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New York joins North Carolina to appeal rates on Transco pipe projects

New York and North Carolina utility commissions have become teammates in an appeal of the Federal Energy Regulatory Commission's approval of natural gas transportation rates for three Transcontinental Gas Pipe Line Co. LLC projects.

The New York State Public Service Commission joined the North Carolina Utilities Commission in asking the U.S. Court of Appeals for the District of Columbia Circuit to review the FERC authorizations of Transco's Atlantic Sunrise, Dalton and Virginia Southside II expansion projects. The state commissions protested the federal agency's approval of the Williams Partners LP pipeline company's use of a pretax return of 15.34% to calculate incremental recourse rates as part of the Natural Gas Act certificate orders for each project. The agencies claimed the return is too high. A recourse rate is a cost-of-service rate for pipeline service available to customers who did not agree to a negotiated rate.

The state commissions argued before FERC, and now before the court, that the federal agency failed to protect consumers from excessive rates and failed to make sure the pretax return was appropriate for current market conditions. The state commissions said the pretax return was based on a rate case filed over 15 years ago. The New York commission said the number is "outdated and inflated."

In a Feb. 26 filing with the federal court, the New York commission said FERC approved the projects without holding an evidentiary hearing to consider issues involving the pretax return, even though such a hearing was requested.

Transco intervened in support of FERC in the case. (U.S. Court of Appeals for the D.C. Circuit docket 18-1018, et al.)

FERC approved the almost $3 billion Atlantic Sunrise project in February 2017, the $190.8 million Virginia Southside II project in July 2016, and the $471.9 million Dalton project in August 2016. FERC upheld the decisions in January for Atlantic Sunrise and in November 2017 for the other projects when it denied rehearing requests, including requests filed by the state commissions.

The 1.7-Bcf/d Atlantic Sunrise pipeline is being built in Pennsylvania, Maryland, Virginia, North Carolina and South Carolina. The pipeline will give various markets on the Transco system access to Marcellus Shale supplies. (FERC docket CP15-138)

The 448,000-Dth/d Dalton project provides gas transportation service to customers in Georgia through 115 miles of pipeline. In July 2017, FERC authorized Transco to begin full service for the project. (FERC docket CP15-117)

The 250,000-Dth/d Virginia Southside II project, which includes over 4 miles of lateral pipe, is designed to move gas for Dominion Energy Inc.'s Virginia Power Services Energy for a new power plant in Greensville County, Va., the Greensville Power Station. FERC let Transco put the lateral in service in November 2017. (FERC docket CP15-118)