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Commission won’t regulate resale of compressed natural gas

Compressed Natural Gas dispensers at the Allied Waste Management station in Boise.

Compressed Natural Gas dispensers at the Allied Waste Management station in Boise. (Photo courtesy of Allied Waste)

The Idaho Public Utilities Commission, in response to a request by Intermountain Gas Co., issued a declaratory order stating it does not have jurisdiction over the resale of natural gas by non-utility third parties.

Third-party entities have asked Intermountain Gas to sell them natural gas so that the third parties can resell it for use as compressed natural gas in vehicle fleets.

Intermountain Gas sought assurance from the commission it would not consider the utility in violation of state law or tariff provisions if it were to sell to third parties for resale to vehicle fleets.

Intermountain anticipates other potential resale transactions may be proposed by other entities due to the price, availability and environmental benefits of using natural gas as a transportation fuel, the commission said in a release. Some Western states, including Washington, Utah and Wyoming, permit public compressed natural gas fueling stations.

Intermountain Gas also raised liability concerns regarding resellers, the commission’s statement said. The company asked that the declaratory order include a statement that the commission will continue to regulate the safety of natural gas facilities operated by Intermountain, but only to the point where Intermountain’s facility or pipeline connects to a buying customer’s metering device. In this way, Intermountain Gas may not be held liable for what happens when its product is resold by third-party entities.

In response to the Intermountain Gas request, the commission determined that the Energy Policy Act of 1992 preempts the commission’s authority over the resale of natural gas for transportation purposes. This was to encourage the use of compressed natural gas in motor vehicles to reduce dependency on foreign oil, commission spokesman Gene Fadness told the Idaho Business Review.

Consequently, the commission stated in a release it “will not exert rate-setting jurisdiction over the resale of natural gas for use as a fuel in motor vehicles.”

The commission stated it will continue to enforce its safety rules and regulations up to the point that Intermountain’s facilities connect to a customer’s metering device. Beyond that point, the International Fire Code establishes the safety requirements for facilities dispensing compressed natural gas as a motor fuel. The State Fire Marshal, local fire departments and fire districts are primarily responsible for enforcing the International Fire Code.

“Basically what this does is enable what we hope becomes a viable market for public fueling of compressed natural gas vehicles,” Byron Defenbach, market products and services manager with Intermountain Gas, said of the commission’s order. The order clarifies what others can do after Intermountain delivers gas to them under its normal operating procedures, and “we see our role today as a facilitator in this market to further CNG vehicle fuel usage where it makes sense,” he told the Business Review.

Intermountain Gas would deliver to the compressed natural gas reseller at a tariff rate that he said is about the same as Intermountain’s least expensive commercial gas price, reflecting that the buyer is buying more gas relative to the utility’s costs to serve the buyer. He said IPUC jurisdiction in this instance ends at the Intermountain Gas meter outlet; the CNG station operator can resell the gas, for motor vehicle use only, at a price that the operator sets.

Historically, federal and state utility operating rules have prevented the resale of natural gas delivered by the utility, keeping the utility as the last entity that gets to measure and sell it, Defenbach said. The rules prevented landlords or developers from sub-metering and re-selling to apartment tenants or landowners in a subdivision, for example.

Intermountain Gas is evaluating whether it will operate fleet or public CNG stations, such as on freeway corridors for long-haul trucks, he said. If the Intermountain Gas utility enters the public fueling business, the Idaho Public Utilities Commission may have to approve the price the company charges for compressed vehicle fuel, he said.

Idaho has not deregulated electricity and natural gas service at a retail level, so competitors are prohibited from coming in and selling or re-selling in assigned service territories of the state’s regulated utilities, Fadness said. There is an exception for compressed natural gas used in motor vehicles, he said.

The Treasure Valley Clean Cities Coalition submitted comments supporting Intermountain Gas in its view that the commission not regulate the resale of compressed natural gas for transportation purposes, the commission said. The coalition supports greater use of compressed natural gas as a motor fuel that will reduce dependency on foreign oil, improve air quality and promote local economic development, the commission said.

Beth Baird, coalition coordinator, said the order substantiates that compressed natural gas can be resold for use in vehicles. The coalition this year received a $5.5 million U.S. Department of Energy grant to build public CNG fueling stations at Allied Waste sites in Boise and Nampa, and to market the availability and use of compressed natural gas in southwest Idaho. Allied has substituted a number of diesel vehicles with CNG vehicles, with help from the grant. Allied’s fleet fueling facility in Boise is completed. By October, a similar facility is to be completed in Nampa, as well as public pumps in Boise and Nampa.

About Brad Carlson