July 2017, Vol. 244, No. 7

Features

Lost Gas: Push to Track Down Gas Missing from Pa. Pipelines

A while back, Peoples Natural Gas customers paid millions of dollars for gas that the North Shore utility couldn’t account for and its customers may not have received. In 2015, 4.4% of the gas that Peoples took into its system wasn’t there when the utility tallied the volumes it delivered to customers.

The utility company has been working on the issue – it has accelerated plans to replace bare steel infrastructure, and for the past year it has been working to map leaks from its pipelines within the city of Pittsburgh though car-mounted emission sensors.

But its rate of unaccounted for gas – a metric that utilities operating in Pennsylvania must report to state regulators – remains the highest of its peers.

Where does all that missing fuel go? It could be leaking out of old pipes or valves. It could be that the gas meters, many of them old, aren’t recording accurate measurements. It’s also possible that a portion of the “lost” gas isn’t actually lost at all – perhaps it’s stuck en route to the customer when the meter reader visits.

This kind of problem could be an issue for any utility in the state. In 2013, the Pennsylvania Public Utility Commission (PUC), recognizing that customers of many companies foot the bill for phantom gas, established a standard method for calculating it.

What makes Peoples’ situation unique, however, is that in addition to gas mains and distribution lines that crawl beneath 700,000 homes and businesses in western Pennsylvania supplying customers with natural gas for cooking and heat, the company also operates more than 1,000 miles of gathering pipelines.

These pipes carry natural gas from old, shallow oil and gas wells – most of them drilled decades ago – that still supply a healthy chunk of the gas sent to Peoples customers.

And in these gathering pipes, 9.2% of the gas that goes in at the meter behind the well sites is unaccounted for at the other end. A few years ago, Peoples began a study of its gathering system to get a better idea of what’s going on, said Lynda Petrichevich, director of rates and regulatory affairs at the utility.

“We know the possible causes,” she said, noting that inaccurate measurements are considered to be one of the main culprits. “It’s just how much is each one contributing.”

During the PUC’s annual review of Peoples’ gas costs last year, the agency’s staff expressed concern at the company’s lost gas on its gathering system and advised the utility to keep working on getting that number down.

It’s been a focus of the commission for some time. “We cared about unaccounted for gas before it was cool,” said spokesman Nils Hagen-Frederiksen.

The PUC put a cap on how much customers would be expected to pay for the misplaced gas. In 2016, utilities could not recover the cost for more than 5% of their lost gas from customers. By 2020, the cap drops to 3%.

But the limit applies only to the distribution system, which for most Pennsylvania utilities is all they have. For Peoples, customers still reimburse the company for all of the unaccounted for gas on its gathering lines, even at a rate of 9%.

Andrew Place, vice chairman of the PUC, said that with a few years of data under its belt, the commission is now looking at whether it makes sense to exclude gathering from the cost-recovery cap. It’s also considering how utilities can identify the exact contributors to the problem.

The issue is multifaceted, Place said.

“It touches on the financial piece for consumers, it touches on safety and it touches on environmental matters,” he said.

Leaking Pipes

That’s why it’s not just consumer advocate groups paying attention to lost gas, but also environmental groups like the New York-based Environmental Defense Fund which studies methane emissions.

The organization is spearheading an effort to get the natural gas industry nationally to follow Pennsylvania’s example and come up with a standard formula for calculating unaccounted for gas. Doing so would give utilities and the environmentalists who are concerned about methane, a potent greenhouse gas, a better picture of how much is leaking from natural gas utility lines.

While it’s not clear how much of the unaccounted for gas on Peoples’ gathering pipelines is due to leaks, the company reported it eliminated 512 leaks on its gathering system in 2015 – the overwhelming majority of which were caused by corrosion.

That’s by far the most of any gas company that reports gathering data to the federal Pipeline & Hazardous Materials Safety Administration (PHMSA).

And yet it accounts for only a fraction of the gathering lines that Peoples operates – about 277 miles of the 1,041 miles in its system. The other 700 miles are too small to be monitored by the federal regulator.

The numbers are indicative of the large size of Peoples’ system, Petrichevich said, and of its age. “If you have a lot more pipe, especially if you have a lot more bare steel pipe,” she said, leaks increase.

Utilities for Everything

The pipelines are a legacy of the company that Peoples used to be – or, rather, the multiple companies that have morphed into the modern-day Peoples. Utilities once did everything from drilling and operating natural gas wells to piping, storing and shipping the gas to their customers.

The fact that Peoples still pulls gas from local wells – there are 8,000 meters with multiple wells behind each one – is a benefit to its consumers, the utility says. Locally produced gas allows the Pittsburgh company to keep prices low and to mitigate the price and volume volatility of regional and national gas markets. State regulators have praised Peoples for keeping its local production sources.

Some of these old wells the company couldn’t abandon even if it wanted to because the gathering lines link directly to customer service lines. For those homes, it is the only source of natural gas.

That local production, however, is in jeopardy since the emergence of shale gas, which upended national and international markets for natural gas and depressed the price of the commodity. That dynamic has forced many small producers out of the game, which has affected Peoples.

In 2015, the company got 25% less local gas than in 2012, Jeff Nehr, Peoples’ vice president for business development said in testimony to the PUC. That means a bigger portion is coming from interstate pipelines.

It’s gotten to the point that Peoples has asked the PUC for permission to offer some local producers higher rates to incentivize their staying in the game. The utility says the local gas, even if some of it is hard to track down, still saves consumers money.

“Our gas costs are among the lowest in the state, due in part to including local gas in our gas supply portfolio,” Petrichevich said. “Even if all of the (unaccounted for gas) could be removed, the impact on our customers would be less than a $1 per month.”

The average monthly bill for a residential customer is $70.37. And a total elimination would be impractical, she added.