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Seven policy assumptions were incorporated in the development of the accelerated scenario, which forecasts that U.S. consumption of natural gas could increase by more than 20 percent and reach 35 quads by 2020. It is difficult to isolate individual assumptions and project the specific gas demand impact of each, but the overall collection of assumptions fosters an environment conducive to the realization of the accelerated scenario and its resulting benefits.
Energy markets will be free and competitive, and natural gas utilities will be allowed to compete fairly in these markets. Energy markets have been opened to competition, and it is assumed that consumers will be increasingly free to buy their energy and energy-related services from whichever suppliers they choose, including gas utilities that wish to offer these services.
It is further assumed that regulatory authorities will understand that as gas markets are opened to competition, the balance between risks and rewards must be maintained for gas utilities. If this were not the case, gas utilities would be put at a serious market disadvantage, which would limit market expansion potential.
The historic reputation of the natural
gas industry for safety and reliability will not be compromised. Safety and reliability have always been the highest priority of the natural gas industry. If this were not so, industry growth would not have been possible. As the nation moves toward an increasingly deregulated energy market, new questions arise.
For example, gas utilities have traditionally had an "obligation to serve" all customers regardless of their ability to pay. Where will this responsibility rest? Will it be with the regulated gas utility that now only transports gas, or will it shift to the unregulated marketing company that sells the gas commodity to the consumer? Another question involves governmental funding of energy assistance programs for low-income households. If this funding is reduced as gas utilities face increasing competitive pressure, who will ensure the safety of the poor in extreme weather (see "Keeping Cool — and Warm")?
It is assumed that these kinds of issues will be addressed and that safety and reliability will not be compromised.
Energy efficiency and environmental regulations will be comprehensive, equitable and balanced. Many energy/environmental regulations are flawed and even counterproductive because they are not "comprehensive" enough. For example, energy efficiency regulations that look solely at the efficiency of the energy-consuming equipment and not at the efficiency of the entire process of providing the energy can push consumers toward equipment that ultimately wastes more energy, emits more pollutants and is most costly.
Similarly, environmental regulations can be counterproductive when they are not equitable. In fact, some regulations are more stringent for cleaner-burning fuels than for dirtier-burning fuels, thereby promoting the consumption of the dirtier fuels.
Finally, environmental regulations can lack balance in that the costs and benefits are not appropriately weighted. It is possible, for instance, to set standards for indoor air quality that are so stringent that they virtually rule out the possibility of natural gas usage in new, tightly constructed houses. Or, in some areas the standards for new fuel-burning equipment are so strict that they tend to encourage energy users to retain older, dirtier-burning equipment rather than upgrade to newer equipment that is cleaner and more economical.
The federal government, in recognition of increased potential national benefits, will promote rather than discourage increased natural gas consumption, and it will step up RD&D; activities. Given the potential significant national benefits of the accelerated projection, it is assumed that
the federal government will promote and support increased use of natural gas. This could include, for instance, tax incentives to extend gas service to areas not currently served. The projection also assumes increased federal funding of gas-related research and development-for system safety as well as for end-use equipment innovation.
The potential of new technologies will be fully recognized in regulations that govern the natural gas industry. As gas industry technologies and practices evolve over time, it is assumed that regulations governing the industry will evolve as well. Plastic pipe provides a good example. Today's plastic pipe can safely operate at higher pressures than older pipe can withstand. If safety regulations did not recognize this advance, the market would be dampened for some forms of gas-based distributed electricity generation systems that require high gas pressures.
In addition, the regulatory arena appears to be moving toward creating more flexible, less prescriptive regulations. It is assumed that this movement will prove to be effective in providing safe and reliable service and that it will continue.
Access to the natural gas resource base will not be unduly restricted. Today, access to significant portions of the gas resource base are totally or partially restricted. The restrictions ban exploration and production activities in the eastern Gulf of Mexico, most of the offshore West Coast, all of the offshore East Coast and portions of the Rocky Mountains. Most of the restrictions are environmental in nature and have been in place for several decades.
In light of the drilling and waste-disposal technologies now in use as well as advances in operating practices, it is assumed that these restrictions will be reevaluated and lifted over the next 20 years.
The costs of providing gas service to new electricity generating plants will not be borne by residential, commercial and industrial customers. Providing gas service to new electric power plants requires that gas pipelines and/or gas utilities invest in facilities and make operational changes, such as adding new line, contracting for storage capacity and upgrading the ability to serve severe load swings.
It is assumed that the costs incurred to serve new generating plants will be borne by power plant operators and not by other existing gas customers. If this is not the case, then gas demand among residential, commercial and industrial customers will be artificially constrained.
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Keeping Cool—and Warm
In 1981 Congress created the Low-Income Home Energy Assistance Program (LIHEAP) to help low- and fixed-income households pay their fuel and utility bills. More than 4 million households, most with annual household incomes of less than $8,000, receive financial assistance under LIHEAP. Almost half of the recipients use natural
gas for heating and cooling.
Since its heyday in 1985 when funding reached $2.1 billion, dollars allocated to LIHEAP have decreased by nearly 50 percent. Current funding can assist only 13 percent of the eligible households.
LIHEAP serves the most vulnerable groups in society — the elderly on fixed incomes, the disabled and households with small children. LIHEAP also helps many low-income working families stay off welfare and alleviates the tough budget choices they have to make every month: paying for utilities versus other necessities such as rent, food, medicine.
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