When a person comes knocking at a consumer’s door, offering to save them up to 30 percent on their heating bill with no cost to them, many people invite that person in to sign their paperwork. That accounts for the 80 to 95 percent sign-up rates that utility companies owned by Summit Utilities Inc. receive for offering natural gas service. 

Summit Utilities was founded in 1996 and built its first pipeline in 1997 in Colorado. “Our company was founded on the idea that we will get natural gas service to other areas of the United States that do not have any,” COO Eric Earnest relates. “So we started in Colorado in the mountains just west of Denver where everybody used propane.”

Building pipelines in areas that the large utility companies have bypassed sometimes makes for more challenging conditions. “If you serve an area like Denver or the suburbs around a major city, you’re going to be putting in about 75 to 90 feet of mainline for each customer,” Earnest estimates. “In the areas we serve, we average about 400 feet of mainline per customer. So that is a much higher investment per customer, and you have to have a rate structure to support that investment.” 

Despite the increased cost, the alternatives that customers have in underserved areas are more expensive than the cost of pipelining natural gas to them. “Across Colorado and Missouri, we offer from a 20 to 30 percent price advantage over propane,” Earnest calculates. “In Maine, we primarily compete against fuel oil and some propane, and we offer anywhere from a 25 to a 40 percent price advantage.”

Go East

After building pipelines in underserved areas of Colorado, Summit Utilities branched out into Missouri and Maine. The company is building two pipelines in Maine, one in the Kennebec Valley (KV) and the other serving the towns of Cumberland, Falmouth and Yarmouth (CFY), which are north of Portland.

The KV project includes 68 miles of steel pipeline and 1,580 miles of polyethylene distribution line expected to serve approximately 18,000 residential and commercial customers by the fourth year of the project. The CFY pipeline will be 250 miles of polyethylene pipeline serving approximately 7,800 residential and 940 commercial customers.

Having first built pipelines in the Rocky Mountains, the flinty soil of Maine is not proving too challenging for the pipeline and civil subcontractors hired by Summit Utilities Inc. “It’s extremely rocky,” Earnest relates. “In the CFY coastal communities, we’re dealing with a lot of rock. In the Kennebec Valley, the digging conditions are a little bit easier, but we do encounter pretty good amounts of granite.”

Providing natural gas pipelines in underserved areas is inherently challenging or pipelines would have been laid there years ago. “We’ve piped the two highest subdivisions in North America in Colorado,” Earnest declares. “We’ve encountered some pretty rough digging conditions in Colorado, and even back in Branson and Lake of the Ozarks, Mo., you’re dealing with dolomite and limestone. We’ve had pretty rough digging conditions in both states before we decided to try this up in Maine.”

Sales Efforts

Marketing a new pipeline precedes construction by about a year. “It’s all about public relations to get community support, marketing and advertising to raise awareness and generate interest, and then personal sales to actually sign the customers up,” Earnest explains. “In that way, we sign up half of the customers before we put any lines in the ground.”

The first-year penetration rate usually is from 50 to 75 percent of eligible customers. This figure increases to 70 to 80 percent in the second year. “In year three and after, it inches up from there,” Earnest reports. “In some areas, we have a 99 percent penetration rate. We truly let marketing drive construction, and that’s one of the key philosophies or key parts of our culture that allows us to be successful.”

Summit Utilities sets a construction allowance per customer that it will spend to bring service to homes and businesses. If the cost exceeds that, the customer is asked to make up the difference. 

Converting Appliances

Switching from fuel oil to natural gas is more complicated for homeowners than just hooking up the gas line – HVAC systems and appliances have to be converted by licensed technicians to use the new fuel. “That is a tremendous opportunity,” Earnest emphasizes. “We estimate we are going to be generating $50 million of conversion work in the state of Maine in just the next few years. That market really needs to respond in order to help us be successful.”

To assist the contractors that provide this work, Summit Utilities has received approval from the Maine Public Utilities Commission to start a conversion company. “There’s this need that exists for conversion companies, and we felt like there weren’t enough in the market,” Earnest explains. “With a little luck, hopefully the rest of the conversion industry responds, and we won’t need to have this company anymore. Our business is building and operating pipelines.” 

Earnest attributes the company’s success to its culture. “We really have a good culture of entrepreneurism,” he stresses. “A lot of people here really enjoy the growth and enjoy working with the challenges that we have. So honestly, our corporate culture is really the primary reason why we’re successful year after year, along with our strong entrepreneurial spirit.”