Slidedeck from the March 22, 2016, presentation on FERC and Pipeline Overbuild at the Institute for Energy Economics and Financial Analysis (IEEFA) Energy Finance Training Program held at Columbia Law School.
8. State PRE-APPROVAL OF
COST RECOVERY FOR
CONTRACTS – EXAMPLES:
• InvesGgaGon of Mas.s DPU (Oct. 2,
2015)(finding electric companies
can enter into long term contracts
for gas)
• Florida Power & Light, December
18, 2013 (finding Sabal Trail project
is prudent because it is needed and
is the least cost alternaGve)
9. You can’t always get what you want...but if you try
sometime, you just might get what you NEED.!
The FERC certificate process has shifted from this.......
10. FERC, give me my
pipeline!! And some
eminent domain with
that too.
...to this.
13. Tools: Natural Gas Act CerDficate Policy Statement Ratemaking Authority
What SecGon 7(e) public necessity &
convenience standard requires
showing of need.
Showing of “public” need
heightened by Sec. 7(h)
eminent domain authority
No ratepayer subsidizaGon
Balance need & impacts:
Need shown by:
Subscribed w/precedent Ks
Market studies or EIA data
Proof of lower electric rates (not
just speculaGon)
State Commission findings?
Return on Equity
Billing determinants based on full
capacity
No ratepayer subsidizaGon
Pros Minimizes overbuild if only
“necessary” infrastructure is
built
Allows consideraGon of other
acGviGes that inform need (City
of Pi)sburgh v. FPC)
Roadmap for project criGcs
Allows for broad consideraGon of
factors that inform need
FERC could manipulate ROEs to
balance need (reduce ROE for
unsubscribed projects)
Billing determinants ensures pipeline
pays for overbuild
Cons Lacks proporGonality – can (and
do) build for peak
Limited protecGon for
compressor staGons w/ land
acquired by K
Precedent Ks = CEII
If no ratepayer subsidies, FERC
inclined to presume that pipeline
spend = need.
FERC unlikely to grant hearings to
adjudicate contested issue of need.
Case specific – no big picture view
No protecGon for retail customers
locked into state-PUC approved Ks
FERC not inclined to cut pipeline
requested ROE (e.g., Sabal CP15-17
ExcepGons for reliability (rolled in
rates allowed) are large enough to
swallow the rule against
subsidizaGon
15. I. Adjudicative Proceedings for Need at FERC
Use discovery & cross-X to probe pipeline’s claimed need & explore alternaGve
Necessary due process protecGon for landowners
II. Electric-Gas Coordination and Operational Changes
Be;er gas-electric coordinaGon can miGgate cost increases
OperaGonal changes are preferable to dealing with peak demand than new
infrastructure
III. Proper Alignment of Rate Incentives
-ROEs too high, capital structures too equity-thick
IV. Enforce Non-Discrimination Tariff Policies
-May address some state PUC long-term K approvals that allow preferenGal treatment
V.
Programmatic Approaches:
Ashbacker Doctrine – Single hearing to compare 2 mutually exclusive pipelines
ProgrammaGc/Regional EIS AND CerGficate Proceeding
Basis:
(1) FERC’s reliability planning obligaGons under Clean Power Plan
(2) Recognized discreGon for regionwide soluGons per
Permian Area Basin, (US Sup. Ct. 1968).
SUGGESTIONS TO ADDRESS OVERBUILD