Member System Profiles: Riviera, AL

Riviera Utilities is a small municipal utility providing water, wastewater, electricity, cable TV and gas to different overlapping service areas in Alabama.

The gas operation, which currently serves about 3500 customers, was built in the 1950s of coated wrapped steel pipe. The system started using PE pipe in early 1990 for low-pressure distribution uses.

Riviera gets natural gas through Gulf South Pipeline at its two city gate metering stations in Bay Minette and Gateswood. Riviera Utilities has firm gas contracts with Prior Energy and Phoenix Pipeline Co. The Gas Department serves customers in Foley, Magnolia Springs, Summerdale, Elberta, Miflin, Gulf Shores, and the municipalities of Loxley, Robertsdale, Silverhill and the gas system customers of Orange Beach.

“Customers who get all of our services like getting just one bill, and going one place to apply for service,” according to Richard Peterson, Superintendent of Gas, Water, and Waste-Water operations. Gas customers are 15 % industrial, 50-60 % commercial and the balance residential. Gas use is increasing because the commercial service industry supporting new growth is gas dependant.

While the gas system is growing, natural gas is becoming a hard sell due to the price situation. If customers knew the price would be stable, gas marketing would be easier, and the Gas Department would be growing faster. Efficiency and price aren’t the selling points they once were. Volatility is the hardest thing to try to explain to people. Most commodities don’t jump in price like this, and since natural gas is an essential commodity, customers cannot just stop buying it if they cannot afford it.

Richard Peterson is putting together a mailer explaining the reasons prices will be high, and urging customers to conserve - lowering thermostats, installing weather-stripping, putting blankets on water heaters, and other such measures.

While the people on Wall Street talk about the wonders of the free market, the way the price of gas is actually determined; it is more than just supply and demand. There is an emotional component to the setting of prices and the creation of price spikes. There needs to be time to analyze the REAL impact of whatever creates the spike. When it goes up very fast, it never seems to come back down that quickly. After three or four of these events in a row, no one seems to remember the baseline price.

Riviera Utilities is really in the free market for a lot of materials, such as equipment, vehicles and the like. “But with gas,” Richard says, “you are pretty much held hostage by this monster.”

The Gas Department has done some hedging, but locking a large portion of base load is “like going to Biloxi and playing the slot machines. We don’t want to gamble away our customers’ winter heating”. Mr. Peterson is now watching gas prices closer to see if it comes down to reasonable levels, to hopefully take advantage of any lull in the price to protect our customers from future price spikes.

In addition to the recent price difficulties, Riviera also faced the challenge of a very short heating season, with cold snaps occurring from mid-December to mid-late-February. Even in this time frame, there are still some days in the 60s-70s range. Because of the short cold period in the south, heat pumps work well fifty weeks of the year, which makes them pretty competitive. Riviera Utilities try to sell our service, convenience, and comfort of natural gas. Plus, people moving from the north are accustomed to gas, which is a boost to marketing.

Liquefied Natural Gas is a good start to get more supply in - but it still going to be foreign gas, with the same potential pitfalls as foreign oil. If competing nations and large industrial gas users give the producers a better price, public gas systems are not going to get much out of it. It would make more sense to build many smaller LNG ports instead of one or two big ones. There would be less of a threat to this supply and volatile pricing from hurricanes or terrorists. The same holds true for production. - if some of the OCS areas off Florida were opened up, then maybe some of the price volatility will go away.

Riviera Utilties has been active in the state association since the gas system has existed, and has been involved in APGA for quite a while too.

One of the biggest values that APGA brings to Riviera Utilities is that of advocacy. An organization on a national level like APGA will have a voice in the direction our industry takes. The periodic info from APGA on legislative agenda is at least keeping public gas systems in touch with what is going on at the national level.

APGA has been as a resource for information on what DOT is looking at, and provides a voice by having a seat at the table for rulemakings. It seems to Richard that many industry concerns do not seem to be weighed as heavily as Department of Transportation concerns -which are often reactionary to events that are not even affected by the regulations! DOT may be trying to apply specifics of oil industry problems to the gas industry, with unexpected negative results.

For example, there are the “one-call” regulations. Even with one-call, third party damage is still one of the main issues for emergency response. “People still ignore locates, or dig that one scoop of dirt with the backhoe more than they should.” Public awareness is also a great idea, but above ground regulator stations will still be run over by people driving carelessly and loosing control of their cars. Public awareness is not going to solve these things.

While he was unable to attend, Mr. Peterson liked the idea of the APGA College Week. For small utilities such as his, which only has 15 employees, they want to send staff to educational-opportunities, but only afford to do so much. “If APGA could partner with state organizations, and combine the times of opportunities, we and other small utilities could particulate in more of these than they can now.“

(APGA listened: the 2007 College Week was a joint effort between APGA and several state gas organizations.)

Originally in December 15, 2005 Public Gas News