and you may payDallas, TX – Natural gas utilities might have to dig up neighborhoods across Texas to replace hundreds of thousands of steel service lines to prevent explosions.

Railroad Commissioner Michael Williams will propose today that the commission require Atmos Energy and other utilities to replace the lines, which bring natural gas from pipelines under neighborhood streets to homes. Texas has at least 525,000 steel lines, maybe a million, he said.

The project could cost more than $500 million, possibly borne by customers.

“It would be the largest replacement program the Railroad Commission has ever done,” he said.

Regulators targeted the service lines after several deadly home explosions.

The problem is that the old service lines are made of rigid steel, which can shift and corrode. Williams wants utilities to replace the steel with new plastic lines.

Depending on how the commission might structure an order, the replacements could take up to 10 years to complete. Creating a rule to require the replacements will take months.

Atmos officials will not talk about the issue. The publicly traded utility is already replacing some lines, but refuses to disclose what is happening.

It’s unlikely that Atmos, CenterPoint Energy and other utilities would be on the hook for the $500 million cost. On the contrary, utilities typically may charge ratepayers for the cost of new infrastructure, plus a 10 percent profit.

Use dates to 1960s

Steel was used for service lines in the 1960s, ’70s and ’80s. There are about 525,000 steel service lines in Atmos’ North Texas territory, which the company calls its Mid-Tex Division. Williams said he doesn’t know how many steel lines CenterPoint has.

“It’s pipe that probably should have been removed many years ago, but it definitely needs to be removed now, over the course of the next few years,” said Geoffrey Gay, a lawyer with Lloyd Gosselink who represents a number of North Texas cities in the matter.

Gay said previous utility owners, TXU and Lone Star Gas, probably should have replaced the pipe. Atmos inherited the problem as houses began blowing up.

In 2006, an elderly Wylie couple died when a natural gas leak ignited their home. In 2007, an explosion in Cleburne killed two women and injured three other family members.

Officials blamed those blasts on leaks at couplings, which are pieces used to join pipes. The commission ordered utilities to replace a particular style of coupling implicated in those explosions.

Then last year, another house in Mesquite exploded. The commission told Atmos to stop using steel service lines like the one at the home. Atmos decided to replace each of the 680 lines in the subdivision.

Atmos has expanded the replacement program beyond the Mesquite neighborhood. According to the Railroad Commission, Atmos already has 52 work crews replacing service lines around North Texas, including in Mesquite, Richardson, Irving and Dallas.

The company has been negotiating with the cities in its territory about who will pay for the repairs, said Gay, the lawyer representing a number of North Texas cities, including Fort Worth, Arlington and Plano.

Smaller-profit push

Gay said that even though Atmos typically charges customers the cost of capital improvements plus a 10 percent profit, he is pushing for a smaller profit. In exchange, cities might agree to allow Atmos to begin collecting the fee before completing the work, he said.

Cities have original jurisdiction over Atmos rates. The Railroad Commission steps in to set rates when there’s a disagreement.

Another point of negotiation is who pays for the road repairs, line marking and other work the cities would normally do. Gay said Atmos would be responsible.

He said Atmos has proposed a method to replace the service lines that wouldn’t disrupt neighborhood traffic. Utility workers would first try to dig a small hole to the service line, then fit the new plastic line inside the steel one. If this doesn’t work, Atmos must tear up the street or alley and dig up the homeowner’s yard to remove the steel line and replace it.

Gay and Williams said it would take years to replace all of the steel service lines.

Williams said he will propose requiring utilities to replace lines in the leakiest areas within two years. That includes cities where leaks are detected at 25 percent or more of the structures served by the natural gas utility, he said.

The utilities would have to replace 10 percent of the steel lines every year in cities with leaks in 5 percent to 25 percent of structures.

Steel lines in cities with leaks in less than 5 percent of the structures would have to be replaced only if the utility runs across a leak.

If the other commissioners agree to the proposal – and Williams said he will give them at least a couple of weeks before asking them to vote – writing and implementing the rule would take months.

Utilities, cities and customers would get 60 days to comment on the proposal. The commission sometimes holds town hall meetings to gather opinions on a new rule, which could lengthen the time.

Even though some houses have had explosions, Williams said the safety issue with the service lines isn’t so severe that they must be replaced instantly.

“It’s just important to replace the infrastructure. Just as we need to do repairs to roads and bridges and highways, we have to do repairs to service lines,” Williams said.