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Natural gas for Sage Mesa and Husula

Just a heads-up: A resident from Sage Mesa asked me to look into natural gas service for that neighborhood.  His understanding is that the economics are not quite good enough for Fortis to invest in the infrastructure that is required.  Although a gas pipeline runs through Sage Mesa, a reducing station (the photo is of a Russian reducing station) is apparently required (update: a reducing station is not required).  Fortis told him they would run natural gas service to his house if he paid for the reducing station.

Here is an opportunity for the RDOS to step in and facilitate a transaction.  We can tax Sage Mesa residents in order to fund a contribution to a neighborhood gas service.  Of course, whether we do this is up to Sage Mesa residents.  And whether Sage Mesa residents are in favor depends critically on the numbers.  RDOS engineering staff has been in some preliminary discussions with Fortis to see what is involved and what a cost sharing arrangement might look like.

From our end I envision a parcel tax applied to all Sage Mesa properties (assuming that the potential coverage of natural gas service is all of Sage Mesa).  That is, everyone pays for the infrastructure regardless of whether they actually decide to run gas from the lot line to their house.  This is because the basic infrastructure is still an amenity.  Perhaps you will not use it, but the person who buys your house might.

This is all very early stage and I will post updates as they become available. Obviously we will have to bring you some pretty firm numbers before we decide whether to proceed with such a project.  In the mean time I am very interested in comments in favor and opposed to this.

Update 27 May 2015:

Roger Huston, the new RDOS Manager of Public Works, and I met with Wade from Fortis a couple of weeks ago.  As Wade explained, Fortis does not generally work with large groups of people to extend its services.  Typically extensions occur in one of two ways:

  1. the utility works with a developer when a neighborhood is being created to arrange service or,
  2. very small extensions are done for a small number or residences (at those residents' cost).

 

What we are asking for, therefore, is something outside their normal operating procedures and competencies. They would prefer not to wrangle a large number of customers into a single yes/no block.  As the residents of Husula have found out, this can be difficult to coordinate.

What the RDOS can do in this case--and Fortis has confirmed this--is act as the "retroactive developer" of the Sage Mesa and Husula subdivisions.  When a new subdivision is created (e.g., Sendaro Canyon), a single entity (the developer) pays Fortis a fee to extend utility services to the subdivision.  The developer then recoups those costs on sale of the lots.  Ultimately the homeowner pays for connection to the utility.  Also, buyers in a new subdivision cannot opt-out of the service.  The gas line is in the roadway regardless they choose to use it in their house design.  It is still seen as a value-adding amenity for the property.

As the "retroactive developer", the RDOS would collect taxes from residents in these neighborhood to fund the gas line extension. Residents could then decide whether to connect to the line running down their street, upgrade their heating equipment, and so on.  The costs of changing from electrical heat to gas heat are thus significant.  However, so is the cost of electrical heat.  My back-of-the-envelope calculations suggest this investment could repay itself very quickly (plus added resale value to the connected homes).  Of course. we will have to see some firm numbers from Fortis before proceeding too far with this.

Again, please stand by.  We hope to hold a public meeting on this sometime in the summer of 2015.  My preference following the meeting is to hold an informal (read: cheap) mail-in/web poll to gauge the level of support in both Husula and Sage Mesa to move forward.  If support is lacking we will drop the project.  If support is high I would recommend moving forward with an alternate approval process (AAP) to gain voter assent for the new RDOS service.  The advantage of AAP is that it is relatively cheap.  Referendums are more expensive (and the cost is paid by those who benefit--that is, the new members of the service area).  Please let me know if you have any concerns about this proposed method of moving forward.

Update 29 May 2015

Fortis has provided some preliminary pricing. If this goes forward, the RDOS will borrow some money and residents in the new service area will pay it back.  As always, there are two ways to pay it back:

  1. Commuted: taxpayers pay their costs in a single lump-sum upfront, OR
  2. Amortized: an annual charge is added to the residents' annual tax bill.  These fees can be deferred with your property taxes.

 

The rough estimates for these are shown below.  These are  just to give you an idea of the ballpark we are in.  Note that there will also be a connection fee, which depends on your distance from the street. I recall this amount being quite small for Sage Mesa residents (likely a nominal flat fee--say $100, but don't hold me to this).  For Husula Fortis will likely charge by length, which could be substantial depending on the distance between your house and the main line.

  Sage Mesa Husula Highlands
Commuted (one time)                             1,846                             2,050
Annual for 10 years                                 239                                 265

 

Update 05 November, 2015:

We had a good turnout at the information meeting and, after a series of questions to the RDOS and Fortis, we have a better sense of the issues.  I see two separate cost-benefit questions in my role as neutral observer and perhaps facilitator:

  1. Is it worth paying $2000 to have a gas main installed on your street IF you have no intention of connecting to it?
  2. Assuming a gas main goes forward, is it worthwhile to incur the cost of connecting to it and retrofitting your heating system to take advantage of the lower cost of gas?

 

Let’s deal with the second question first.  A major issue in Sage Mesa especially seems to be that many of the homes were built in the electric-only/no air conditioning era.  As such, these houses have no duct work, making conversion to combustion-based heating a major undertaking.  Of course, some of these houses are also of the age at which major renovations might occur, so retrofitting may not necessarily be out of the question.  The point is: this is a case-by case issue.  For those with high heating costs and who are planning to renovate, this might be a no-brainer. For others with low heating costs (due to wood heating or a small household) and no plans to renovate, conversion is unlikely to be beneficial. Fortis provides a pretty good modeling tool that captures some of the specifics of each homeowner's situation (location, existing heating type, home size, etc.) and provides an estimate of energy savings with gas.

The first question is a bit more general.  The specific question that arose in the meeting is whether the mere fact of having a gas main in the road impacts property values.  It is likely impossible to answer this question with any precision but I sent out the question to some realtors just in case.  One realtor, who had just dealt with the gas issue during a transaction, gave the following response:

  1. Never had one fall through due to lack of gas but lack thereof is certainly a factor in negotiation.
  2. Usually about $5k negotiation factor.

 

You may have your own sources of information on this.  If so, please share using the comment section below or by emailing me (I will post your views without your name or identifying information).

 

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