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PUBLIC GAS NEWS

Inside this Issue

2

APGA Files Request for Rehearing FERC Policy Statement

3

Congress Passes Natural Gas Market Transparency Language Supported by APGA

3

APGA Sends Letter to FERC on Capacity Release

4

What to look for in the Senate Climate Change Debate

5

APGA takes part in Consumer Energy Day on Capitol Hill

6

Plan to Attend the Training and Education Workshop September 8 – 12

6

Register Direct Use of Natural Gas….Substantially Reduces Greenhouse Gas Emissions

7

APGA Board Supports National Advertising

8

A Message from Your Associate Members

APGA Adds Resources Section to the Website APGA has dedicated a section of the website to archiving the APGA Weekly Updates. This new page is better organized and will allow you greater ease in accessing the most current APGA Weekly Update articles. To view our newest feature to the website please go to http://www. apga.org/pressroom/resources.asp

June 2, 2008 Volume 27 Number 10

APGA Testifies On Energy Market Transparency Before U.S. House of Representatives Subcommittee

Laura Campbell of Memphis LIght, Gas, & Water testifying on behalf of APGA before the U.S. House Representatives Subcommittee on General Farm Commodities and Risk Management

APGA testified last Thursday, May 15, before the U.S. House of Representatives Subcommittee on General Farm Commodities and Risk Management. The purpose of the hearing was to review the role speculators have played in the recent run up in prices for energy and agriculture commodities. Laura Campbell, Assistant Manager of Energy Resources with Memphis Light, Gas, and Water testified on APGA’s behalf. In her testimony, she communicated to lawmakers about the importance of market transparency and effective oversight to restore consumer confidence in the market. Ms. Campbell testified that the price for commodities traded on exchanges,

such as natural gas, must accurately represent supply and demand fundamentals. Testifying alongside APGA, were representatives from the American Farm Bureau Federation, Chicago Mercantile Exchange, Petroleum Marketers Association of America (PMAA) and New York Mercantile Exchange (NYMEX). The subcommittee also heard testimony from the Commodity Futures Trading Commission (CFTC), National Corn Growers Association, Minneapolis Grain Exchange, National Grain and Feed Association and ICE Futures U.S. Lawmakers focused mostly on the impact speculative investment has on the price for commodities. The CFTC along with the exchanges (NYMEX, continued on p. 2


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APGA Testifies On Energy Market Transparency Before U.S. House of Representatives Subcommittee continued from p. 1

Publisher: Bert Kalisch Editor: Kristin Gomez Writers: APGA Staff Layout: Marghet Hager For Questions and Comments: Marghet Hager 202.464.0832 or mhager@apga.org Public Gas News is published biweekly by the American Public Gas Association Copyright 2008 American Public Gas Association All rights reserved. This is intended for actual subscriber use only. You may not forward, distribute, copy or republish this newsletter in any manner without the express written consent of the American Public Gas Association.

Chicago and ICE) said that current commodity prices are the result of properly functioning markets, and not from excessive speculation. The witness from the Petroleum Marketers testified that speculators and other non-commercial investors are driving up commodity prices to a certain extent. He cited testimony from oil company executives that supply and demand fundaments indicate oil should be priced between $55 and $60 per barrel at this time. APGA maintains that speculators play a necessary role in the market by providing liquidity, but the market must be transparent and regulated to prevent abusive and manipulative trading activity such that occurred with Amaranth Advisors, LLC. Subcommittee Chairman Bob Etheridge from North Carolina highlighted that APGA has been chosen to serve on the CFTC’s newly formed Markets Advisory Committee that will provide a public forum to examine emerging energy market issues. Ms. Campbell will represent APGA on the CFTC Committee whose first meeting is scheduled for June 10. Congress will most likely hold additional hearings as commodity prices continue to stay high. If you have any further questions please feel free to contact Nate Hill at nhill@apga.org or 202-464-2742.

June 2, 2008

APGA Files Request for Rehearing on FERC Policy Statement On May 19, APGA filed a rehearing request regarding FERC’s Policy Statement regarding the composition of proxy groups for determining gas and oil pipeline return on equity (Docket PL07-2). The FERC Policy Statement issued on April 17, 2008, permits the use of master limited partnerships (MLPs) in the determination of the returns on equity (ROE) of interstate pipelines under the discounted cash flow (DCF) methodology. The Commission initially had proposed to make adjustments to the distribution data of MLPs in order to remove distortions that the Commission recognized in earlier decisions resulted from using MLPs in the DCF analysis, but in its Policy Statement the Commission reversed itself on this issue and only made a relatively minor adjustment to the longterm growth rate of MLPs. APGA, which submitted five sets of comments, including affidavits by its DCF expert, opposed the use of MLPs in the DCF analysis because using them as proxies in the DCF analysis will drive up the resulting return on equity. In its rehearing request, APGA pointed out that the record evidence did not support the Commission’s action and that the Commission’s Policy Statement would escalate pipeline ROEs with no concomitant benefits for consumers. APGA urged the Commission either to withdraw the Policy Statement or to modify it by adjusting the MLP data to remove the upward ROE bias. A copy of APGA’s filing can be viewed at the APGA website at www.apga. org. If you have any questions on this article, please contact Dave Schryver of APGA’s staff by phone at 202-464-2742 or by email at dschryver@apga.org.


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June 2, 2008

Congress Passes Natural Gas Market Transparency Language Supported by APGA On May 14, the House of Representatives passed natural gas market transparency language as part of the 2008 Farm Bill Conference Report by a vote of 318-106. The Senate passed the bill the following day by a vote of 81-16. The natural gas market transparency language included in the Farm Bill was strongly supported by APGA. The language in this bill will increase transparency on exempt commercial markets, such as the Intercontinental Exchange (ICE), in the trading of significant price discovery contracts, making such contracts subject to reporting and recordkeeping requirements. The language also requires exempt commercial markets to fulfill certain self-regulatory requirements, including among others, the requirement that they list for trading only contracts that are not readily susceptible to manipulation, monitor trading to prevent manipulation, have the legal authority and ability to obtain information from traders, and apply position limits and enforce trading rules. The market transparency language

included in this legislation is a tremendous first-step towards regaining the confidence of APGA’s members and consumers by helping ensure that the price consumers pay is an accurate reflection of supply and demand conditions for natural gas and not the result of manipulation or other abusive market conduct. APGA members have continually communicated to Congress, the Commodity Futures Trading Commission (CFTC) and others about a growing lack of confidence in the market which has been directly tied to the lack of transparency. Last year, APGA testified three times before Congress and once before the CFTC to communicate this concern and push for the passage of legislation that would increase natural gas market transparency. APGA also recently testified before the House Agriculture Subcommittee on General Farm Commodities and Risk Management at a hearing on the impact speculative investment is having on commodity prices (see related article on the testimony in this weekly update).

Upon passage of this legislation, Bert Kalisch, APGA’s President and CEO, stated that “APGA has long maintained that market transparency is crucial to sustaining consumer confidence and the overall integrity of the natural gas and energy markets. This legislation will help give the CFTC the tools it needs to police its beat.” Mr. Kalisch went onto state that “Prices are high enough as a result of the tight supply-demand balance, so that whatever consumers pay, it should be a fair market price— not a manipulated price.” President Bush has expressed his opposition to a number of subsidies included in this legislation and as a result has vetoed the bill. However, Congress voted to override his veto and the language has now become law. This is a great victory for APGA! If you have any questions on this article or on APGA’s market transparency efforts, please contact Dave Schryver or Nate Hill of APGA’s staff by phone at 202-464-2742 or by email at dschryver@apga.org or nhill@apga.org.

APGA Sends Letter to FERC on Capacity Release On May 21, APGA sent a letter to Chairman Kelliher and the other FERC Commissioners that addressed the promotion of an efficient capacity release market. Specifically, the letter follows up on a letter sent by market petitioners that urges FERC to issue a final rule in Docket RM08-1-000 in order to remove regulatory uncertainty regarding the status of asset management arrangements (AMAs) under the capacity release rules. The proposed FERC rule would revises the capacity release rules in two ways. It would lift the maximum rate cap on releases of capacity with a term of one year or less. It would

also exempt prearranged capacity releases associated with AMA’s from the Commission’s prohibition against tying and from its bidding requirements. In its letter, APGA states that “APGA’s members are for the most part small and medium-sized LDCs, and they rely heavily on AMAs to handle gas acquisition; scheduling and balancing on interstate pipelines; secondary market transactions; and the like.” The letter goes onto state that it is extremely important for APGA members to “rely with confidence on the AMAs that are either in place or under negotiation without

fear of enforcement consequences.” A copy of the APGA letter and the letter sent by market petitioners referenced in this article is available on the APGA website at http:// www.apga.org/upload/apga_ferclet ter_052108_511171368_52720081 52513.pdf and http://www.apga.org/ upload/Letter%20re%20RM08-1000_700396405_5222008092358. pdf. If you have any questions on this article, please contact Dave Schryver of APGA’s staff by email at dschryver@apga.org or by phone at 202-464-2742.


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June 2, 2008

What to look for in the Senate Climate Change Debate Last Friday, U.S. Senate Majority Leader Harry Reid filed the first procedural step to debate climate change legislation on the Senate floor. This action by the Majority Leader signals that the debate on climate change is most likely to occur as scheduled on June 2, after Members of Congress return from Memorial Day recess. Senators will debate legislation originally sponsored by Senators Liebermann (D-CT) and Warner (R-VA). This bill is not expected to move out of the Senate, but the debate will provide important insight into future climate change legislation that will be a top priority for the next Congress and Presidential candidates in both parties. Public gas systems should be aware of the impacts of climate change legislation could have natural gas markets. The Lieberman-Warner bill seeks to reduce greenhouse gas emissions 19% below current levels by 2020 and 71%

by 2050. The bill uses a cap-and-trade mechanism to achieve the emission reductions. An overall cap is placed on greenhouse gas emissions (i.e. carbon dioxide) from 2012-2050 and certain emitters are responsible for turning in tradable permits each year to meet the cap’s overall requirements. Climate change legislation creates a price for emitting carbon into the atmosphere which will increase the cost of producing energy from dirtier fossil fuels like coal or oil. Natural gas emissions are regulated upstream under the bill at the processing plant. However, given the inherent cleanliness and abundant supply of natural gas compared to most other fuels, it is logical to assume that natural gas will play an even greater role in meeting greenhouse gas reduction targets. While the bill is hundreds of pages long and regulates multiple sectors of the economy, most Senators will focus the debate on a few issues including: mitigating the costs of reducing

emissions, emissions targets and timetables, international agreement, and the ability of states to create stricter standards. Cost mitigation and targets and timetables to reduce emissions are two important issues for APGA members to listen for in the Senate debate because both issues impact the price customers will pay for natural gas. The bill generates roughly $6.7 trillion in revenue and Senators will debate how that money is best used to reduce energy costs, drive technology and other uses. Strict emission reduction targets will force utilities to fuel switch from coal to natural gas to generate electricity in the early years which will stress available gas supplies. If you have any questions on this article or on APGA’s climate change efforts, please contact Dave Schryver or Nate Hill of APGA’s staff by phone at 202-464-2742 or by email at dschryver@apga.org or nhill@apga. org. org

Customers Clamor For Calendars! Answer their call by ordering your 2009 APGA Calendar today! It is the only calendar that spotlights the attributes of natural gas and natural gas appliances. To order your calendars today please visit the APGA calendar website at www.apgacalendar.com. You are encouraged to place calendar orders as soon as possible but no later than August 15. The price is lower than other comparable quality calendars even with its unique focus on natural gas. The calendar also serves your RP 1162 compliance efforts with the inclusion of Safety Information & Tips. Thirteen different residential natural gas appliances grace the calendar months using eye-catching artwork and photography.

If you have purchased calendars in past years you know their value and the resulting goodwill generated between customers and their utility. If you are a first-time buyer, please read the testimonials to learn what your industry colleagues have to say about the calendar. Lastly, calendar buyers have asked for an easier way to distribute their calendars. A second calendar shipping option is now offered. It is called the Fulfillment Option. For a small added fee, LyonTree Studios will ship your system calendars directly to your customers. All you need do is provide LyonTree with a database of customer names and addresses and they will ensure timely receipt to your customers. All shipping option details are in-

cluded in the calendar website, www. apgacalendar.com. For more information about the APGA Calendar, please contact Bob Beauregard at 202-464-0831 or bbeauregard@apga.org


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June 2, 2008

APGA takes part in Consumers Energy Day on Capitol Hill APGA joined 60 plus organizations on Thursday, May 22 for the first-ever Consumers Energy Day on Capitol Hill. The event was a chance for this broad coalition of energy consumers to voice concerns to lawmakers and their staffs about the impact of rising energy prices. Participants also took the opportunity to educate congressional staff about the relationship between U.S. energy prices and the energy policies enacted in Washington, D.C. The Consumers Energy Day event was hosted by the Consumer Energy Alliance (CEA), a newly-formed broad coalition of stakeholders who are impacted by energy prices. The event was co-hosted by 16 bipartisan mem-

bers of the U.S. House of Representatives and took place in the House Cannon Building. CEA is looking at future dates for a Consumers Energy Day event in the Senate. APGA participated with other CEA member associations including trucking, aerospace, American Gas Association, small business, agriculture, manufacturers, retirees, consumer groups, and others whose members are reeling with the cost of high energy prices. APGA’s director of Government Affairs, Nate Hill, and Communications Director, Kristin Gomez, attended the event and visited with several congressional staff about the impact that record high natural gas prices have on

not-for-profit public gas systems. Hill and Gomez told congressional staff that record high natural gas prices are very difficult on not-for-profit systems who are solely responsible to the citizens they serve. They added that increasing supply is a fundamental component of long-term affordable natural gas. If you have further questions about Consumer Energy Day or the Consumer Energy Alliance please contact Nate Hill at 202-464-2742 or nhill@ apga.org.

Top photo: Speaking Panel at the CEA Consumers Energy Day

Lower right and left photos: Attendees of the Consumers Energy Day event mingle with U.S. House of Representative members and their staff


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June 2, 2008

Plan to Attend the Training and Education Workshop September 8 – 12

For the third consecutive year, APGA will co-sponsor the Training and Education Workshop on September 8-12 at the Holiday Inn Hotel in Decatur, AL and at the Leak City Training Center in Athens, AL. This workshop will feature professional development opportunities for all levels of public gas system operations personnel. Last year’s T&E Workshop attracted over 200 participants. This year’s workshop promises to be even bigger. Sessions held at Leak City will include classroom and hands-on testing in corrosion control, valves operation & maintenance, regulators, tapping and stopping, odorization, leak Inves-

tigation, locating and damage prevention, purging, plastic fusion and steel & plastic pipe repair. Evaluations may be used to satisfy operator re-qualification requirements and are recognized by the APGA Security and Integrity Foundation (SIF). At Decatur, sessions will include an Operations and Regulatory Compliance Round Table, Professional Development Workshop, and Safety Roundtable. Also in Decatur will be an exposition of the latest utility products and services offered by our associate members. Other sponsoring organizations are the Alabama Natural Gas Association, Mississippi Natural Gas Associa-

tion, Mississippi Public Service Commission, Municipal Gas Authority of Georgia, Southern Gas Association, Tennessee Gas Association, Tennessee Regulatory Authority and Athens Utilities. Registration information can be downloaded from http://www. apga.org/upload/NaturalGasFall WorkshopAnnouncement2008 Final_181556691_5132008120649. pdf (no spaces). For further information contact John Erickson, APGA Vice President, Operations 202-4640834 or jerickson@apga.org.

That is the premise of a proposal put forth to APGA, AGA and INGAA by the Gas Technology Institute and Science Applications International Corporation. The three industry associations were asked to fund the core modeling and other analysis that will conclusively demonstrate how the expanded direct use of natural gas will substantially lower U.S. carbon emissions. The modeling and analysis will form a firm analytical underpinning for the natural gas industry’s climate change advocacy positions. APGA and the APGA Research Foundation responded quickly to the funding request. They agreed to cofund public gas’ share of the modeling and analysis. Public gas dollars will not be spent until the project is fully

funded by other industry organizations. It is the fervent hope of APGA and the APGA Research Foundation that this project be fully funded. Once fully funding, the project could be completed in six months or less. This project offers a proposed path to: optimize the nation’s use of existing energy sources, increase energy efficiencies, reduce CO2 emissions under a lower-cost, immediately available option; and, sustain/expand natural gas markets in the near-term and beyond 2030. Specifically, the initiative proposes a near-term, aggressive deployment of increased efficiency natural gas equipment in our nation’s homes, offices and industries to displace - - wherever feasible and effective - - similar electric appliances. Imple-

mentation would be through incentives for consumers to achieve highefficiency “full energy cycle” targets. The CO2 emissions reductions that result from reduced electricity demand will significantly exceed increased CO2 emissions resulting from increased gas consumption. The project will also cover the replacement of less-efficient gas-based technologies (e.g., water heaters, furnaces, and boilers) with higher efficiency gas technologies to further reduce CO2 emissions. Funding and project updates will be provided in future editions of Public Gas News. For further information, please contact Bob Beauregard at 202-464-0831 or bbeauregard@ apga.org

If you haven’t heard… the APGA Annual Conference will be held August 3 – 6, at the Hyatt Regency in beautiful Monterey, CA. There are ample opportunities for public gas systems and associates to support this premier event by becoming a sponsor.

The sponsorship form can be viewed and downloaded at http:// www.apga.org/Monterey-2008/AC_ Sponsorship.pdf. You should have also received a form in your conference registration packet. Sponsorships range from $500 to $5,000, so there are opportunities to fit every

budget. We look forward to seeing you at what is sure to be the highest attended conference in APGA history. For further information, please contact Sheila Deringis at 207-642-5062 or sheila@apga.org

Direct Use of Natural Gas...Substantially Reduces Greenhouse Gas Emissions

APGA Annual Conference Sponsorship Opportunities


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June 2, 2008

APGA Board Supports National Advertising

At its May 5, meeting the APGA Board considered and unanimously approved a resolution in support of a national advertising program for natural gas. The wording of the resolution is important and is repeated here: NATIONAL ADVERTISING PROGRAM IN SUPPORT OF NATURAL GAS WHEREAS, the M&S Committee at its November 2007, meeting voted to organize a National Advertising Task Force (NATF); and WHEREAS, the NATF decided the necessary first step was to gather together all sectors of the natural gas industry to determine interest in and commitment to a National Advertising program; and WHEREAS, the NATF organized and hosted a National Advertising Summit in Arlington, Virginia on February 20, 2008; and WHEREAS, thirty-five representatives of public and investor owned utilities, pipelines, marketers, producers and GTI attended and actively participated in the February 20 Summit; and WHEREAS, the Summit attendees reached consensus on three matters: • An industry-wide National Advertising program in support of natural gas is critically needed; • A new stand-alone organization should be created to lead the program and be the steward of program revenue; • The investor-owned utility (IOU) Green Team initiative, begun in August 2007, should serve as the starting point for achieving an expanded, industry-wide national advertising program; and WHEREAS, the Chairman of the

Green Team, Donna Peeples of AGL Resources, addressed the APGA Board on May 5, 2008, and demonstrated broad and growing IOU support for a National Advertising program and the work of the Green Team; and, WHEREAS, Donna Peeples and the supporting IOUs seek public gas support for the Green Team initiative; and, WHEREAS, the APGA Board believes a National Advertising program in support of natural gas is critically needed; NOW THEREFORE BE IT RESOLVED, that the Board hereby expresses its strong support for the IOU Green Team and its mission and strongly encourages APGA members to join and support the Green Team initiative and work toward expanding the initiative to an industry-wide National Advertising program. Finally, the Board thanks the NATF members and its Chairman, Jimmy Sprouse, for their excellent and important work. Prior to Board approval of the resolution, Donna Peeples of AGL shared the breadth of IOU support for a national advertising program and urged public gas to join in that support. Donna outlined the IOU effort to-date and went on to announce that Bob Beauregard of APGA had been elected to the Core Team of the Green Team initiative. Bob will work to maximize public gas access to and usage of national advertising products developed under the direction of the Core Team. The Team is working toward a two-tier access model: Tier I to include free advertising products as long as the user commits to using the product. Tier II will be a “pay for what you use” structure that includes TV ads.

The Green Team was recently renamed the Council for Responsible Energy (CRE). The Council springs from the leadership of five founding companies located in the South East – Alagasco, Atlanta gas Light, Mobile Gas, Piedmont Gas, and Teco/ Peoples Gas – however, it anticipates the membership and campaign will quickly become national. The CRE will be governed by a Board of Directors who will decide the campaign’s strategic direction and make all financial decisions. The Board will consist of nine voting members who will be director/officer level individuals. The nine will be made up of the five founding companies and one representative from participating companies in each of the following regions: West, Midwest, Southwest and Northeast. Major natural gas trade organizations….APGA, AGA, SGA, ESC and GTI, will be invited to participate in Board and committee discussions as Associate Members. Associate members will not vote on financial and strategic decisions made by the CRE Board. The size of the national advertising program will depend on participation. The CRE anticipates voluntary contributions totaling $2-15 million annually within the next couple of years. For more information, please contact Bob Beauregard at 202-464-0831 or bbeauregard@apga.org


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June 2, 2008

A MESSAGE FROM YOUR ASSOCIATE MEMBERS Now that the weather is warm, but the economy is not…. by Dean Park, President, BHMG Engineers and Chairman, APGA Associates Committee summer, take the time to complete those chores you may have been putting off; such as:

Dean Park, President BHMG Engineers and Chairman, APGA Associates Committee

A lot of municipalities will be issuing fewer building permits this year. That means fewer gas main extensions and fewer new service lines to install, releasing more crew time and some management time as well. This

• Main and service line replacements • Meter change-outs • Station regulator replacements • Rectifier re-builds • Odorizer upgrades • Updating your O&M plan PRESORTED • Test equipment calibration STANDARD • Fusing and welding equipU.S. POSTAGE PAID ment repairs FAIRFAX, VA • SCADA system improvements Permit No. 6241 or installation • Rate study • Strategic plan • System modeling • Mapping updates • Staff training • Software upgrades

AMERICAN PUBLIC GAS ASSOCIATION

201 Massachusetts Ave NE Suite C-4 Washington, DC 20002

Phone: 800.927.4204 Fax: 202.464.0246 Web: www.apga.org

Perhaps, you need financing for these improvements; or maybe your finances are too closely tied to weather and throughput and you need to change your rate design. Your APGA associate members can help with all of this and more! Your associate members are active in APGA. We know you and we know municipal gas systems. We work hard to provide products and services tailored to municipal needs. We attend and support APGA functions; we listen to your needs; and we respond in ways that others can’t. We’re listed in the back of your 2008 APGA directory. We put you first. APGA is the Voice and Choice of public gas. Make us your first choice for the products and services you need now.

PRESORTED FIRST-CLASS U.S. POSTAGE PAID FAIRFAX, VA Permit No. 6241


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