September 2, 2017 Read More →

Questions Remain on Dominion’s Proposed Pipeline

Washington Post:

FERC has a history of approving most of the pipeline projects it reviews. It doesn’t delve too deeply into the economic viability of the projects, relying instead on whether customers have signed up to use the new pipelines. “There is no planning process. They [FERC] are less interested in the issue of need,” says Cathy Kunkel, an energy analyst at the Cleveland-based Institute for Energy Economics and Financial Analysis.

ACP partners Dominion, Duke Energy and the Southern Co. have negotiated contracts with five utilities, including their own subsidiaries, to tap 90 percent of the pipeline’s capacity.

If all goes well, the ACP could be a big moneymaker. Dominion spokesman Aaron F. Ruby says that demand for natural gas is expected to grow 165 percent in Virginia and North Carolina over the next 20 years.

FERC allows returns on equity of up to 14 percent. Pipeline critics, such as Ivy Main, Virginia Sierra Club conservation co-chair, say it is a conflict of interest for Dominion Energy to set up a subsidiary to make money on the backs of its own ratepayers. The State Corporation Commission, which regulates utilities, hasn’t addressed such concerns. Dominion’s Ruby says that the setup is legal if Dominion doesn’t give preferential treatment to its subsidiaries.

Exactly how Dominion will use the gas isn’t clear. The utility has new natural gas power stations in Greensville and Brunswick counties. At some point, Dominion says the ACP will be needed to serve them. But it has also told the State Corporation Commission that the plants could be served by an existing Transco pipeline that runs through the center of the state, raising questions about why it needs its own pipeline.

What role Dominion’s ratepayers will play is unclear. If the pipeline sells gas to Dominion for electricity, then captive ratepayers would be charged not just for the gas but also for pipeline construction. Contractual details addressing the issue haven’t been made public.

Cost is another issue. Ruby says that ACP gas will be cheaper than gas pumped from the Gulf of Mexico Coast, resulting in lower wholesale electricity prices locally. Thomas Hadwin, a former utility executive living in Waynesboro, says that ACP gas will be more expensive than gas from existing pipelines once transportation and other costs are factored in. “It’s like you are at a gas station and you pay for the gas plus to pump it,” Hadwin says.

Energy prices are notoriously fickle. A decade ago, for example, a flood of natural gas from advanced hydraulic fracturing came roaring out of nowhere to replace cheap coal for electricity generation.

If natural gas loses its low-price luster, will ratepayers get stuck with the bill? Consider what happened in South Carolina. Scana Corp. announced that it was abandoning construction of its V.C. Summer Nuclear Power Station in late July. Its costs had soared from $14 billion to $25.7 billion over nine years. Ratepayers could be required to pay $2 billion in costs.

In Virginia, if the ACP explodes or leaks, causing major damage and deaths, who pays? Will the ACP post bonds or offer other collateral to cover expenses as are required in other energy sectors, including coal? Will Dominion Energy pay or would the pipeline company?

Ruby says that there may be surety bonds to cover events at roads and other crossings.

How far such coverage might go is one more unanswered question.

Dominion and its partners should answer these questions, at least for ratepayers if not for FERC.

Questions remain on Dominion’s proposed pipeline

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