Replacement/Upgrades Remain Priority For Gas Distribution Market

February 2013, Vol. 68 No. 2

Federal safety regulators did not mandate a timetable for completion of the efforts; however, the strong expectation of the Call to Action and related initiative is that pipeline operators and their regulators will work toward addressing the replacement needs expeditiously. The benefits of accelerated replacement efforts are compelling and include: pace of replacement; geographic approach to replacement; outside contractor costs; and coordinated planning with municipalities.
In summary, proactive management of the integrity of aging pipe infrastructure, accelerated replacement, enhances safety and reliability, contributes to cost savings over the longer term and is less disruptive to customers and communities than a reactive approach. Acceleration of replacement efforts also delivers the desired integrity and safety benefits more expeditiously, lowering maintenance requirements associated with the aging plant that is being replaced.

Replacement efforts
While noting that LDCs expend considerable effort and capital maintaining and replacing the infrastructure serving existing gas customers, the American Gas Foundation report calls attention to the challenges that remain as considerable quantities of pipe in service are constructed of material types and vintage that will eventually require replacement. Moreover, the current slow pace of replacement in some states is projected to lead to significantly longer time frames to complete.

This is illustrated in the accompanying Figures 1 and 2 that show the miles of mains represented by these materials has declined from 195,000 in 1990 to 112,000 in 2011, the most recent year for which data are available. Similarly, the count of services has declined from 11,395,000 in 1990 to 5,655,000 in 2011. While the data show progress has been made across the range of materials, it also indicates it may take another three decades to finish the job at the current pace of replacement.

Cost drivers
While the primary objectives of efforts to address leak-prone pipe infrastructure are to preserve the public safety and maintain the reliability of supply delivery, an important secondary objective is to manage the level of costs incurred, particularly for LDCs that have significant replacement challenges.

When leaks develop, a fundamental choice faced by LDCs is whether to repair or replace aging pipe - a decision that requires an assessment of the safety risk along with the tradeoff between a current capital cost and likely ongoing operations and maintenance (O&M) expenses.