Exterior view of South Jersey Gas Company headquarters in Folsom, Monday Aug. 10, 2012. (The Press of Atlantic City/Staff Photo by Michael Ein)

Michael Ein

Folsom-based South Jersey Gas will spend $140 million over the next four years replacing old infrastructure to reduce natural gas leaks through a program approved this week by the state Board of Public Utilities.

The natural gas utility, a subsidiary of South Jersey Industries, said it will spend about $35 million per year replacing bare steel and cast iron mains, work that is in addition to normal capital projects.

The federal government has been recommending that natural gas companies phase out those types of mains over concerns that they are more likely to leak, said Stefanie Brand, director of the Division of Rate Counsel, a state office representing utility customers.

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The amount approved through the Accelerated Infrastructure Replacement Program is lower than the $250 million South Jersey Gas initially requested in a July petition to the BPU.

Brand, who opposed the larger request, said the investor-owned utility agreed to show the replacements reduced leaks and to a lower rate of return.

“We’re trying to keep these to be small, limited programs just designed to do a particular project, and we asked them to take less,” she said.

As of Oct. 31, South Jersey Gas had an active leak inventory of 1,054, BPU documents approving the spending show.

The company will try to reduce that by about 60 percent during the next four years, the BPU said.

“Part of our business is responding to gas leaks that happen every day. It’s the nature of this business, and it’s part of what we have to do as a gas utility focused on safety and efficiency of our systems,” South Jersey Gas spokesman Dan Lockwood said.

Lockwood said the bare steel and cast iron materials will be replaced with modern plastic and cathodic-protected steel pieces. He said the work will create about 140 jobs the first year.

The utility has more than 354,000 residential, commercial and industrial customers in South Jersey, including Atlantic, Cape May and Cumberland counties, and natural gas is used to heat the majority of homes in the region.

The spending program will not affect rates until South Jersey Gas’ next base-rate case, in which utilities seek state approval to adjust what they charge.

The utility has not scheduled its next filing. It is required to do so by December 2015 at the latest.

Wholesale gas prices have dropped substantially over the past few years due to increased U.S. production, and South Jersey Gas said those prices have helped offset such infrastructure spending.

The latest South Jersey Gas rates took effect in October, with the average residential customer using 100 therms paying about $132 a month.

Lower wholesale gas prices also led the utility to issue a one-time credit of about $10 million — or about $32 for the average customer — earlier this year.

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