give us the strategic vision we need.”
The need to see around the corner has become critical in recent years as Pridemore and her PSC colleagues provided oversight of the rapid expansion of Atlanta Gas Light’s system both in terms of load growth and meter count, increases in LNG use and rapidly evolving federal safety mandates affecting its operations. And in a state where agriculture is the No. 1 industry, Pridemore sees the development of renewable natural gas as another issue where regulators will benefit from a longer-range planning tool.
Pridemore also sees “multifold” benefits for ratepayers and the general public in the added layer of scrutiny, from simply giving folks more information about where system expansion and improvement projects will take place years down the road to helping regulators ensure that Atlanta Gas Light is not only investing in the infrastructure needed to ensure a safe, reliable and efficient system, but is “doing it at the best possible price for ratepayers.”
“From a regulatory standpoint, the other thing I like about the IRP on the electric side, which is why I wanted [the i-CDP], is that it’s an open and transparent way that we get everybody a seat at the table,” Pridemore said. “If you are an intervenor who represents a commercial or industrial company, or an association … or if you’re somebody who’s interested in the environment and how utilities affect the environment, these types of open planning regulatory processes are a great way for regulators to hear your point of view.”
Discussions about the need for an IRP-like tool began during Atlanta Gas Light’s rate case in 2019, and the directive to start work was part of the commission’s order in that case. The framework for the i-CDP was developed by a working group of PSC staff, Atlanta Gas Light personnel and representatives of 18 gas marketers that, in a deregulated state like Georgia, actually own the gas in the pipelines and the end-use customer relationship.
“Everyone kind of came to the same conclusion [that it was needed] at the same time,” said Pridemore, who is aware of at least one other state—Utah—that has implemented a planning tool like the i-CDP to date.
This kind of collaboration is not unusual in Georgia, which has ranked No. 1 in Area Development’s “Top States for Doing Business” eight years in a row, and where the availability of natural gas is seen as a major economic development asset. According to Pridemore, residents in counties that aren’t already piped for natural gas are clamoring for it to replace the propane they use now.
John Gunnells, who keeps an eye on evolving regulatory practices as manager of state affairs for the American Gas Association, says AGA supports innovations, such as the i-CDP, that foster greater openness and collaboration.
“One thing we are very much supportive of is this transparency before regulatory bodies, because that fosters a positive relationship between the utility and the regulators,” Gunnells said. “Being able to be transparent with the commissioners and commission staff about utility planning—that is only going to aid in the planning and ratemaking process. There’s going to be a lot of winners in that process.”
Atlanta Gas Light’s Horne agrees wholeheartedly. “What this is going to do is give us a road map; as long as we stick to the road map, we’re going to be authorized to execute and follow that road map,” he said. “And as we make these investments or procure those capacities, it will make those rate proceedings and capacity supply plan proceedings a little easier to get through because we will have had a plan and we will have stuck to executing it.”
Gunnells has a unique perspective on the i-CDP as a former member of the Georgia PSC staff; he joined AGA soon after Atlanta Gas Light filed its plan in April. While quick to point out that AGA typically doesn’t weigh in on specific regulatory actions by states, he says what’s happening in Georgia bears watching.
“Programs like this are few and far between. IRPs are a standard within the electric industry, but capacity planning and infrastructure planning on the gas side vary greatly from state to state,” Gunnells said. “People need to take notice of the i-CDP because it’s a quite unique mechanism that seems to have a lot of positives to it.”
It might be more than a little ironic that a planning tool borrowed from the electric utility industry playbook could actually help Atlanta Gas Light and the natural gas industry address the 800-pound gorilla in the room: the rising chorus of voices pushing to accelerate electrification of the energy system and install a permanent stopcock on the flow of natural gas.
While Georgia is what the PSC’s Pridemore calls “still very much a pro-gas state” in the sense that businesses and residents are seeking greater access to the fuel, the number of states and municipalities that have implemented or are considering bans on new natural gas hookups across the country is growing.
Pridemore and Horne agree that more transparency about long-term plans could help the industry do a better job of telling its story about the value of natural gas in contributing to a resilient, reliable, affordable energy system overall—and the important part it can play in a sustainable energy future.
“I think so,” Pridemore said. “We take so much time as regulators looking at electricity generation—how it’s generated, where it’s generated. That’s a topic for public debate with the utilities and all the parties in a case. We don’t have that same level on the gas side, and I think this is yet another way that we can talk to people about the value of natural gas.”
Horne points out that the i-CDP includes detailed information on the company’s evaluation of potential opportunities to continue to improve leak-detection and flaring techniques, and finish pipeline replacement projects that will further tighten up its system.
Atlanta Gas Light also has a team working on developing RNG and incorporating green hydrogen, which could be delivered to customers through the company’s existing distribution system. Both will become part and parcel of future updates to the i-CDP.
The fact remains that, on the path to net zero emissions, Georgia will always need reliable energy, something renewables like solar and offshore wind can’t provide. Like many states, Georgia currently relies heavily on natural gas for generating baseload energy that is distributable and available at the flick of a switch.
“Natural gas is a great means of providing baseload power,” Pridemore said. “Fuel costs over the last several years have remained low, and that trend is expected to continue, so there’s even a greater value to the ratepayer. We want to be able to have that type of discussion in a public forum, ensure it is transparent and allow everybody to have a seat at the table.”
Gas utilities that don’t accept or see the value in putting more detail on the table could be forced to do so. New York’s Department of Public Service recommended earlier this year that gas utilities be required to file long-term plans and update them every three years. In June, the Environmental Defense Fund issued a call for more transparency in gas utility planning and aligning regulation of the natural gas industry with climate goals.
“There is a good story to tell around natural gas. In Georgia, over 20 years, Atlanta Gas Light reduced its annual methane emissions by 59% while growing its distribution system by 21%,” Horne said. “Natural gas has been a driving factor in emissions reductions across the United States, and it will continue to be one for decades to come, serving as the foundation on which other forms of clean energy can stand while helping to keep energy affordable. Since some people are questioning the future role of natural gas, we might as well share this story with as many as we can.”
Since Atlanta Gas Light filed its first i-CDP last spring, stakeholders that have seen it, including the commission and the gas marketers involved in developing the plan, have more information about the company’s operations than ever before—information Atlanta Gas Light wasn’t required to provide under the preexisting regulatory framework.
“We believe greater transparency is good for both our customers and our business,” Horne said.
The reaction has been positive.
“We’ve had a lot of good feedback on it so far,” Horne said. “People are like, ‘Wow, I never knew this about your business.’ Once we get through the sausage-making part, it’s going to be a very good tool to use, and hopefully other utilities in other states can take what we’ve done and shape it into something they can use in their state.”
Recent Developments: Natural Gas Expansion and Replacement Activity
New Jersey
South Jersey Gas filed in November 2020 for approval to invest about $742.5 million over five years for a major infrastructure improvement program, or IIP, that will enhance the safety and reliability of its system. SJG will replace 825 miles of steel mains and install excess flow valves on new service lines. Under New Jersey Board of Public Utilities IIP rules, SJG will recover the incremental investment through annual rate adjustments outside of base-rate case proceedings.
Kentucky
LG&E’s 12-mile pipeline project in Bullitt County south of Louisville moved one step closer to fruition in September with the approval of a key permit from the U.S. Army Corps of Engineers. The company still has legal challenges to overcome before beginning work on the $74 million project, which will provide resiliency by adding backup supply in the event of service interruption and will serve a rapidly growing customer base, including a large Jim Beam distillery.
Nevada
Southwest Gas continues to close in on completion of an important expansion project to bring natural gas to residents and businesses in Spring Creek. The $61.9 million project, approved by the Public Utilities Commission of Nevada in December 2019, began with bringing service to 62 homes in the Elko Summit Estates community. Phase II work began in April and will connect 500 residential customers and 55 commercial and school properties. The project is expected to extend beyond 2021.
Michigan
Reducing the carbon footprint of its distribution system is a key objective of DTE’s Gas Renewal Program. DTE announced in August that it will replace 92 miles of pipe in the Grand Rapids area with durable, flexible plastic that will help reduce methane emissions and support DTE’s goal of net zero carbon emissions enterprisewide by 2050. The $10 million project also includes upgrades to 9,000 meters. DTE’s newly opened Three Mile Road Station will serve as a hub for the Gas Renewal Program.
Maine
Summit Natural Gas expanded natural gas service to customers in Farmingdale after breaking ground on the $3 million project in May 2020. Summit is working to extend its distribution system to bring natural gas to additional residential and commercial customers in the community, allowing many of them to convert from oil to natural gas. The Farmingdale project was part of Summit’s plans to invest up to $10 million in expansion projects in 2020.
Mississippi
Fueling economic development that spurs job creation and fills local coffers with tax revenue is the goal of an Atmos Energy expansion project. The company broke ground in late April on a $4 million project that will supply a new Montgomery County sawmill announced in January by Biewer Lumber. The state-of-the-art mill will bring 150 new jobs to the area and represents a $130 million investment by Biewer. The Atmos project will also allow 90 homes and businesses to receive natural gas service.
Pennsylvania
UGI announced in August 2020 that it completed a project to bring natural gas to IRIS USA’s new 500,000-square-foot manufacturing facility in Hazleton. UGI constructed approximately 1,100 feet of gas main, as well as meter and regulation equipment, to serve the new $80 million Luzerne County plant’s heating and manufacturing needs. The Arizona-based maker of injection-molded plastic products said it selected Pennsylvania for its first East Coast location in part because of the state’s reliable supply of low-cost energy.
Maryland
BG&E’s proposal to discard traditional means tests for gas system expansion is moving through the regulatory process again after a delay requested by the company in January. The “Pay it Forward” pilot program filed with regulators in May 2020 would reduce contributions from certain potential customers in cases where extending the distribution system to serve them is projected to result in additional new customer connections and where the revenue increase from new customers is projected to exceed expansion costs.
California
SoCalGas won a 10-year extension for its Mobilehome Park Utility Conversion Program that has upgraded infrastructure and enhanced safety for more than 16,000 mobile homes throughout its service territory. The company is converting parks to direct utility control from a system using sub-meters maintained and operated by the park owner or property manager. The 2020 order authorizes SoCalGas to upgrade up to half of the approximately 132,000 mobile homes in its territory to direct utility service through 2030.
Virginia
Regulators approved Columbia Gas of Virginia’s request to add $20 million to allowable expenditures for 2020 infrastructure improvements previously authorized under the state’s SAVE (Steps to Advance Virginia’s Energy Plan) Act, which allows gas utilities to replace infrastructure and recover costs in a timely manner. Separately, Virginia Natural Gas has replaced 100% of its low-pressure pipelines and reduced greenhouse gas emissions by 27% between 2012 and 2019. The SAVE Act became law in 2010.