December 2015 Vol. 242, No. 12
Features
APGA Determined to Have Its Voice Heard on Capitol Hill
Leading a natural gas distribution company is always a challenge because there are few businesses that deal so directly with their customer base, be it residential, commercial or industrial, as well as safety regulators, equipment and service providers, not to mention the city council or utility board that approves rates.
Now picture being the head of an association that has to deal with that miasma, and that oh, by the way, are municipally owned and operated, and you have a sense of the daunting in front of Rich Worsinger, 2015-16 chairman of the American Public Gas Association (APGA) Board of Directors.
Worsinger comes to APGA from the city of Rocky Mount, NC where he is Energy Resources director, responsible for the municipally owned electric and natural gas utilities serving 27,000 electric and 17,000 natural gas customers. He has been with the city since January 2001.
Born and raised in Philadelphia, Worsinger has a bachelor’s of science degree in electric engineering from Drexel University and is a licensed professional engineer in North Carolina. Before coming to Rocky Mount, he spent most of his professional career employed by Public Service Electric & Gas Co. in New Jersey in various engineering and management positions in both the electric and gas departments.
Worsinger serves on the boards of the APGA Security & Integrity Foundation, Carolinas Public Gas Association and North Carolina Eastern Municipal Power Agency. He represents public gas systems on the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) Technical Advisory Committee. He also served on the board and is a past president of the North Carolina Association of Municipal Electric Systems.
In this interview, APGA’s chairman discusses his career, the natural gas business, and the heady challenges facing this important industry sector.
P&GJ: What can you tell us about Rocky Mount?
Worsinger: Rocky Mount is a city with a population of about 57,000 located in eastern North Carolina. Our gas division has 22 employees and serves customers in Rocky Mount and the surrounding area. We are the very definition of a “local” distribution system. All of our employees report in and out of the same building every work day. Probably 99% of our customers live within 10 miles of our office.
My CEO is the city manager, and the mayor is the chairman of my “board of directors.” You might think Rocky Mount is not typical of public gas utilities, and you would be correct. We are the 40th-largest of the approximately 1,000 public gas systems in the U.S. One of APGA’s biggest challenges is to continuously remind agencies like PHMSA that its regulations have to be reasonable for small utilities to implement because 70-80% of the utilities it regulates are even smaller than Rocky Mount. I have one engineer on staff – the majority of utilities don’t – so rules that require significant technical analysis will be very difficult for most utilities.
P&GJ: Can you cite some examples?
Worsinger: The recent construction inspection rule prohibits employees involved in a gas main installation project from inspecting any task they performed. It presumes the utility has other qualified employees who could go out to the job site and perform those inspections. For larger utilities that may be true, however, even for them it could be very burdensome to pull someone off one construction job to inspect another crew’s work. For the over 500 utilities with five or fewer employees, and probably only one crew qualified for construction, there would be no choice but to hire an outside inspector, significantly increasing their construction costs.
And while it’s not a regulation, PHMSA is encouraging operators to follow the new API Recommended Practice (RP) 1173 on Pipeline Safety Management System (PSMS). APGA participated in developing that document, but we were outnumbered and outvoted by large interstate oil and gas pipeline operators who, to no one’s surprise, wrote the RP to describe what safety management systems would be appropriate in their organizations.
Let me read you a sentence from the audit section of RP 1173: “An audit may be performed by external professionals or internal personnel not involved in the work of the PSMS or the operations being audited.” I’m not sure even Rocky Mount could find internal personnel capable of auditing pipeline safety not involved in our operations and, as I said, we are the 40th-largest out of nearly 1,000 public gas systems.
That said, APGA fully supports the principles of safety management systems. The 10 basic elements in RP 1173 are applicable to operators of all sizes. APGA is writing guidance for applying PSMS to public gas systems that will be written in terms that smaller operators will understand and are applicable to public gas systems.
For example, top management in most public gas systems are elected or appointed officials, in my case, the mayor and city council. Our document will explain the role of elected and appointed officials in managing safety at a public gas utility and provide guidance on how, through their words and actions, these officials can foster a safety culture in their utility.
P&GJ: What is today’s leading issue for public gas systems?
Worsinger: Natural gas is the cleanest, safest and most useful of all fossil fuels. It is also domestically produced, abundant and reliable. APGA strongly believes that the direct use of natural gas is in the best interests of our country and provides a number of benefits, including increases in overall efficiency and reduced greenhouse gas emissions. By direct use, I refer to using gas at the location where energy is needed, rather than converting that gas into electricity, a process in which over 75% of the energy is lost.
Unfortunately, over the last several years, public gas systems have faced an increasing number of threats to the direct use of natural gas. These threats have come from legislation, regulations and building codes and standards. APGA is extremely concerned about the increasing number of attacks on the direct use of natural gas, and we fear that some are pushing ill-advised policies that are moving the end-use energy market toward an all-electric society. These threats are so serious that APGA recently formed a Direct-Use Task Group to identify and respond to policies that discourage the direct use of natural gas.
An example of just such a policy is the Department of Energy (DOE) rulemaking setting an energy efficiency standard for natural gas furnaces. The current standard is 80% Annual Fuel Utilization Efficiency (AFUE), which is a non-condensing furnace. DOE proposed to require a 92% AFUE that would require condensing furnaces. Condensing furnaces can’t vent through a conventional chimney, requiring special venting that adds significantly to the cost of installation.
We are concerned that the additional costs associated with replacing a non-condensing natural gas furnace with a condensing furnace will push many residential customers – particularly those in warmer climates – to purchase and install less efficient home- heating alternatives with higher operating costs, higher energy use and higher greenhouse gas emissions. This certainly runs counter to the rule’s goal of increasing efficiency.
P&GJ: In the past, APGA has urged Congress to amend the Natural Gas Act regarding pipeline over-collections. Is that still a priority issue?
Worsinger: APGA continues to urge Congress to amend Section 5 of the Natural Gas Act (NGA) to give natural gas consumers the same protection it gives electric customers under the Federal Power Act (FPA). Under the FPA, if electric customers file a complaint and the Federal Energy Regulatory Commission (FERC) rules that the rate the customers have been paying was unjust and unreasonable, FERC can make the new just and reasonable rate effective back to the date the complaint case was filed. The affected customers will receive refunds of the overcharges.
By contrast, FERC does not have the same authority under the NGA to require refunds to gas customers that have been overcharged by their pipeline supplier. The gas customer will begin to pay the new just and reasonable rate only when FERC has concluded the complaint case, not from the date the complaint was filed as allowed for electric customers. The pipeline keeps all overcharges from the time the complaint is filed until it is finally resolved, which could be several years.
This current system makes it uneconomical for customers to challenge excessive pipeline rates, which virtually guarantees that many pipelines will continue to overcharge their customers despite the NGA mandate that pipeline rates be just and reasonable. There is no valid reason to protect electric customers from paying unjust and unreasonable rates but not gas customers. Fairness requires that successful complainants, both gas and electric, must be awarded refunds from the date the complaint is filed until the date new just and reasonable rates are ordered to be in effect.
P&GJ: What are APGA’s priority issues as Congress addresses Reauthorization of the Pipeline Safety Act?
Worsinger: APGA supports a clean reauthorization of the Pipeline Safety Act. A number of regulations that came out of the last reauthorization are yet to be finalized or are still early in the implementation phase. We believe time should be allowed for those regulations to go into effect before additional regulations are imposed upon public gas systems.
The issue of methane as a greenhouse gas has received a lot of publicity. It may be raised and place scrutiny on how PHMSA considers environmental impacts when regulating utilities’ leak management and main replacement programs.
The issue of pipeline safety user fees has been raised. Since 1986, PHMSA’s pipeline safety program has been completely funded by user fees paid by gas consumers and collected by transmission pipeline operators. (The logic behind user fees is that gas consumers are the ultimate beneficiaries of a well-regulated gas pipeline system. Therefore, those gas consumers should pay the cost of regulating pipeline safety.)
Most of the gas consumed in the U.S. moves through transmission pipelines at some point, therefore, Congress decided that was the logical place to collect user fees. The pipelines would pass the fees onto their LDC and direct-sale customers, and then the LDCs would pass the fees on to the LDC’s customers.
Recently the Interstate Natural Gas Association of America (INGAA) testified before Congress that the current system was unfair because PHMSA regulates both transmission and distribution safety, insinuating that Congress should amend the act to require PHMSA to collect some portion of user fees directly from LDCs. APGA strongly opposes any change in the manner in which user fees are collected. As originally established, user fees for funding PHMSA are to be collected by natural gas transmission operators from their downstream customers, not paid by the pipeline.
These user fees are treated by FERC as part of the transmission operators’ legitimate cost of service and hence are includible in the transmission operators’ rates. This approach minimizes the number of collection points between the government and those from which it is collecting the user fees.
There is no reason for any pipeline to pay a single penny of PHMSA’s user fees out of its profits any more than Walmart has to pay any portion of the sales tax it collects from its customers out of its profits – it’s a pass through. To change the user-fee collection point to distribution would more than double the number of entities through which PHMSA would collect fees, more than doubling the administrative burden of assessing and collecting the same amount of money.
Also, if some portion of user fees is collected directly from distribution operators instead of via the rates they are charged for transportation, fairness dictates that the pipelines should adjust their transportation rates to remove user fees from transportation rates.
APGA represents publicly owned natural gas distribution systems. There are approximately 1,000 public gas systems in 37 states and over 700 are APGA members. Publicly owned gas systems are not-for-profit, retail distribution entities owned by, and accountable to, the citizens they serve. They include municipal gas distribution systems, public utility districts, county districts, and other public agencies that have natural gas distribution facilities.
Captions:
Rich Worsinger with APGA President Bert Kalisch, left, and FERC Chairman Norman C. Bay, right.
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