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Pipeline Replacement Programs

Pipeline Replacement Programs. Presentation By Frank Radigan Hudson River Energy Group June 26, 2012. Topics of the Day. Who is HREG? Pipeline Replacement Programs What they tell the regulator What they tell Wall Street Lessons learned

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Pipeline Replacement Programs

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  1. Pipeline Replacement Programs Presentation By Frank Radigan Hudson River Energy Group June 26, 2012

  2. Topics of the Day • Who is HREG? • Pipeline Replacement Programs • What they tell the regulator • What they tell Wall Street • Lessons learned • Considerations to be addressed in developing a program to upgrade the LDC's system

  3. Who is HREG • Former NYS Public Service Employees • Frank Radigan – Rates, Cost of Service, Rate Design, Depreciation • Phil Teumim – Focus on utility management, policy issues and rates • John Gawronski – Gas Safety • Mike Scott – Gas Safety and Planning.

  4. Our Recent Experience • Yankee Gas • Southern Connecticut Gas • Connecticut Natural Gas • Washington Gas Light Company • Northwestern Energy (Montana) • Peoples Gas (Chicago) • Investigation into the cause of a gas explosion in the Southwest

  5. Pipeline Replacement Programs (a rose by any other name) • Pipeline Integrity Program • Accelerated Pipe Replacement Program • Leak Prone Pipe Replacement Program • Pipeline Modernization Program • On Electric Side – • Smart Grid • Environmental and Reliability Account

  6. What Utilities Tell The Regulator • Maximize Safety • Proactive to prevent accidents • Reduce customer outages • Current system safe but program will enhance safety and reliability • Local economy benefits from new jobs

  7. What Utilities Tell Wall Street

  8. Lessons Learned • Sales Growth is slow or non-existent due to decoupling • Companies are in the business to grow • Increased investment increases earnings • Riders (et. al.) reduce regulatory lag • If request for rider is rejected, utilities survive

  9. Distribution Integrity Management Plan (DIMP) • USDOT Pipeline Safety requirement • Under development for years and first applied to high pressure pipelines • Regulations affecting LDCs issued 2/10 and plans must be implemented by 8/11

  10. DIMP Requires LDCs to • Know and understand their systems • Development of awareness of threats to systems • Rank risks in terms of likelihood and consequences • Identify and implement measures to address the identified risks • Put in place systems to monitor performance and measure effectiveness • Evaluate the program periodically and implement improvements • Report the above annually to US DOT (PHMSA)

  11. Findings to Date • LDC approaches tend to be long on spending (throwing money at the problem) and short on analysis • To be fair, analytical deficiencies may be the result of poor data quality • DIMP implementation is spotty • DIMP does not mean you have to increase spending • Some LDCs requesting substantial funding for DIMP

  12. Which Pipe is Most Vulnerable? • Cast iron, particularly smaller diameter - tendency to crack • Bare steel, non-cathodically protected steel (typically pre-1970) - tendency to corrode • Some early plastic pipe - tendency toward embrittlement

  13. Indicators of Need for Upgrades • Amount and Percent of Vulnerable Pipe (Cast Iron and Bare Steel) • Leak rates, categorized by pipe composition and cause • Numbers of Third Party Damages (excavation) • LDC's response to DIMP. • DIMP analysis will show need for upgrades

  14. Leak Rates, the Primary Indicator • Annual data available; all LDCs required to file annual report with US DOT • Broken down by pipe material, cause of leak, vintages of pipe • Enables analysis of pipe replacement rates, trends in leak rates

  15. Third Party Damages • Not a function of the condition or age of the infrastructure. • Typically, largest single cause of leaks and incidents on LDC systems • Programs vary widely but should include: • Outreach and education to the public • Outreach and education to excavators, both public employees and private contractors • Close working relationship with one-call system

  16. How to Evaluate Proposed Program • Does the LDC have a plan for replacing its vulnerable pipe? • How does it prioritize pipe sections for replacement/rehabilitation? • Does the LDC's plan target the highest risk areas? • What has the LDC done to address DIMP?

  17. Independent Analytical Approach • Compare leak rate performance against national and regional averages • Compare third party damage rates against national and regional averages • Determine trends in leak rates by type and vintage of pipe

  18. Summary • Basic premise: vulnerable pipe needs to be replaced over a reasonable period of time according to a well thought out plan. • Worthy goal. Need to find the right balance between cost and safety. • Is a Rider necessary? • Plan should be data driven. • LDC may need to do a lot more homework to come up with a reasonable plan.

  19. Contact Information Frank RadiganHudson River Energy Group237 Schoolhouse RoadAlbany, NY 12203 e-mail: FRadigan@aol.comTel. (518) 452-2585Fax (518) 452-2684

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