New York – Energy distributor Integrys Energy Group Inc. may not be getting much in the way of federal stimulus dollars, but that doesn't mean it won't benefit from the spending package, according to one of the firm's top officials.

A lot of stimulus funding is aimed at boosting energy efficiency and conservation. That means new opportunities for the Chicago-based company – especially when it comes to customer relationships.

"We're not looking to be the people looking to acquire the stimulus dollars," said Larry Borgard, Integrys's president and chief operating officer of utilities. "Our job in the coming months as the stimulus dollars start flowing is to make sure our customers connect with those folks who have the dollars."

Borgard made the comment during the recent GasMart 2009 conference in Chicago.

That might mean putting customers in touch with state and local government units or even research entities that have super boilers, Borgard said.

Integrys, as a buyer of pipeline services, is also a big fan of pipeline development. The company's utilities ship on 13 different pipelines, buy from 37 different suppliers and purchased $2.1 billion in natural gas in 2008, Borgard said. Integrys is also a big player in the storage business.

But tight capital markets aren't making pipeline expansion easy, Borgard said on the sidelines of the conference. "We've seen some (pipeline projects) pulled back, some of them pushed out in time, some of them cancelled altogether," he said.

That situation won't likely last forever, Borgard said. Pundits had been talking about a pick up at the end of '09, although that later morphed into the end of '10, he quipped. He didn't hazard to guess as to when the turnaround might materialize. But he said the company plans to be ready when demand finally returns.

"When this economy recovers, when the demand for natural gas recovers, we're going to need all the pipelines we can get," Borgard said. "As capital gets freed up, as peoples' balance sheets recover, most of the projects are going to get built."

And if demand recovers quickly, he thinks a price spike is "a very real possibility." "People are shutting in production today. They can't just turn that production back on at the flip of a switch," Borgard said. "There is some lag time in terms of when demand starts to come back and when you can get production back on, getting the drilling rigs back out in the field and drilling for natural gas."

Perspectives couldn't help it. We know Integrys isn't a pipeline company. But we still had to ask: what's the company's take on steel futures?

Borgard didn't directly discuss the CME/Nymex steel futures contract. But he said the company tries to "lock in" steel costs, especially for big projects.

The company built about 70 miles of laterals off the Guardian pipeline project in Wisconsin. "That was a big steel buy for us, and we made sure that we locked in the price of steel," he said. The company may use a fixed contract with a producer or hedge, he said.

Integrys doesn't do interstate pipelines, but does build feeder lines–and is also in the midst of replacing 2,000 miles of cast iron pipe in Chicago. "That's going to be a big job for us that's going to last quite a while," he said.

We also figured we'd pop a question about cap-and-trade. Yea? Or no way?

Direct use of natural gas represents about 6 percent of total carbon emissions, Borgard said. But the industry has done a "great job" of increasing efficiency and reducing overall emissions over the last 20 years, he argued.

"We think the industry should get some credit for that. Because that's exactly what regulators and politicians want the automotive industry and the electricity industry to do," he said. "We think that the direct use of natural gas should be exempted from the cap at least initially."

He acknowledged that might be wishful thinking. But if natural gas and electricity are covered under the cap, the industries should be granted allowances to protect customers from potential "price shock," Borgard reasoned.

Customers are already having a hard time paying their gas bills as it is, he pointed out during his presentation.

Integrys estimates that roughly 200,000 jobs have been lost within the company's mostly Midwest service area. And "bad debt" is larger the closer you get to bigger cities. In Chicago, bad debt accounts for 2 to 3 percent of revenue from the area.

Low demand and resulting low prices are a mixed bag. It's been an economic stimulus of sorts for customers, who are paying far less than last year, Borgard said. But that might not help if you don't have a job.

"Customers are struggling to pay their bills," he said. "Even if you are employed, maybe you're not getting paid as much as you did a year ago. ... Unfortunately, we're disconnecting record numbers of customers across our services territories for nonpayment."

That's not the kind of business Integrys wants to be in, especially when the economic uncertainty leads to a vicious cycle of disconnecting, reconnecting and then disconnecting again.

"We need to figure out ways to break that cycle," he said.

So, while the company is a fan of lower prices–there are limits. And that's especially true if savings for customers means producers are on shaky grounds.

"Prices can't be so low as to endanger supply," Borgard said, adding that Integrys doesn't want tags to dwindle to the point where they "push producers out of business."

Today, such issues are "front and center" because they can "literally take down companies," Borgard said.

And the overall economy has meant big changes in Integrys's business model as well, he said. The company plans to make an announcement regarding the divestiture of its Integrys Energy Services unit late in the third quarter or early in the fourth quarter, he said.

With capital tight, "cash is king today." Just a few years ago, the company was trying to increase capital spending to grow. Now, it's focused on reining-in spending to preserve cash and not getting ahead of itself, Borgard said.

reprinted with permission from American Metal Market.