IFRS Foundation


  • GHG Emissions
  • Air Quality
  • Energy Management
  • Water & Wastewater Management
  • Waste & Hazardous Materials Management
  • Ecological Impacts

Human Capital

  • Labor Practices
  • Employee Health & Safety
  • Employee Engagement, Diversity & Inclusion
General Issue Category
(Industry agnostic)

Disclosure Topics (Industry specific) for:
Gas Utilities & Distributors

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Access & Affordability

Energy Affordability

A de facto objective of regulated gas utilities is to deliver natural gas to customers in a safe, reliable, and environmentally responsible manner. Companies in the industry are tasked with managing these potentially competing priorities to maintain favorable relations with customers and regulators—and ultimately to earn appropriate returns for shareholders. The affordability of energy, from the utility customer perspective, is particularly challenging to balance, as it often conflicts with other core objectives. Utility energy bills are widely perceived to be increasingly more expensive for low income customers (affordability is determined by both the net cost of energy bills and the underlying economics of customers). Playing a role in ensuring that utility bills are affordable is crucial for utilities in building trust (intangible asset value) with regulators and customers. Quality of regulatory relations is a key value driver for utilities, and one of the more closely analyzed issues by investment analysts. Regulators’ willingness, or lack thereof, to grant rate requests, rate structure modifications, cost recovery, and allowed returns is a primary determinant of financial performance and investment risk. Effectively managing affordability may give utilities the opportunity to invest more capital, favorably revise rate structures, and increase allowed returns. Furthermore, utilities that do not effectively manage affordability are increasingly exposed to customers obtaining energy supplies from means other than natural gas (or reducing energy needs) by pursuing alternative energy sources (e.g., industrial customers’ use of combined heat and power). Managing affordability involves operating an efficient business with a well-thought-out, long-term perspective and strategy, as well as working closely with regulators and public policymakers on rate structures and, potentially, bill-assistance programs. While the precise nature of financial impacts of affordability are largely determined by utility business models and rate structures, affordability is a critical business issue for utilities to manage in terms of maintaining (and growing) customer bases, building intangible asset value, creating investment and return opportunities, and ultimately delivering shareholder returns.

Business Model Resilience

End-Use Efficiency

Natural gas produces fewer greenhouse gas (GHG) emissions than other fossil fuels. Its expanded use in the economy is therefore a key strategy for many governments and regulators striving to reduce GHG emissions. Despite the relatively lower emissions, however, the natural gas value chain still produces meaningful levels of GHG emissions overall. As policymakers and regulators look to address climate change, efficient consumption of natural gas will be an important theme over the long term. There is a wide range of measures that utilities can take to promote energy efficiency among their customers, including offering rebates for energy-efficient appliances, weatherizing customers’ homes, and educating customers on energy saving methods. How a gas utility stands to gain or lose from the trend toward GHG mitigation is significantly predicated on its regulatory environment. Traditional rate structures generally do not give gas utilities an incentive for energy efficiency and, further, they may economically suffer from reductions in customer demand. This is increasingly driving gas utilities, and their regulators and customers, to pursue alternative ratemaking. Such alternative rate design often “decouples” utility revenues from customer consumption and may also build in explicit incentives for successful utility performance in terms of end-use efficiency and demand reductions. Overall, companies whose strategic plan includes efficiency initiatives that strive to reduce downside risks from demand fluctuations, gain returns on needed investments, and lower costs are more likely to be well positioned to earn stronger risk-adjusted returns over the long term.

Critical Incident Risk Management

Integrity of Gas Delivery Infrastructure

Operating a vast network of gas pipelines, equipment, and storage facilities requires a multifaceted, long-term approach to ensuring the integrity of such infrastructure, and the management of related risks. While customers depend on constantly available gas supplies, companies are tasked with managing substantial risks—including those related to human health, property, and greenhouse gas (GHG) emissions—that result from operating gas distribution networks and related infrastructure. Aging infrastructure, inadequate monitoring and maintenance, and other operational factors may lead to gas leaks. Gas leaks can result in safety-related risks, such as losses of containment, which may result in fires or explosions that can be particularly severe in urban areas where companies often operate. Furthermore, gas leaks also result in fugitive emissions (methane), causing adverse environmental impacts. Regulated gas utilities generally incur no direct costs for gas leaks, as the cost of gas is typically passed directly to customers (though this may vary by region). However, gas leaks that result in safety-related risks and/or fugitive emissions may financially impact companies through a variety of regulatory, legal, and product demand channels. Accidents, particularly fatal accidents, can result in claims of negligence against companies, leading to costly court battles and fines. GHG emissions may lead to increased regulatory scrutiny—a critical element directly connected to financial performance, given the importance of regulatory relations—and potential fines and penalties. Importantly, regulated gas utilities can also financially benefit from opportunities for capital investments designed to improve performance and mitigate risks related to safety and emissions. These capital investments may lead to higher rate bases, ultimately benefiting the company and its shareholders. Companies seek to manage such risks through pipeline replacements, regular inspections and monitoring, employee training and emergency preparedness, investments in technology, and other strategies—all typically done by working closely with regulators. In many parts of the country, concerns about aging infrastructure have caused companies in the industry to look for ways to expedite the replacement approval process, especially in cases where pipelines are located near densely populated areas.

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