Confident in their ability to weather the coronavirus pandemic, gas utilities have turned their focus to long-term strategy, executives told the financial community during a virtual gathering.

That confidence stems largely from the steps the sector took to shore up its finances and processes as the pandemic was taking hold, industry representatives said during the American Gas Association's 2020 Financial Forum. AGA President and CEO Karen Harbert kicked off the event, an annual meetup that moved online following the outbreak, by outlining the trade group's three goals for navigating the outbreak and associated government restrictions and economic downturn.

The first was to make sure gas utility workers were deemed essential to ensure they could move freely through their territories and access personal protective equipment from government stockpiles.

Second, AGA has sought to be a conduit of information, both between the federal government and industry and among gas distributors, in order to accelerate the sector's response.

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Last, the organization counseled regulators and lobbied legislators during negotiations for stimulus packages, which included $900 million in new Low Income Home Energy Assistance Program funds in the Coronavirus Aid, Relief and Economic Security Act.

Financial community checks the pulse of gas utilities

Government stimulus was not the sole factor that helped gas utilities mitigate the early impacts of COVID-19, Northwest Natural Holding Co. CEO and AGA First Vice Chair David Anderson said. Many utilities have regulatory mechanisms in place to offset unexpected volume and revenue swings, and the pandemic's timing — accelerating as the high-demand heating season was already winding down — also tempered some of the potential demand effects, he said.

Gas utilities acted quickly to shore up liquidity, as well, issuing $1.5 billion in new term loans and credit facilities in March and April and ending the first quarter with $9 billion in liquidity, he added. The broader utility sector had issued about $43 billion in long-term debt through mid-May, up 62% from the same period last year, he said.

"We're starting at a good place, but these are uncertain times and the economic conditions continue to evolve, and frankly the full effects of those, to state the obvious, are not known by any of us," Anderson said.

Utilities with a higher percentage of industrial gas customers will be closely watching the macroeconomic picture, he said. However, he indicated that just 20% of gas utility revenues come from manufacturers and other customers sensitive to the business cycle, compared with 50% of electric utility revenues.

While utility stocks went from outperforming the S&P 500 at the start of the U.S. outbreak to trailing the broader market, both gas and electric power equities have largely maintained their premium valuations, Anderson said. He noted that utilities faced incremental headwinds in the first quarter, including regulatory uncertainty over COVID-19 and the sixth warmest winter on record for the Lower 48 U.S.

AGA lays out strategic initiatives

Breaking with a tradition of establishing a theme for the year, AGA instead set a multiyear strategic focus, Dominion Energy Inc. Co-COO and AGA Chair Diane Leopold said. The strategy, designed to remain in place through the next two annual chairmanships, focuses on three areas, she said: protect the people, preserve the planet and picture the potential.

Under the protect the people tenet, the industry will continue to advance safety management systems and cybersecurity initiatives, while leveraging technology and best practices to improve safety for customers and workers, Leopold said. That pillar will now include the evolving efforts to protect staff and ratepayers throughout the pandemic and to continue offering assistance to unemployed and financially impacted customers, Southern Co. Gas President and CEO and AGA Second Vice Chair Kim Greene said.

AGA will also focus on developing real programs and technology under the preserve the planet focus to further reduce the industry's carbon footprint and achieve net-zero greenhouse gas emissions, Leopold said. AGA intends to look beyond reducing its own emissions through ongoing pipe replacement and new initiatives and encourage upstream gas producers to improve their operations.

"Most Americans agree on the importance of addressing climate change and the end goal of net-zero emissions," Leopold said. "What people disagree on is the path to get there. It's up to us to show that we are committed to solving this challenge and that we have a clear path."

The picture the potential initiative will encourage companies to embrace innovation to become the "utility of the future," she said. That includes pushing forward renewable natural gas development, which helps other sectors like agriculture and manufacturing reduce their emissions by processing methane waste into fuel that can flow through distribution systems.