American Gas - August/September 2014 - (Page 27)

rather than the traditional approach of "asset-only" optimization. Sponsors need to carefully balance the long-term beneﬁts of return-seeking assets versus those assets whose purpose is to reduce plan volatility. * Reviewing the appropriateness of settling retiree obligations through an annuity placement with an insurance carrier. Most importantly-and unlike most other industries-utilities have a provision for pension cost reimbursement built into rate structures approved by regulators. During periods of low volatility, these mechanisms work well, with reimbursements often in line with actual plan costs. However, during periods of higher volatility, utilities often face a mismatch (sometimes known as "carrying cost risk"), where the reimbursement can lag actual plan costs for a signiﬁcant period of time. In light of this mismatch, some utility sponsors and state rate commissions have moved to a cost "tracker" approach that better serves to align costs and protects both ratepayers and utility plan sponsors. Last year was historically exceptional for pension plan sponsors due to strong equity returns and an uptick in interest rates. While the average Fortune 1000 plan sponsor saw its plan funding status increase to 82 percent at year-end 2013, the utility sector average climbed to a ﬁveyear high of 89 percent. These positions will now enable many sponsors to implement (or continue along) their pension journey plan-which should consider settlement strategies in a coordinated manner with investment, funding, and beneﬁt design strategies. We recommend that utilities use this current opportunity, working with their respective rate commissions and other key stakeholders, to manage pension risk in a prudent way for the future. Royce Kosoff is a senior consulting actuary with Towers Watson. AGA SCHOLARSHIPS PROVIDE ASSISTANCE FOR FUTURE WORKERS Recognizing the urgent need for skilled workers in the natural gas industry, the American Gas Association last year established the AGA Scholarship Program, providing a total of $1 million over a ﬁve-year period in funding for students pursuing technical careers in the industry. To date, more than two dozen schools are working with AGA and its member companies to provide scholarship assistance to 37 students who either have already started their education or will begin their studies this fall. In some cases, AGA members offer additional ﬁnancial assistance to qualifying students. Participating schools may offer certiﬁcates or associate's or bachelor's degrees in relevant programs including HVAC, welding/welding technology, air conditioning technology, chemical engineering, civil engineering, transportation technologies, electronics and computer technology, construction engineering management, gas utility construction and service, manufacturing engineering technology, and mechantronics. AGA anticipates that 200 students will be able to take advantage of the program over the next four years. Scholarship funds may be used for tuition, lab fees, books, tools, and other equipment needed to complete the academic program. Participating schools include: Baton Rouge Community College Bishop State Community College Bismarck State College Butte College California State Polytechnic University Central Piedmont Community College City Colleges of Chicago Clackamas Community College Colorado School of Mines Eric Community College Gwinnett Technical College International School of Hydrocarbon Measurement Ivy Tech Community College Kilgore College Lamar Institute of Technology Los Angeles Trade and Technical College Marshalltown Community College Monroe Community College Northeast Iowa Community College Northeast Wisconsin Technical College Northern Virginia Community College Pennsylvania College of Technology Salt Lake Community College Stevens Institute of Technology University of Houston West Virginia University Westmoreland Community College AUGUST/SEPTEMBER 2014 AMERICAN GAS 27

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American Gas - August/September 2014