Corning Natural Gas
For a gas utility to grow, it has to keep expanding both its piping network in the ground and its markets by connecting more customers. This process is capital intensive and requires the company to maintain financial discipline so it can attract both investors and lenders. To date, the company has been very successful with this strategy.
CNGC, as a public utility, is unique in that it is the only LDC in NYS with a Federal Energy Regulatory Commission (FERC) certificate that allows it to run pipe into Pennsylvania and connect directly to the Marcellus Shale. Seventy percent of its annual gas supply purchases are from local production in Pennsylvania Marcellus wells and New York Trenton Black River wells.
Historically, interstate capacity brought gas supplies from the Gulf of Mexico and West Virginia to Corning Natural Gas. Now that the company is directly connected to local production, it has access to lower cost gas and can economically support additional customer growth.
CNGC is obligated to serve its firm customers first, by law, and must prove to the New York Public Service Commission on an annual basis that it has adequate pipeline capacity and supply to meet anticipated peak winter and normal annual demands. If the company has excess pipeline capacity, or gas supply, it can resell this excess supply and capacity into the market, retaining a small margin for its shareholders while passing the majority of the revenue on to the customer as lower gas costs.
The company no longer needs to utilize 100% of its interstate pipeline capacity to serve its customers since its gas supply is now primarily from local sources. Of course, these benefits to the customers and shareholders would not be possible to such a degree without access to the abundant supply in the Marcellus Shale Play.
A further component of expansion into new locations is the necessity of applying for a “Certificate of Public Convenience, ” which increases the franchise area of the utility. It is a procedural legal process wherein the company must first apply with a municipality for a franchise, and once granted, must then apply with the state Public Service Commission (NYSPSC) for the final franchise approval.
While deregulation has allowed consumers to choose their electric or gas supplier from an Energy Supply Company (ESCO), the distribution component is still highly regulated to ensure the safety and integrity of the delivery system, and to prevent excessive cost due to redundant systems.
Typically, only one LDC can be granted a franchise within a given area. In effect, the LDC is a regulated monopoly. While CNGC has franchises in Steuben, Chemung, and Cortland Counties in New York, Leatherstocking Gas has begun building infrastructure in Susquehanna County, Pennsylvania, and has 201 customers in the Montrose area with plans to expand into New Milford.