CBS Newsletter
Spring 1994
pg. 10

Bringing Better Planning and Energy Efficiency to Gas Utilities

Scientists in the Utility Planning and Policy Group of the Energy Analysis Program recently completed a document designed to introduce gas utilities and their regulators to the benefits of integrated resource planning. IRP is a process used by utilities and public utility commissions (PUCs) to assess a comprehensive set of supply- and demand-side resource options when meeting customers' long-term energy service needs. The document, known as the Primer on Gas Integrated Resource Planning,is being published by the National Association of Regulatory Utility Commissioners (NARUC) under a grant from the U.S. Department of Energy.

Interest in gas IRP has increased in recent years for a number of reasons. One is the industry's ongoing restructuring which is being accelerated by recent policy changes at the Federal Energy Regulatory Commission. FERC Order 636 requires gas utilities to become active managers of their gas portfolios. Also, widespread adoption of electric IRP processes has made state regulators aware of the potential benefits of gas IRP. Finally, the Energy Policy Act of 1992 (EPAct) now requires states to consider IRP a regulatory process. Despite the increased interest in gas IRP, until now there has not been a single comprehensive report on the topic. The Primer fills the information gap by providing an overview of many regulatory and technical issues raised by gas IRP.

Gas IRP is a controversial topic because it is not clear that IRP, largely developed for electric utilities, directly applies to the natural gas industry, which is less vertically integrated and is subject to greater competition in certain end-use markets. According to LBL principal investigator Charles Goldman, "It is probably not a good idea to conduct IRP for gas utilities in the same manner as the electric utilities do. Compared to the electric industry, the gas industry is not as vertically integrated, does not make incremental investments in large chunks, and does not face the same environmental constraints. Further, the amount of untapped end-use energy efficiency potential appears less. As a result, it may make more sense for PUCs to adapt IRP regulations to conditions facing the gas industry and, for utilities, to include IRP objectives in ongoing strategic planning processes."

The Primerpresents the potential benefits and drawbacks of IRP as a regulatory process as well as approaches that states may take to reap IRP's benefits. Several areas of analysis must be coordinated in an IRP process regardless of the regulatory structure in which a gas utility operates: demand forecasting, demand-side and supply-side screening, the integration of supply- and demand-side resource options, and financial and rate planning. A simplified representation of the analysis framework and the relationships between various areas is shown in the figure. In addition to providing an overview of the major areas of analysis in gas IRP, the Primerfocuses on specific technical areas including:

The Primer does not resolve major policy issues associated with gas IRP. Instead, it provides a comprehensive discussion of many of the major policy issues and highlights promising planning methods and other analytic tools that gas utilities and regulators are beginning to use in IRP processes. According to Nevada Public Service Commissioner Jo Ann Kelly, who coordinated the NARUC Gas Committee's review of the Primer, its development process "was unprecedented because of the amount of input that was received from the gas industry and the NARUC Conservation and Gas committees. As a result, the document is very balanced and will be of great value to many PUCs, especially in light of the requirements in EPAct."

—G. Alan Comnes

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Charles Goldman
(510) 486-4637
or G. Alan Comnes
(510) 486-4647
Utility Planning and Policy Group
Energy Analysis Program

To request a copy of the Primer,contact Judi Ford at NARUC: (202) 898-2203.

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