While a new tariff on imported steel will increase some costs for utility NiSource Inc., its CEO said at an energy conference March 29 that the measure ultimately benefits its business by bolstering the economies of the states it serves.
Joe Hamrock, the president, CEO and director of NiSource, told S&P Global Market Intelligence on the sidelines of the Energy Thought Summit in Austin, Texas, that the Trump administration's 25% duty on foreign steel is "a complex question" to unpack. NiSource is the parent of a regulated electric and gas utility in Indiana, and gas utilities in Ohio, Kentucky, Pennsylvania, Massachusetts, Maryland and Virginia.
Steel is a critical part of the Rust Belt region's economy, Hamrock said, which he witnessed firsthand growing up in the steel town of Mingo Junction, Ohio. "Anything that underpins the viability of that sector is a net positive for our communities and the communities we serve," he added.
"But you have to look at the second- and third-order equations there to understand how does it ultimately play out," Hamrock continued. "So far I'd say I think it's a good move."
And while NiSource is still assessing how the tariff is affecting upstream and downstream industries — "the gas industry uses a lot of steel, so the input [prices] could go up for us," Hamrock acknowledged — the pros seem to outweigh the cons at this point, in his view.
"When you balance all that out, I think anything that makes our economy stronger is a good thing," Hamrock said.
Some in the energy industry have opposed the steel duty, in large part because the move will likely raise costs associated with infrastructure development.
Hamrock said the measure does not necessarily give NiSource an advantage over competitors, but rather, "I look at that picture as more about sustainability and stability" for his company.
"If you've watched [steel] over the long run, you've seen the legacy assets slowly but surely cut back on production, and some have all gone away, essentially," Hamrock continued. "And so that's a long game; it's not a one-year-at-a-time kind of thing."
The tariff has prompted Hamrock to "look at it as more a sustainability [factor]," he said, "which is the same point I made about how tax reform has helped our business because it takes pressure off our customer bills and underpins the necessary investments that we're making."
NiSource is executing a $30 billion long-term capital plan, two-thirds of which is earmarked for gas-related spending. Hamrock said the company is "on pace" for $1.7 billion to $1.8 billion of investment in 2018.
The "vast majority" of 2018 capital, the CEO added, is going to modernization of assets, including the replacement of pipelines, substations and wires. NiSource is also using some funds for major transmission projects and environmental retrofits to coal-fired facilities.