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NC regulators protest Transco gas pipeline project at FERC

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NC regulators protest Transco gas pipeline project at FERC

The North Carolina Utilities Commission is protesting Transcontinental Gas Pipe Line Co. LLC's proposed Leidy South expansion project. The commission, or NCUC, contends that Transco has not shown that existing shippers, including those in North Carolina, would not be harmed or that proposed rates follow policy and precedent at the Federal Energy Regulatory Commission.

The action is the latest of a series of NCUC protests of pipeline projects and rate proposals at FERC, including those for several other Transco expansions. NCUC has previously questioned whether FERC's approach considers whether returns reflect market conditions and produce recourse rates that serve their intended purpose of providing a check on a pipeline's market power in reaching negotiated rates with project shippers.

The 582-MMcf/d Leidy South project would move gas from production areas in Pennsylvania along the Central Penn Line to an interconnection with Transco's mainline near the Pennsylvania-Maryland border. The capacity has been reserved by producers Cabot Oil & Gas Corp. for 250 MMcf/d, Seneca Resources Corp. for 330 MMcf/d and UGI Utilities Inc. for 2.4 MMcf/d.

In its application filed July 31, Transco said the project will enable Transco to provide 582,400 Dth/d of incremental firm capacity for abundant supplies of natural gas from northern and western Pennsylvania to markets in Transco's Zone 5 and Zone 6. (FERC docket CP19-494)

Downstream shippers

The state regulators, in a protest filed with FERC Sept. 4, questioned Transco's assertion that the capacity is expected to serve local distribution companies, power plant conversions from coal, and new natural gas generation plants in Transco Zone 5 and Zone 6, including in New York, New Jersey, North Carolina and South Carolina.

"Transco simply fails to explain how the capacity can serve loads outside of Zone 6 if the only path rights created, and the only incremental capacity to be constructed as part of the Leidy South Project, are in Zone 6," NCUC wrote Sept. 4.

The North Carolina regulators also argued that Transco failed to show that service will not be degraded for existing shippers outside of Zone 6 in states that Transco asserts will be served by new capacity.

They also argued that the proposed return and depreciation rates used to calculate recourse rates run counter to FERC policy and raised questions about whether overstated recourse rates could check market power. To back its proposed recourse rate, Transco has offered no support for using its last proposed, rather than last approved, rate of return and depreciation rates, NCUC contended. The pipeline company used "the inflated, filed-for return figure and depreciation rates" from a rate filing "which has been accepted subject to refund but not approved by the commission," NCUC continued.

Transco spokesman Christopher Stockton said, "We have received this protest and other interventions, which we are currently reviewing to develop an appropriate response." Intervenors include Duke Energy Carolinas LLC, Duke Energy Progress LLC, Piedmont Natural Gas Co. Inc., Southern Co. Services and Exelon Corp.

Prior protests

NCUC in December 2018 similarly protested recourse rates proposed in the MVP Southgate project, an extension of the main Mountain Valley Pipeline project that would serve SCANA Corp. utility PSNC Energy.

Previously, NCUC joined the New York State Public Service Commission in an appeals court challenge to FERC approvals of three Transco projects: the 1.7-Bcf/d Atlantic Sunrise expansion, the 448-MMcf/d Dalton expansion and the 250-MMcf/d Virginia Southside II expansion. The state commissions argued that the recourse rate FERC used was based on an outdated and inflated pretax return set in 2002. But the District of Columbia Circuit Court of Appeals in April found the state commissions lacked standing because they failed to establish injury such as higher prices for ratepayers. An NCUC challenge is pending in the same court to FERC's approval of recourse rates for the Atlantic Coast Pipeline.

The Leidy South project involves installing and replacing several short pipeline segments, two new compressor stations, upgrading two compressor stations and other facilities, along with leasing arrangements. Transco targeted the in-service in time for winter heating in December 2021.

Maya Weber is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.