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Natural gas fueling a hot debate

People in Panguitch - and scores of other rural communities - want natural gas service. And apparently they want urban residents to pay for the costs of getting it there.

The Legislature's Public Utilities and Technology Committee is debating two proposals to extend natural gas service to rural communities, both of which include mechanisms whereby those who already have natural gas service would pay for the expansion."Every place in the world wants natural gas. It is cheap, reliable and it works," said Panguitch City Councilman Craig Twitchell.

But that is about the only thing anyone in the natural gas debate agrees on. And the issue has now evolved into a broader discussion over free market economies and whether government has any role in subsidizing natural gas service to rural residents.

Add to that politically volatile mix the debate about whether lower energy costs of natural gas are essential to revitalizing sluggish rural economies, where propane costs several times what urban residents pay for natural gas.

"Rural Utah can only be revitalized if it has natural gas," insists Vern Fisher of the Intermountain Gas Association.

The association is pushing a bill that calls for the creation of a "universal service fund" - basically a surcharge on all natural gas users with the money going to expand natural gas service into areas that are currently not receiving it. Cities would borrow from the fund to build the necessary infrastructure.

Another bill, being pushed by the town of Panguitch in Garfield County, would give Mountain Fuel a rate increase in order to expand service into that particular area of the state. That would mean all Mountain Fuel customers would pay higher fuel bills to keep Panguitch's costs down.

The small populations in rural Utah, coupled with the high costs of adding connections from the communities to the main pipeline, have proved cost-prohibitive for companies like Mountain Fuel to expand on its own.

"The reason we are talking about it right now is because the free market does not address all of the problems out there," said Steve Mecham of the Public Service Commission. "It is where the market fails that we need a universal service fund."

The PSC is not opposed to creation of a universal service fund, but it is not supporting the idea, either.

Under the current system, any community or special service district can tie into natural gas pipelines - the vast majority owned by Mountain Fuel - but those entities have to pay the costs of the expansion. In Panguitch, that cost would be about $3,500 per person.

Under one rate increase proposal, those costs would be spread to all Mountain Fuel customers through a rate hike.

Under the other proposal, Pan-guitch could borrow the money from the universal service fund to pay for the expansion, and then repay the fund over time. The only roadblock there is that Mountain Fuel does not allow cities to purchase the natural gas and then re-sell it to residents at a higher cost to recover the infrastructure costs.

Claire Geddes, of the consumer watchdog group United We Stand of Utah, is perturbed that both approaches run counter to a free market system. "We are asking ratepayers to shoulder the costs of subsidizing the expansion of a monopoly," she said.

Providers of other energy fuels also complained. For example, Mark Harris of the Propane Gas Association said there are 75 different companies providing propane to rural residents that could be devastated if the state subsidizes natural gas expansion into areas now receiving propane.

"It is not appropriate in this age of energy deregulation," he said. "Utah does not need a natural gas subsidy to spur economic de-vel-op-ment."

There is also a political dilemma. If lawmakers approve either proposal, they are formalizing a state position that it prefers natural gas over other energy sources, and they are willing to back up that preference with subsidies.

And that policy decision will have all providers of other energy fuels - particularly the politically powerful electrical power lobby - hopping mad.