Peoples hopes surcharge will help expand gas service

Peoples Natural Gas wants to supply more southwestern Pennsylvania homes with natural gas, and it has filed a new tariff plan that would make it easier for customers to connect to pipelines.

The company, headquartered on the North Shore, has submitted a rider to the Pennsylvania Public Utility Commission that would allow it to add an extra charge to customers’ bills in exchange for connecting them to a natural gas pipeline. The surcharge, a flat fee that would cost an average of $50 to $100 per month, would replace the current model where Peoples would charge unconnected homes thousands of dollars in upfront costs.

Currently, 49 percent of Pennsylvania homes do not use natural gas to heat their homes, according to the U.S. Department of Energy. There are 20 states in the country that have a higher percentage of homes using natural gas heating.

Peoples developed the idea for the surcharge in response to state legislators who have asked utility companies to help find ways to keep Marcellus Shale gas in the state.

“The people that run the state thought to themselves it would be better served to keep that gas in the state than export it out of state,” said Jeff Nehr, director of new business development at Peoples.

Those without access to natural gas use electricity, heating oil, propane or other fuels to heat their homes and service other appliances. But as Marcellus Shale drilling has helped lower natural gas prices domestically, that means those residents often face higher bills than natural gas customers do.

Heating oils and propane can cost customers double what they would pay for similar natural gas use, according to the Energy Information Administration.

But it is expensive to expand natural gas infrastructure.

Peoples spokesman Barry Kukovich said in some instances it can cost $500,000 to $1 million to lay just one mile of pipe, factoring in things like the steepness of a grade, right of way issues and soil composition.

While utilities such as Peoples invest millions annually in infrastructure upgrades, those investments are capped by the PUC to prevent large rate increases. Those investments often are not enough to cover the cost of new installations, which leaves customers who request them stuck with a big bill.

“That up-front cost is a barrier to receiving service,” Mr. Nehr said.

The surcharge spreads that cost out over the span of about 20 years. The surcharge will vary depending on the project. If an entire community is connected, the costs will be less because a lot of the infrastructure expenses will be shared. More isolated customers will see bigger bills.

In a lot of cases, Peoples believes customers will still realize cost savings with the surcharge. If not, the company would recommend against installation, Mr. Nehr said.

Peoples will insulate itself from risk by crafting the surcharge so that it stays with the dwelling, meaning that if the owner who authorized the installation sells the property, the company still would collect over the term of the agreement.

Customers will still have the option to pay all costs up front, said Joe Gregorini, vice president of rates and regulatory affairs at Peoples.

He said the company is confident the PUC will approve the rider and estimated the surcharge could start being offered early next year.

“We think this new approach will let us get to the customers we couldn’t get today,” Mr. Nehr said. “In turn, they can realize savings.”

Michael Sanserino:, 412-263-1969 and Twitter @msanserino.

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