AGA
Juan Alvarado is American Gas Association Managing Director, Energy Analysis.
Affordability of utility service is a central and enduring objective of public utility regulation. While short-term changes in utility bills often dominate public attention, those changes are driven by market-driven commodity prices and weather-driven demand. Long-term affordability, however, depends on the institutional and economic frameworks that govern how utility infrastructure is financed and how expansion and maintenance costs are shared among customers.
Beginning in the late 19th century, courts and regulators across the U.S. began to develop what is now known as the “regulatory compact.” Although complex in application, the purpose of the compact is to balance the interests of utilities and consumers by establishing rules for access, abandonment, financial viability, equity, and affordability.
Line extension policies are a core feature of the regulatory compact, designed to ensure equitable access to service while minimizing cross subsidies. Far from being a narrow technical issue relegated to the depths of rate design testimony, line extension rules are foundational to the ability of all utilities – whether electric, water or natural gas – to uphold their obligation to serve all customers efficiently and at just and reasonable rates.