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PUBLIC GAS NEWS

Inside this Issue

2

APGA Participates on CFTC Energy Markets Advisory Committee

2

FERC Issues Capacity Release Rule

3

Florida Public Gas Systems Push for Passage of Congressman Peterson’s Natural Gas Supply Amendment

4

Interagency Task Force Established to Study Commodity Markets

4

APGA Sends Letter of Support for Chilton Nomination to CFTC

4

APGA to Hold Conference Call with Federal Trade Commission to Discuss Identity Theft Rule

5

The APGA RF Funds Critical End Use Technology R&D in 2008

6

Your Customers Love Calendars – Promote Natural Gas in 2009, not Norman Rockwell

6

APGA Urges PHMSA to Discontinue EFV Customer Notification Recordkeeping

Member Spotlight:

Borough of Chambersberg, PA Borough of Chambersburg is one of the state of Pennsylvania’s two municipal gas systems, a town of nearly 18,000 people with a long history in the gas industry.

Go to page 8 for the rest of the profile!

June 30, 2008 Volume 27 Number 12

APGA Participates on CFTC Energy Markets Advisory Committee

Acting Chairman Walter Lukken, CTFC

On June 10, the Commodity Futures Trading Commission (CFTC) Energy Markets Advisory Committee held its first meeting. The Committee was formed to focus on the issue of transparency and trading in the energy markets. Laura Campbell, Assistant Manager of Energy Resources for Memphis Light, Gas & Water, serves as APGA’s representative on the Committee. Other members of the Committee include Jeffrey Sprecher – Chairman and CEO of ICE, James Newsome – President of NYMEX, and Skip Horvath – President of the Natural Gas Supply Association. In a statement that accompanied the Committee’s first meeting, Acting CFTC Chairman Lukken stated “In these extraordinary times for the commodity markets,

the Commission is eager to learn from this knowledgeable group, comprised of a cross section of those who use and are affected by the markets, on the important issues of market transparency and index trading.” Acting Chairman Lukken went onto state that “The insight the Commission will gain from this new Committee, and from the agency’s own recent initiatives in the energy markets, will better prepare the Commission as it continues its critical oversight function of these growing and evolving markets.” During the meeting, there was considerable discussion regarding the current high energy prices and the impact speculative investment had on price. Specifically, there was discussion continued on p. 2


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APGA Public Gas News

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.

www.apga.org

APGA Participates on CFTC Energy Markets Advisory Committee continued from page 1

“In these extraordinary times for the commodity markets, the Commission is eager to learn from this knowledgeable group, comprised of a cross section of those who use and are affected by the markets, on the important issues of market transparency and index trading.” -Walter Lukken, Acting Chairman, CFTC regarding the impact that index traders (large investors that automatically buy futures when their projected yield exceeds the average of a broad index of shares or bonds) are having on the market. Laura Campbell expressed concern regarding the fact that the monthly settlement price for natural gas on the NYMEX is based on the last 30 minutes on the last day of trading and the potential for market abuses and volatility during this short time. Acting Chairman Lukken stated that a product of the Committee could be a best practice for natural gas contracts that would base the price on a longer average. The Committee may meet once more this year. 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. dschryver@apga.org

June 30, 2008

FERC Issues Capacity Release Rule On June 19, the Federal Energy Regulatory Commission (FERC) issued a final capacity release rule. APGA recently sent a letter to the Commission urging the release of a final rule so that “LDCs know the rules of the road going into the 2008-09 winter season”. As stated by FERC, the rule is designed to enhance competition in secondary natural gas capacity release markets by removing price caps on short-term releases of capacity, and increasing flexibility afforded asset management agreements under FERC’s capacity release rules. In a statement that accompanied the release of the rule, Chairman Kelliher said “This final rule will strengthen competition in the secondary capacity release market, and therefore benefit consumers, by giving shippers more options for how they obtain gas supplies and improving access to the interstate natural gas pipeline system”. He also stated “The rule also will provide more accurate price signals on the market value of pipeline capacity.” The final rule adopts and clarifies provisions of the rule proposed in November 2007 to remove permanently the rate cap on capacity release transactions of one year or less. The rule does not lift the rate cap on long term capacity releases of more than one year and on primary sales of capacity by pipelines. The final rule also modifies FERC policies and regulations to facilitate and accommodate the use of asset management arrangements (contractual relationships where a party agrees to manage gas supply and delivery arrangements, including transportation and storage capacity, for another entity) under which a capacity holder releases some or all continued on page 3


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June 30, 2008

Florida Public Gas Systems Push for Passage of Congressman Peterson’s Natural Gas Supply Amendment

Congressman Peterson (R-PA)

On June 17, the Florida Municipal Natural Gas Association (FMNGA) sent letters to members of the Florida congressional delegation that serve on the House Appropriations Committee urging them to support an continued from page 2

amendment Congressman Peterson (R-PA) intends to offer during the full Committee mark-up of the FY’2009 Interior, Environment and Related Agencies Appropriations Bill. FMNGA is a non-profit association of 33 publicly-owned natural gas distribution systems in Florida and South Alabama, which collectively serve some 270,000 customers with nearly 700 employees. Congressman Peterson’s amendment would revise the moratoria currently in place for exploration in the outer continental shelf (OCS) to allow natural gas and oil exploration from 50 miles out from the coast. The letters were sent to Representatives: Boyd; Young; Weldon; Crenshaw; and Wasserman Schultz. In its letter, FMNGA states that “As our country moves into an era of even greater reliance on natural gas, sound energy policy requires that we secure an accompanying increase in supply.” The letter goes onto state that “This

amendment must be considered a critical step as Congress begins to address climate change by looking to reduce greenhouse gas emissions.” Climate change legislation will have a significant increase on natural gas demand as it is expected to become the fuel of choice for electricity generators to meet required greenhouse gas reductions. APGA has maintained that increasing supply is a fundamental component of the solution to longterm affordable natural gas. The House Appropriations Committee was scheduled to mark-up the FY’2009 Interior Appropriations bill on June 18th but that mark-up has been postponed and has yet to be rescheduled. Copies of the FMNGA letters are available on 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.

FERC Issues Capacity Release Rule

of its pipeline capacity to an asset manager who agrees either to purchase from or supply the natural gas needs of the capacity holder. In an effort to promote asset management arrangements, the rule exempts capacity releases made as part of such arrangements from the prohibition on tying capacity releases to any extraneous conditions. FERC’s final rule also clarifies the definition of asset management arrangements to relax the delivery and purchase obligations of the replacement shipper and to permit supply side asset management arrangements. The final rule clarifies that short term asset management arrangements may be rolled over without bidding and that the price

“This final rule will strengthen competition in the secondary capacity release market, and therefore benefit consumers, by giving shippers more options for how they obtain gas supplies and improving access to the interstate natural gas pipeline system” -Joseph Kellher, Chairman, FERC ceiling does not apply to any consideration provided by an asset manager to the releasing shipper as part of an asset management arrangement. In addition, FERC clarifies that its prohibition on tying does not apply to conditions associated with gas inven-

tory held in storage for releases of firm storage capacity. This exemption from tying will allow a releasing shipper to include conditions in a release concerning the sale or repurchase of gas in storage inventory, even outside the context of an asset management arrangement. The final rule permits shippers releasing storage capacity to require the replacement shipper to (1) take title to any gas in the released storage capacity at the time the release takes effect, and (2) return the storage capacity to the releasing shipper at the end of the release with a specified amount of gas in storage. 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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www.apga.org

June 30, 2008

Interagency Task Force Established to Study Commodity Markets

On June 10, the Commodity Futures Trading Commission (CFTC) announced that an interagency task force had been formed to evaluate developments in commodity markets. The task force will be made up of representatives from the: CFTC, the Federal Reserve, the Department of the Treasury, the Securities and Exchange Commission, the Department of Energy, and the Department of Agriculture. The role of the task force will be to examine investor practices, fundamental supply and demand factors, and study the role of speculators and index traders in the

commodity markets. In announcing the formation of this group, the CFTC stated that “High commodity prices are posing a significant strain on U.S. households and the announced Interagency Task Force will aid public and regulatory understanding of the forces that are affecting the functioning of these markets. The Interagency Task Force will strive to complete its work as expeditiously as possible, and will make public the results.” APGA has maintained that there needs to be an appropriate level of market transparency to ensure that the price consumers pay accurately

reflects market fundamentals and is not the result of market manipulation or other abuses. In testimony APGA gave in May to the House Agriculture Subcommittee on General Farm Commodities and Risk Management APGA further stated that effective and vigilant oversight over these markets is needed. If you have any questions on this article or on APGA’s efforts to increase natural gas market transparency, please contact Dave Schryver of APGA’s staff by phone at 202-464-2742 or by email at dschryver@apga.org.

On June 16, the American Public Gas Association (APGA) sent a letter to Senate Agriculture, Nutrition and Forestry Committee Chairman Tom Harkin (D-IA) and Ranking Member Saxby Chambliss (R-GA) expressing support for the confirmation of Bart Chilton to the Commodity Futures Trading Commission (CFTC). APGA President & CEO Bert Kalisch said in the letter that “Commissioner Chilton has been a true advocate on the CFTC for restoring consumer confidence in the commodity markets.” In June 2007, Commissioner Chilton was confirmed to a term on the CFTC that expired April. He has

been nominated by the Administration to another five-year term on the Commission. Chairman Harkin held a nomination hearing for Chilton, Lukken and new CFTC nominee Scott O’Malia in early June. Their nominations must be voted out of the Agriculture Committee and confirmed by the full Senate. Last October, APGA sent a similar letter to Harkin and Chambliss supporting the nomination of Acting Chairman Walter Lukken to become the Chairman of the CFTC. Mr. Kalisch went onto to say in the letter that Commissioner Chilton had been responsive to concerns from

APGA and other consumer groups and that APGA encourages the committee and the full Senate to act expeditiously to confirm his nomination. Commissioner Chilton was formerly the Chief of Staff and Vice President for Government Relations at the National Farmers Union. He also served as deputy Chief of Staff to U.S. Agriculture Secretary Dan Glickman in the Clinton Administration. A copy of the letter can be viewed on the APGA web site. If you have further questions please feel free to contact Nate Hill at 202-464-2742 or nhill@ apga.org. apga.org

APGA has set up a conference call for 3pm eastern time on July 9, with staff of the Federal Trade Commission (FTC) to discuss a regulation that came out of the FACT Act 2003 (Fair and Accurate Credit Transactions Act of 2003). The regulation requires each utility (including public gas systems) to have in place by November 1, 2008, an identity theft prevention program to protect customer records. The program must meet standards set forth and outlined in the rule. The key objectives of program are to detect,

prevent, and mitigate identity theft. In May 2008, APGA sent out a memo to all of its members informing them of this requirement. In response to that memo, a number of questions have been raised by APGA members who are learning about the rule. This conference with the FTC staff has been set up to help provide guidance to public gas systems in setting up a program that meets the FTC’s standards. FTC staff will provide an overview of the rule and answer questions regarding the measures that must be taken

by public gas system to comply with the rule. FTC staff will also be prepared to answer questions from APGA members in regard to the regulation. This conference is open to all APGA members. If you are interested in participating in the call, please contact David Naples of APGA’s staff by email at dnaples@apga.org or by phone at 202-464-2742. Once you have registered for the conference call, you will receive information in regard to dialing in and participating.

APGA Sends Letter of Support for Chilton nomination to CFTC

APGA to Hold Conference Call with Federal Trade Commission to Discuss Identity Theft Rule


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www.apga.org

June 30, 2008

The APGA RF Funds Critical End Use Technology R&D in 2008

by Anthony Miller, Gas System Director, Greenville Utilities District & 2nd Vice Chairman, APGA RF The Utilization Technology Development (UTD) consortium is a member-controlled partnership of natural gas distribution companies, each contributing at least $250,000 per year, formed to ensure that near-term applied research is conducted and to develop, test and deploy energy efficient, environmentally-friendly end use technologies. UTD’s purpose is to improve efficiencies in current equipment, promote more equipment options, improve load factors and ensure prudent growth in natural gas sales for natural gas utilities. UTD is a not-for-profit affiliate of the Gas Technology Institute (GTI). The APGA Research Foundation (APGA RF) is a UTD member along with ten (10) other gas utility members. In this capacity, the APGA RF represents the financial interests of the approximate 150 RF investors on all UTD project funding decisions. Anthony Miller of Greenville, North Carolina, serves on the UTD Board on behalf of the APGA RF. Leonard Phillips of Springfield, Missouri, represents the APGA RF on the UTD Technical Project Committee (TPC). Annually, UTD identifies projects and determines the funding to be allocated for each project. The process of identifying the projects and funding levels involves several steps that vary by participant, based on whether the

member is an individual company or is a group like the APGA RF. For a group like the APGARF, the first step in the process begins with the development of a survey listing the proposed projects that is distributed to APGARF board members. The board members then rank the projects and provide comments regarding the prioritization based on funding and importance to the industry. These rankings and comments are forwarded to the APGARF UTD TPC representative, Leonard Phillips. Leonard then meets with his counterparts from the other UTD members typically for a two-day period in February, to discuss the suggested new projects with GTI and the progress of current projects. After much discussion, the UTD representatives agree on the projects to be funded, the level of funding and a final report is drafted. The final report is typically completed over the course of the subsequent few weeks as each participant finalizes funding numbers and discusses any unresolved issues. The project and funding decisions made by the UTD participants serve as objectives, or guidelines, for GTI regarding how much effort/money is spent on the research and development of specific projects. The UTD member representatives have completed this process for 2008 and identified the following new and active projects to receive funding. The dollar figures represent the amount of APGA RF funding allocated to each of the projects: I. Residential/Commercial Water Heating Working Group (RCWH) Venting Solutions $ 8,000 Residential Water Heater - Base lining $29,318 Solar-Assisted Natural Gas Energy Systems $ 7,692 Solar-Assisted Natural Gas En-

ergy Systems - New $ 5,000* Solar/Natural Gas Domestic Hot Water Solution $10,000* II. Residential/Commercial Space Conditioning Working Group (RCSC) Whole House Energy Efficiency Wizard $16,458 Residential Furnace NO x Emissions $3,443 Gas Options for Improved Indoor Air Quality $15,000* Residential Venting Program $12,500* Roadmap for Gas Usage in NetZero Energy Homes $5,000* III. Commercial Food Service Working Group (CFS) Gas Fired Ware Washer Field Test $11,742 Gas Fired Rethermalizer $15,000* Deployment of New Technology Key/National Accounts $10,000* IV. Transportation Low Cost Scalable CNG Cylinder $5,000* V. Industrial Processes (IP) Direct Flame Impingement/NonFerrous Forging $6,629 VI. Carbon Management (CM) Carbon Management Information Center $25,000 VII. DG Power & Steam Generation (DGPSG) High-Efficiency Flexible Combined Heat and Power Unit $11,874 Energy/Water Recovery Flue Gasses/Retrofit Applications (using nonporous membrane technology) $16,148 Super Boiler Technology for continued on page 6


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www.apga.org

June 30, 2008

The APGA RF Funds Critical End Use Technology R&D in 2008

continued from page 5

Large Water tube Boilers/Phase I $ 7,253 *new projects APGARF allocated a total of $221,057 to fund nineteen (19) active and new projects for 2008. This represents funding for approximately 42% of the forty-five (45) active and

new projects funded by UTD in 2008. APGARF has $25,235 of unallocated 2008 funds. For more information on these projects, visit www.utd-co.org. Of course, the work of the UTD participants does not end with the selection and funding of the projects. The participants are actively monitoring the progress of the research and

development and reporting their findings to the appropriate people. In the next APGA newsletter, we will discuss how the APGA RF is organized to monitor the progress of each project and to communicate the progress to all APGA RF investors.

Your Customers Love Our Calendars – Promote Natural Gas in 2009, Not Norman Rockwell

The APGA Calendar is the only calendar that spotlights the attributes of natural gas and natural gas appliances. 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. Those testimonials, as well as pricing and ordering information are included on the easy-to-navigate APGA 2009 Calendar website at: www. apgacalendar.com Please place calendar orders as soon as possible but not later than August 15, 2008. Prices are way below any comparable quality calendar even with its unique focus on natural gas. Importantly, the calendar also serves

your RP 1162 compliance efforts with the inclusion of Safety Information & Tips prepared by the APGA Operations & Safety Committee. Thirteen different residential natural gas appliances grace the calendar months using eye-catching artwork and photography. 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 detailed on the calendar website: www. apgacalendar.com Please note: Don’t be fooled! There

is a calendar manufacturer representing their calendar as one “designed just for APGA members.” This is not the APGA calendar. Rather than promoting your natural gas business, this manufacturer highlights scenic America and Norman Rockwell. For more information about the APGA Calendar, please contact Bob Beauregard at 202-464-0831 or bbeauregard@apga.org

APGA Urges PHMSA to Discontinue EFV Customer Notification Recordkeeping In written comments filed with the Pipeline and Hazardous Materials Safety Administration (PHMSA) on June 19, APGA urged PHMSA to discontinue requiring operators to maintain records that they had notified customers about excess flow valves (EFVs) whenever a installing a new or replaced service line. Under these rules, in effect since 1994, operators would have to install an EFV if the customer agreed to pay the additional

cost. APGA’s comments pointed out that the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006 required PHMSA to issue rules requiring operators to install EFVs on all new and replaced services to single residences if the line operates continuously at or above 10 psig. Customers no longer have any choice whether or not to have an EFV installed, so the new requirements make customer notification obsolete, APGA pointed out.

For more information contact John Erickson, APGA Vice President, Operations 202-464-0834 or jerickson@ apga.org. To view the comments go here: http://www.apga.org/upload/ Comments on 5-22-08 PHMSA information collection_ 285998736_6192008100925.pdf


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www.apga.org

June 30, 2008

APGA Joins Coalition of 20+ Organizations Asking to Authorize $5.1 Million in LIHEAP Funding

APGA joined a coalition of 20-plus other organizations in a letter to the Chairman and Ranking Member of the Senate Appropriations Committee asking to provide the fully authorized $5.1 million in funding for the Low Income Heating Energy Assistance Program (LIHEAP) in FY09. Funding for the LIHEAP program is provided through the Labor, Health and Human Services and Related Agencies (Labor-HHS) appropriations bill. Appropriations Chairman Robert C. Byrd from West Virginia and Ranking Member Thad Cochran from Mississippi plan to mark up the FY09 Labor-HHS appropriations bill in the full committee today. The letter stated that LIHEAP protects the health and safety of fixed-income seniors and low-income families, especially those with young

children and disabled members by making their energy bills more affordable. The letter went onto to say that rising energy prices underscore the importance of the LIHEAP program. According to the National Energy Assistance Directors’ Association’s analysis of EIA projections, consumers will see an increase in energy prices for the 2008-2009 heating season from nearly all fuels including home heating oil (+32.2%); natural gas (+14%); propane (+17.8%); and electricity (+3.9%). Prices have risen so dramatically that low-income households are having a hard time affording their energy bills even when weather conditions are not extreme. APGA has consistently pushed Congress to provide the fully authorized $5.1 million for the LIHEAP pro-

gram. APGA recognizes LIHEAP’s critical role in helping low-income families not have to face the choice between paying their energy bills or paying for other necessities such as healthcare, food and childcare. While there is strong support for LIHEAP on Capitol Hill, gridlock between Congress and the Administration over this year’s appropriations process have many expecting that lawmakers will only pass a temporary extensions of current spending levels for the next Congress and Administration to address. Should a temporary extension be passed, LIHEAP would then be funded with the $1.8 billion that Congress provided in FY08. If you have any further questions, please feel free to contact Nate Hill at 202-464-2742 or nhill@apga.org.

APGA Annual Conference Update:

Conference Registration: The deadline to register for the Annual Conference is July 11th. Please submit your completed registration forms to the APGA office before that date. If you have not yet made your hotel reservation, please note the hotel cut-off date is July 2nd. Tours & Side Trips: The deadline to register for the optional tours and side trips is July 15th so get your registration forms to Associated Hosts promptly. There is still space available on many of the tours being offered. Sponsorships: If you are interested in being a conference sponsor, there are still opportunities available for every budget. If you want your name to appear in the onsite conference program, please submit your sponsorship forms to the APGA office by

July 11th to be sure you are included in the program. There will also be prominent signage throughout the conference. Chairman’s Dinner: If you would like to reserve a table for your group at the Chairman’s Dinner on Tuesday evening, please contact Sheila Deringis at sderingis@apga.org or (202) 352-1193. The cost to reserve is $100 for a table of 10 people.

And don’t forget to bring a door prize! All of the conference forms are available on the APGA website www.apga.org. If you have questions or need assistance with anything, please contact Sheila Deringis at sderingis@apga.org or 202-352-1193.


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www.apga.org

June 30, 2008

Member System Profiles: Borough of Chambersburg, PA

ern troops in 1864. However, the gas plant survived. Thankfully, the town rebuilt and years later the Borough of Chambersburg continues to proudly serve its residents. John Leary, Gas Superintendent for the Borough of Chambersburg, Borough of Chambersberg, PA effectively serves his customers using The state of Pennsylvania has two nine full-time gas employees, as well municipal gas systems, Philadelphia as another seven that work at the Gas Works (PGW), one of the largest emergency dispatch and Borough in the country and Borough of Chamwarehouse that serves the whole bersburg, a town of nearly 18,000 town. Having different utilities there people with a long history in the gas allows them to share in cost, because industry. In 1836, the Chambersburg the gas operation has to pay for only PRESORTED STANDARD gas works was built as a private 1/3 of emergency dispatch vs. 100% U.S. POSTAGE manufactured gas plant using coal for a gas-only utility. This sharing PAID for street lighting. Even back then, FAIRFAX, VAis one of the reasons their of costs No. 6241 the Borough was the main customer. Permit customers pay the lowest gas prices Eight years later, Chambersburg in Pennsylvania! earned the unfortunate distinction When asked about the Borough of being the only town in the north of Chambersburg’s relationship with destroyed by Confederate troops APGA, Leary chuckles that “Chamduring the Civil War. The entire town bersburg joined APGA long before I was burned to the ground by Southcame on as Superintendent a bit over

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

five years ago.” He calls APGA the premier organization representing munis, and that APGA shares priority with his operation in pushing for safe, affordable gas for muni gas systems. There are many legislative and regulatory issues that APGA is involved in. Leary states “APGA gives us a voice and representation in the regulatory and legislative area, and connects us with the highest levels at FERC and Congress.” Chambersburg is also on the Regulatory subcommittee of APGA, which gives them a direct hand in national issues they wouldn’t have otherwise. On the operational side, APGA has been a great help to the Borough of Chambersburg by providing assistance that only a large utility could afford on their own. It is just more affordable due to the pooling of resources and according to Mr. Leary “APGA dues are the best money we spend. Really!”

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


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