Category Archives: Economy

Art of the Self-Deal

Oil Change International, in collaboration with Public Citizen and the Sierra Club, have released a September 2017 report, Art of the Self-Deal: How Regulatory Failure Lets Gas Pipeline Companies Fabricate Need and Fleece Ratepayers.

The report examines how a new wave of gas pipeline construction threatens to shunt serious risks and costs on to utility ratepayers. Utilities and gas companies are increasingly engaged in self-dealing practices to support a dangerous gas pipeline buildout in the Appalachian Basin. Lax oversight from regulators – particularly the Federal Energy Regulatory Commission (FERC) – is enabling companies to manufacture ‘need’ for projects while shifting financial risks from shareholders to ratepayers. Absent effective oversight, ratepayers could end up shouldering long-term costs for pipeline capacity they don’t need, while losing out on opportunities to take advantage of increasingly cheaper, cleaner choices.

Case studies of four pipelines illustrate this dynamic: the Atlantic Coast, Mountain Valley, PennEast, and NEXUS projects.

As regulators snooze, ratepayers are getting ripped off so pipeline companies can rake in profits – and the climate is getting wrecked.

Blast Zone

Blast Zone – Natural Gas and the Atlantic Coast Pipeline: Causes, Consequences and Civic Action is a new report from the Rachel Carson Council. In addition to naming and exploring the economic and political systems underlying fracking and the ACP, Blast Zone highlights organizations, businesses, and campuses working in interconnected ways toward reducing greenhouse gas emissions at the source, restoring equity, and putting decision-making in the hands of communities.

The report discusses:

  • Natural gas: current and future trends (including the “bridge fuel” myth)
  • Fracking in the Marcellus and Utica Shale Basins
  • The Atlantic Coast Pipeline (including the power behind it, industry motives, what’s paving the way, and the ACP and the environment)

And the report includes an entire set of “Toolboxes” for fighting the ACP:

  • Policy Toolbox: Our Power Plan
  • Housing Toolbox: Efficient, Affordable, Durable Investments
  • Voter’s Toolbox: Supporting Fossil-Free Leaders
  • Campus Toolbox: Research and Advocacy for the Public Interest
  • Advocacy Toolbox: Eliminating Fracking Dangers
  • Financial Toolbox: Divest and Reinvest
  • Property Rights Toolbox: Challenging Eminent Domain
  • Lobbying Toolbox: Re-envisioning FERC
  • Policy Toolbox: Water Quality Permits
  • Civil Rights Toolbox: Driving Racial and Social Justice
  • Direct Action and Advocacy Toolbox

Easily understandable graphs and charts, along with photographs (many you’ll recognize) help to make the points in this clear and thoughtful report.

Distraction: “Hey, look over there!”

Our colleagues near the Richmond area tell us Dominion has been hitting the TV commercial circuits pretty hard in the evenings lately. (To the point of distraction ad nauseum.) Seems you can’t even sit and peacefully watch Jeopardy without being inundated with lies about cheaper power bills and how much we need their safe gas pipeline. Thankfully, there are the ads like this one, from the hard-working folks at Natural Resources Defense Council (NRDC). This video was created by a nonpartisan partnership of clean energy, conservation, consumer and social justice organizations from around Virginia to highlight Dominion’s favorite pastime: distracting you from some of the things you might not like about them, something they do every single day to their customers and to lawmakers alike.

And while the enthusiastic Byron from Distraction Energy might not be an actual lineman, what he’s saying about Dominion is 100% true.

Customers Will Pay the Costs of the Unneeded ACP

Two recent publications explain in detail (using Dominion’s own data) why the economic benefits Dominion says the ACP will bring to Virginia won’t happen.  (But Dominion, Duke, Southern, and their shareholders will profit.)

Thomas Hadwin, worked for electric and gas utilities in Michigan and New York for many years, leading a department which was responsible for the site selection and approval of multi-billion dollar projects working with state and federal agencies, as well as assuring that all company facilities complied with existing environmental regulations. In Power to the People on September 5, 2017, writes, To Understand Pipeline Economics, Follow the Money.

Using information that the pipeline owners (Dominion Energy, Duke Energy, and Southern Company, the parent company of Virginia Natural Gas, have filed with the Federal Energy Regulatory Commission (FERC), he explains that:

  • Data filed with FERC show the ACP will cost customers more than existing pipelines. “Using gas prices from May of this year, which show a price advantage at the Dominion South zone (the source of supply used by the ACP), the total price of gas delivered by the ACP to Dominion’s Brunswick plant would be 28% more expensive than gas delivered by the connection to the Transco pipeline built in 2015. The fee to use the ACP is over three times more expensive than using the Transco connection. Using existing pipelines in other parts of the state would save even more money compared to the ACP.”
  • Dominion study shows savings from the ACP, but doesn’t tell the whole story.  Dominion’s calculations of ACP cost savings are based on a short-term phenomenon that was over in 2016, but was assumed to last until 2038; the calculations included a “magic multiplier” – and omitted the costs of transportation.
  • The ACP is more expensive than using existing pipelines. “As new takeaway pipelines are added in 2017-2018 to the production zone used by the ACP, it is expected that the gas price in this zone will equalize with other regions, so that the difference in the price of delivered gas will be due mainly to pipeline transportation costs. This will put the ACP at a considerable disadvantage to other alternatives. Using the ACP to deliver gas over the long-term is far more expensive than using existing pipelines.”
  • Can existing pipelines deliver the gas? Dominion’s actions say yes. “Dominion argues it can’t get enough gas from other pipelines, but its actions indicate otherwise. The ACP’s FERC application identifies that the Columbia Gas Pipeline can deliver Dominion’s full allotment of gas from West Virginia to Virginia for use in power plants…. Gas service to southeast Virginia and to North Carolina could be accomplished with connections to existing pipelines, mostly over existing rights-of-way, at a fraction of the cost and impacts associated with the ACP. Southeast Virginia could obtain as much, or more, natural gas using a connection to existing pipelines, entirely over existing rights-of-way. The region could have its own source of supply for 80 years for a fraction of the price it would pay for the 20-year contract with the ACP.”
  • With demand for natural gas slowing, rushing to build the ACP risks making a costly mistake. “Dominion and Duke have been scaling back the number of gas-fired units that require service from the ACP and pushing back the expected dates for initial operation. Just this year, the two companies cut in half the number of large gas-fired power plants needed in the next 15 years. The first unit is not needed until 2025, in Virginia.”
  • Learning from others’ mistakes: Florida’s example. “The ACP is not the only pipeline project to overestimate demand. Further south, Sabal Trail, the most recent pipeline to go into operation, is running at 25% capacity, all of it taken from existing pipelines. This new pipeline, in rapidly growing Florida, was promoted as being absolutely necessary to meet growth in natural gas demand by its utility holding company owners, NextEra and Duke Energy. Yet, total natural gas usage in Florida is down 4% over last year, undercut by cheaper renewables.”
  • If Virginia’s families and businesses lose, who wins? “FERC offers a 50% higher return for gas pipelines than for interstate transmission lines. The holding company executives are making what they see as a prudent decision to chase this extra money, while revenues from their utility subsidiaries are flat, and shift the risk and higher costs to the utility ratepayers. A choice that is good for the shareholders but bad for the ratepayers is not one that we should encourage. A company cannot be successful in the long run setting the interests of its owners against the interests of its customers. If Dominion builds the pipeline and successfully convinces the SCC to pass on the full costs of the 20-year agreements to the ratepayers, customers will pay billions more for no benefit.”

On September 8, 2017, Institute for Energy Economics and Financial Analysis posted IEEFA Update: Atlantic Coast Pipeline Risk Is Being Borne Not by Dominion and Duke, but by Their Customers. “[I]n the three years since the Atlantic Coast Pipeline was first proposed, Duke and Dominion have revised their projections of future electricity demand substantially. By 2025, Duke’s forecast is lower by 10,800 gigawatt-hours (GWh) and Dominion’s by 7,700. These are not small numbers. For context, the 1,585-megawatt combined-cycle gas plant under construction by Dominion in Greeneville, Va.—a not-insignificant project—will generate 11,000 GWh per year. The total downward revisions in demand by Duke and Dominion—18,500 GWh —works out to about 400 million cubic feet per day of natural gas, a sizeable chunk of the pipeline’s daily 1,500-million-cubic foot capacity…. FERC considers a pipeline “needed” if the pipeline developer has found other companies willing to sign contracts to ship gas on the pipeline. Duke and Dominion have met this criterion—but only by contracting with their own utility subsidiaries to purchase the pipeline capacity, an investment risk ultimately borne for by the customers of those utilities.”

Whether it be politics, pipelines, or mystery stories, one gets answers by following the money. With the ACP, the utility companies and their stockholders get the money – and the customers pay more to line the pockets of the companies and shareholders.

ACP: Not Many Jobs (Despite Dominion PR)

At recent Department of Environmental Quality hearings, pipeline supporters touted the jobs the pipeline would bring. But wait – will it really?

An August 29, 2017, letter to the editor in the Richmond Times-Dispatch points out the ACP won’t provide many jobs at all. Yes, it is true that Dominion claims on its Web page that the ACP would support 17,240 temporary jobs and 2,200 permanent jobs. But these numbers include both the out-of-state pipeline worker (who will leave when the work is done) and the local store employee who makes a one-time sale of a shirt to that worker. Hardly a measure of real jobs added to our state employment rolls.

“The ACP economic impact report given by Dominion itself says that only 39 permanent jobs will be directly created by the ACP in Virginia. Despite what Dominion would have us believe, this tiny number of created jobs does not come close to outweighing the environmental risks and dangers posed by the Atlantic Coast Pipeline.”

Dominion Puts Profits Ahead of Public Necessity

In an August 11, 2017 press release, the Southern Environmental Law Center (SELC) announced their filing with the State Corporation Commission (SCC) revealing flaws in Dominion’s plans that will mean added costs to customers.

“Expert analysis filed with the Virginia State Corporation Commission today reveals that Dominion customers will end up paying anywhere between $1.6 to 2.3 billion in unneeded costs if Dominion Energy builds the Atlantic Coast Pipeline. The analysis is included in one of three expert testimonies on Dominion Energy’s Integrated Resource Plan filed by the Southern Environmental Law Center at the SCC today….

“The detailed analysis of Dominion’s IRP reveals that the company persists in using outdated data and modeling to come up with an energy plan for Virginia – one that skews in favor of the most lucrative plan for shareholders rather than the soundest one for energy consumption and customer cost.

“SELC’s experts reviewed Dominion’s IRP and found the following:

  • “Dominion is dramatically over-projecting the demand for electricity in Virginia ….
  • “Dominion’s claim, that the Atlantic Coast Pipeline is needed for cost-saving reasons, does not add up….
  • “Dominion is setting an arbitrary cap on the amount of solar it is willing to commit to in favor of building more natural gas infrastructure….

“SELC will represent Appalachian Voices, the Chesapeake Climate Action Network and the National Resources Defense Council at Dominion’s IRP hearing at the Virginia SCC in September.”

Read the full press release here.