Energy Biz - July/August 2008 - (Page 98) » Final Take Reflections on Regulation By don mason EDitor’s notE (Guest opinion) Ohio utility regulator Don Mason sent out an e-mail upon announcing his retirement. In part it read: “Time has gone by so quickly since I have been a public servant since the day after I stepped off the wrestling mats in 1979 as an NCAA All American and began working as an intern for the city of Zanesville, Ohio. “When I was a college wrestler, we had a motto, ‘8 minutes — no regrets!’ The point was that it is important to put maximum effort into the task before you so that when you one day looked back at either success or failure, you would know that you did your best.” EnergyBiz invited him to reflect on his career and some of the issues that remain important to him. i have been involved in environmental and energy regulation since the early 1990s. It is easy to think that life has not changed much since then. We remember the 1990s as the era of cheap energy, even though at the time we did not know it. Mainlines and distribution lines were being extended into new subdivisions and replacing other home heating fuels as rural America became increasingly populated with urban dwellers. In the last 10 years, natural gas use within the home increased from 57 million to over 64 million homes. At the same time independent power producers and regulated utilities were excited to build natural-gasfired electric power generation because siting was quick, construction lead times were short and natural gas deregulation at the federal and state levels created alternative supplies of natural gas. The wellhead price of gas hovered near $2 per thousand cubic feet of gas and increases in fuel prices were not a concern as the prior 10 years had seen natural gas go above $2 and return below $2 mcf with frequency. In Ohio, companies were able to stay out of rate cases as growth in residential customers more than made up for any home weatherization or equipment efficiencies that made their way into the system. Natural gas was proclaimed to be the cheap, environmentally friendly fuel that would assist our country and meet peak generation requirements while keeping our skies clean from pollutants. A lot has changed since then as natural gas prices have tripled; our natural gas supply-demand balance is only possible with the importing of natural gas produced overseas. Meanwhile, the petrochemical industry is moving overseas to locations with cheaper energy while our consumers are feeling the heat of high electricity and natural gas bills. July/August 2008 Don Mason In 1997, electric generation was fueled by slightly over 4 trillion cubic feet of natural gas, while last year power generation consumption rose to nearly 6.7 tcf. The discussion on climate policy is sure to lead to increased demand for natural gas-fueled generation while at the same time the domestic production is having difficulty meeting today’s requirements. It seems that many in our country would rather send money overseas to purchase energy than invest in domestic onshore and offshore production. Over the last 10 years, I have seen many regulatory tools successfully used to make the existing distribution and transportation system more efficient and improve the process to replace aging and unsafe pipe. In Ohio, we have used accelerated mainline replacement and project preapproval to reduce investor risk and allow for a timely return on investment. Natural gas hedging has become an often-used tool to reduce volatility. Capacity release and asset management programs have reduced waste and increased shared revenues between ratepayers and shareholders. The most meaningful trend that has developed is the increased discussion of revenue decoupling, recognizing that the perfect rate case should, among many other things, fairly create cash flow for a utility to maintain the system integrity, provide for a sufficient workforce and capital investment. 98 E n E rgyB i z
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