Using Electricity Customers to Pay for Pipelines

A new post on Power for the People VA by Ivy Main discusses how southeastern electric utilities find their way to higher profits through gas pipelines and captive consumers.

Dominion Resources is one of the companies that has adopted a growth strategy reliant on large volumes of fracked gas. For Dominion and other southeastern utilities, rate of return is only part of the attraction. “In a strategy that ought to concern regulators and electricity consumers, Duke, Dominion and NextEra all plan to use their regulated electric power subsidiaries to guarantee demand for the pipelines they’re building. The subsidiaries will build natural gas generating plants, paid for by electricity consumers, to be supplied with gas carried through the pipelines owned by their sister companies.”

BUT (the article points out), “So many pipelines are in development that analysts say there simply isn’t enough gas to fill them all. At the 2016 Marcellus-Utica Midstream Conference in February, attendees were warned that pipeline capacity ‘will be largely overbuilt by the 2016-2017 timeframe.’ ”

Further, “Linking pipelines to captive customers should prove a profitable arrangement for the utilities. For the customers who bear the costs and risks, it’s much more problematic. But state law gives them no say in the matter. In these southern states, the electric power subsidiaries hold legal monopolies in their designated territories. Once federal regulators approve the pipelines and state regulators approve the gas plants, the captive customers bear the loss if the bet turns sour.”

Read the full article here.