NOTICES
PENNSYLVANIA PUBLIC UTILITY COMMISSION
Investigation Order
[39 Pa.B. 491]
[Saturday, January 24, 2009]Public Meeting held
October 9, 2008Commissioners Present: James H. Cawley, Chairperson; Tyrone J. Christy, Vice Chairperson; Robert F. Powelson; Kim Pizzingrilli (Statement Attached); Wayne E. Gardner
UGI Utilities, Inc. and UGI Penn Natural Gas, Inc.;
Management Efficiency Investigation;
Doc. No. D-2008-2063177
Gas Beyond the Mains Investigation;
Doc. No. M-2008-2072850
Investigation Order Before the Commission for consideration is the Management Efficiency Investigation (''MEI'') of UGI Utilities, Inc. (''UGI'') and UGI Penn Natural Gas, Inc. (''UGI-Penn'') (hereinafter referred to jointly as ''the Companies'') conducted by the Bureau of Audits (''Audits''). One area of concern that Audits extensively investigated as part of the MEI was UGI's Gas Beyond the Mains (''GBM'') program, which provides propane service to customers located away from existing gas mains at regulated natural gas rates, and not the unregulated market price of propane. The Commission believes that there are many unanswered questions related to propane service in general and tariffed GBM programs in particular that we should review.
Background
As stated above, Audits conducted a MEI on the Companies. The MEI examined UGI's progress in implementing 20 of the 23 original recommendations from a February 2005 Focused Management and Operations Audit of UGI, the Companies' compliance with the Order approving the acquisition of PG Energy (now UGI-Penn) and their emergency preparedness.
As stated, one issue that Audits has extensively investigated in the context of these audits has been UGI's GBM program. In the 2005 Focused Management Audit, Audits made the following recommendations:
* Develop a policy to procure periodically competitive bids for the propane used for the GBM Program.* Develop a policy and procedure governing GBM market analysis, retain the documents for future regulatory review and implement appropriate program changes.* Provide justification to the Commission for GBM systems served with propane for longer than five years and absent sufficient justification absorb the incremental cost differential between propane and natural gas for these long-term GBM customers.* Establish procedures to consistently maintain O&M records in accordance with 49 CFR Part 192 for all existing and future GBM systems.In the context of this MEI, Audits reviewed and evaluated the effectiveness of UGI's efforts to implement the above GBM recommendations and noted the following improvements achieved by UGI:
* Documented and retained market analyses for each new GBM system.* Modified its tariff to provide justification to the Commission for any GBM systems that have been served with propane for more than 5 years.* Began to maintain Operations and Maintenance records in accordance with 49 CFR Part 192 for all GBM systems.However, Audits had several concerns related to UGI's GBM program and identified these further improvement opportunities:
* Initiate steps to remove long-term individual (stand-alone) customers from the GBM program.* Provide detailed support as part of the annual PGC filing in order for the Commission to assess the prudency of the propane purchases for the GBM program as it relates to UGI's least cost fuel procurement policy.Discussion
According to Audits, the GBM program was primarily designed to use propane to extend service to new developments in areas not presently served by natural gas only until natural gas distribution lines could be extended to serve these customers. Audits found that UGI's GBM program includes 24 individual residential customers and 42 individual commercial customers served via individual propane tanks on the customers' premises. Audits states that some of these residential customers have been on the GBM program since the 1960's whereas most of the commercial customers were added in the 1980's and 1990's. On the other hand, Audits also found that some customers who received propane gas service under the GBM program were served via distribution systems fed by centrally located propane tanks. The jurisdictional status of such systems is unclear.
Audits is also concerned that through its GBM program, UGI is serving individual (stand-alone) customers with propane gas at natural gas rates, thereby normally increasing natural gas costs to customers. We are aware that such issues are not limited to UGI. Our review of current natural gas tariffs shows that UGI Penn and Columbia Gas of Pennsylvania also include propane service rate schedules in their tariffs. See also Appli- cation of PPL Gas Utilities Corporation, Docket No. A-122050F2003, Public Meeting of January 26, 2006 (approving abandonment of gas beyond the main service to 13 commercial customers). Accordingly, the Commission believes that there are many unanswered questions, which should be reviewed concerning propane service in general and tariffed GBM programs in particular.
The Commission desires to review its jurisdiction over propane distribution systems and whether we are appropriately regulating GBM programs of our jurisdictional utilities. Therefore, we are instituting, at a separate docket, a nonprosecutory staff investigation of all the issues related to our jurisdiction over GBM programs and other propane distribution systems. The issues to be investigated include, but are not limited to, the following:
1. Whether GBM programs are in the public interest?
2. Whether the Commission's oversight of GBM programs through individual utility rate proceedings is sufficient?
3. If GBM programs are not in the public interest, what alternatives should the Commission consider to encourage the expansion of natural gas distribution infrastructure?
4. Whether the Commission possesses legal authority to regulate propane distribution systems? And, if yes, how should the Commission exercise such authority over existing systems?
Conclusion
The Commission is concerned about the GBM programs of our jurisdictional gas utilities and our jurisdiction over other propane distribution systems. The investigation directed by this order should review the jurisdictional status of such systems and any other relevant issues. Accordingly, we shall institute a nonprosecutory staff investigation at a separate docket to address these issues; Therefore,
Statement of Commissioner Kim Pizzingrilli Emergency preparedness and the protection of underground service lines are central to the provision of safe and reliable utility service. This management efficiency investigation examined both issues and included recommendations which UGI has agreed to adopt. These findings and recommendations should serve as a reminder to all utilities of the importance of emergency preparedness and damage prevention programs.
Specifically, UGI was evaluated for its compliance with the Commission's Public Utility Security, Planning and Readiness regulations, which were adopted in 2005. (52 Pa. Code § 101.1, et. seq.) The Commission requires that utilities develop and maintain physical security, cyber security, emergency response and business continuity plans to protect the Commonwealth's infrastructure and to ensure safe and reliable utility service. A utility is required to file a self-certification form indicating that it has reviewed and tested its plans on an annual basis.
As found with the recent power outages in Western Pennsylvania, it is critically important that all utilities continually review and update its plans to ensure that they are prepared to respond in the event of an emergency in an efficient and effective manner. Staff recommended that UGI update the plans for both companies. I would encourage all utilities to review their existing emergency preparedness and security plans to ensure that they are current and consistent with the Commission's regulations.
The audit also evaluated UGI's efforts to prevent damage to their underground facilities by contractors and others. Damaged facilities, including line hits, are the number one safety issue for Pennsylvania's gas industry. Pennsylvania averages three reportable incidents a year related to gas explosions caused by facility damages. In 2007, 27% of all natural gas facility damages were caused by excavation performed by other utilities. Additionally, according to the Common Ground Alliance, 38% of all damages to underground facilities are, in part, a result of the One Call Center not being contacted. Damaged facilities are a reliability issue for all regulated utilities. Repair and restoration costs not recovered from the responsible parties are ultimately paid for by utility customers.
A comprehensive damage prevention program includes tracking of third party damages to utility owned facilities as well as tracking of damages caused by the utility and their contractors. The damage prevention program also includes tracking and collection of costs and recovered dollars related to facility damages.
This audit shows that a damage prevention program implemented by UGI in 2005 has contributed to a significant reduction in line hits and a higher recovery of costs from the responsible parties. I would encourage all other utilities to review this aspect of the audit report, evaluate their own operations, and ensure that they have comprehensive damage prevention and cost recovery programs.
Recently, Pennsylvania One Call (PA One Call) and the Damage Prevention Industry implemented the ''8-1-1'' ''Call before You Dig'' number to assist in the reduction of facility damages. PA One Call has sponsored Safety Days across the Commonwealth to educate the public and contractors regarding safe excavation practices and damage prevention programs. PA Safety Days have become some of the largest one day safety expositions in the nation, emphasizing best practices in all phases of underground excavation safety and hands-on demonstrations. As part of these events, an emphasis is also placed on educating participants on the importance of calling 8-1-1 three days before beginning any excavation project to ensure that utility lines are marked.
PA One Call, of which this Commission is a board member, is dedicated to minimizing utility service interruptions, reducing on the job injuries and deaths, promoting a higher level of public safety and protecting the environment. PA One Call handles all calls made to 8-1-1 by anyone requesting location of underground lines. The service is available 24 hours per day, every day of the year.
The Commission will continue to partner with PA One Call to educate the public on the importance of calling 8-1-1 to ensure that utility lines are marked prior to digging. All public utilities must do their part by educating contractors on the importance of contacting 8-1-1 and by implementing comprehensive damage prevention programs.
The Commission's Bureau of Transportation and Safety, Gas Safety Division, continues to work closely with PA One Call to determine what changes in filing requirements may be necessary to ensure that preventative measures are being taken to avoid damages; that all damages are reported, and One Call is able to sufficiently track information and take appropriate action.
KIM PIZZINGRILLI,
CommissionerIt Is Ordered That:
1. That a nonprosecutory staff investigation is hereby instituted at Docket No. M-2008-2072850 to investigate gas beyond the mains programs and propane distribution systems.
2. That the investigation is assigned to the Law Bureau which, in conjunction with the Bureaus of Fixed Utility Services, Audits and Transportation and Safety, shall initiate and conduct the investigation and submit a report to the Commission on or before March 31, 2009.
3. That this Order be served upon all jurisdictional natural gas distribution companies, the Energy Association of Pennsylvania and the Pennsylvania Propane Association.
4. That this Order shall be published in the Pennsylvania Bulletin.
5. That the proceeding at Docket No. D-2008-2063177 (Audits Report at D-07MEI005) be marked closed.
JAMES J. MCNULTY,
Secretary
[Pa.B. Doc. No. 09-144. Filed for public inspection January 23, 2009, 9:00 a.m.]
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