Bill aims to answer pipeline question: ‘Is this necessary?’
RICHMOND, Va. (AP) — As Dominion Energy spearheads the $8 billion Atlantic Coast Pipeline, Virginia lawmakers are advancing legislation sponsored by a Republican who says he wants to protect the company’s captive ratepayers from possible overcharges.
Under legislation from Del. Lee Ware, Dominion’s Virginia electric utility would have to demonstrate the need for a new fuel source and show that it “objectively studied” other options, among other conditions, before the State Corporation Commission could approve passing along costs from the natural gas pipeline.
Ware said his bill “makes very clear the question that I’ve always wanted answered: Is this necessary for the ratepayers ... or is this entrepreneurial on Dominion’s part?”
The legislation has passed the House and is scheduled for a hearing Monday in a Senate committee stacked with Dominion-friendly lawmakers.
Richmond-based Dominion, the lead developer of the project that would run from West Virginia through Virginia and into North Carolina, is a giant energy company heavily invested in natural gas infrastructure with customers in 18 states. Dominion’s electric utility is Virginia’s largest and covers about two-thirds of the state.
The company is developing the pipeline with partner Duke Energy. Southern Company recently sold its small stake in the project to Dominion.
Electric and gas utilities owned by those three companies have signed up to receive about 96% of the the pipeline’s gas once it’s built. Critics say that setup raises questions about whether the gas is truly needed and whether customers could be on the hook for costs that have soared as the project faced numerous delays.
Ware said he wants to make sure Dominion customers don’t overpay. The SCC previously rejected a bid by environmentalists to weigh in on the prudency of the pipeline before it goes into service.
Dominion initially opposed the bill, but spokesman Aaron Ruby said an amended version that will permit the SCC to consider reliability will allow fuel cost recovery from the pipeline.
Ruby also said transactions involving companies affiliated with the project’s developers shouldn’t be considered any differently from contracts with other customers served by the pipeline.
“Our pipeline companies and electric utilities are totally separate parts of the company. ... We cannot share non-public information or give preferential treatment, and both sides have to act in their own best interest,” he said.
The pipeline was announced amid huge fanfare in 2014, with a projected cost of $4.5 billion-$5 billion and a target completion date of 2018. But despite heavy spending by Dominion to win over civic leaders in towns along the pipeline’s path, the project has met with fierce resistance by environmental groups and land owners.
The pipeline has suffered legal setbacks to its state and federal permits, and Dominion’s most recent estimate put the costs of the project at about $8 billion, with a completion date of 2022.
While Dominion has publicly said the gas will be used in Virginia and North Carolina, a company executive said in remarks at an energy conference that “everybody knows” it won’t stop there and could be extended into South Carolina and beyond.
Dominion and other pipeline supporters — including labor union leaders, economic development officials and many lawmakers from both parties — say the project will bring a critical new gas supply to Virginia and North Carolina that will help lure new manufacturing businesses to the area.
Supporters also say additional natural gas is needed as the state moves to retire coal plants and expand renewables.
Critics, meanwhile, question whether the extra gas is really needed or if it could be provided in other ways at a lower cost.
Federal regulators allow “a windfall of profits” for interstate natural gas pipeline developers, said Tom Hadwin, a former utility executive who has done consulting for environmental groups fighting the pipeline. He calls the project a “money-making enterprise.”
Pipeline developers are allowed a rate of return on equity of 14-15%, significantly higher than what utilities typically get building power plants.
In a legal brief, Virginia Attorney General Mark Herring’s office said the pipeline developers’ claim that it will meet an unmet and growing demand for natural gas “does not withstand scrutiny.”
“Indeed, recent analyses indicate that the demand for natural gas will remain flat or decrease for the foreseeable future and can be met with existing infrastructure,” the brief said.
Ware backed a similar bill last year that advanced out of a GOP-controlled House but died in the Senate, also controlled then by Republicans.
This year, Democrats control both chambers and many of them have openly criticized Dominion’s outsized political power. But the company still has plenty of allies, especially on the Senate committee that could decide the bill’s fate.
“We have a long history of working with whatever party is in the majority,” Dominion CEO Thomas Farrell said on a recent earnings call.