Pipeline Replacement Programs

Presentation By Frank RadiganHudson River Energy Group

June 26, 2012

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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

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.

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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

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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

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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

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What Utilities Tell Wall Street

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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

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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

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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)

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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

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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

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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

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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

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Leak Rates, the Primary Indicator

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

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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?

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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

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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.

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Contact Information

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