Cold snap renews need for pipeline
Published 9:43 am Thursday, January 11, 2018
As North Carolina and other southeastern states thaw out from last week’s record-setting cold snap, there’s another winter weather issue waiting in the wings….higher prices for natural gas.
That fact has led some officials with utility companies to reassert their belief that the proposed Atlantic Coast Pipeline (ACP) is needed, now more than ever, to help alleviate the current unstable supply of natural gas as well as maintaining the price for the tradable commodity at reasonable levels.
According to S&P Global Platts – an independent provider of information, benchmark prices and analytics for the energy and commodities markets – natural gas prices soared from $3 per dekatherm in late December to an all-time record high of $175 at the end of last week.
Additionally, severely limited capacity on the pipelines now serving Virginia and North Carolina forced some utilities to curtail natural gas service to major industrial customers and raised consumer prices to historic highs.
Aaron Ruby, Media Relations Manager for Dominion Energy, said he was aware of two companies, Piedmont Natural Gas and Virginia Natural Gas, having to briefly interrupt service to several industrial customers.
“The deep freeze of the past week is a real-world example of the natural gas supply constraints facing North Carolina that we’ve been talking about for the past three years,” Tammie McGee, Corporate Media Relations for Duke Energy/Piedmont Natural Gas, told the Roanoke-Chowan News-Herald on Tuesday. “North Carolina’s lack of pipeline infrastructure has significant consequences for consumers’ pocketbooks across the state.”
Piedmont alerted federal regulators earlier this week that it urgently needs new infrastructure by the end of 2019 to serve customers’ growing needs.
“To be clear, the higher prices and a tight supply did not result from a natural gas shortage,” McGee noted. “There is plenty of natural gas available. Prices dramatically increased and supplies were strained during the past week’s severe cold because of a transportation shortage. North Carolina is dependent on a single, increasingly-constrained transportation source, the Transco pipeline, and that source feeds natural gas to many states and many customers. Our dependence on a single source of natural gas supply is a critical vulnerability for our state.”
Meanwhile, Virginia Natural Gas, which serves homes and businesses in the Hampton Roads region, reported service interruptions to 11 major industrial customers over the last two weeks, some lasting for as long as four days.
Ruby told the News-Herald that the extreme cold and spikes in natural gas usage across the Mid-Atlantic states over the last two weeks demonstrated in dramatic fashion the real and urgent need for the Atlantic Coast Pipeline.
“The reason is simple, our region’s pipelines are too constrained, and we don’t have enough access to lower-cost supplies from the Appalachian region (from where the ACP will originate),” Ruby said. “In response to urgent requests from utilities, we proposed the Atlantic Coast Pipeline more than three years ago to relieve those constraints and bring these lower-cost supplies to consumers in Virginia and North Carolina. The Atlantic Coast Pipeline would significantly lower the risk of this kind of volatility in the future.”
He added that the spike in the price for natural gas will ultimately be reflected in higher electric and natural gas bills for consumers. Ruby says Dominion Energy Virginia relied on the Transco pipeline for about 75 percent of its natural gas supply during the cold spell, while public utilities in North Carolina depended on this single pipeline for 100 percent of the state’s supply.
“Transco is currently the only natural gas transmission pipeline serving all of North Carolina, leaving the state particularly vulnerable to shortages and price volatility,” Ruby stressed.
In contrast, Ruby said prices in the Appalachian region remained low during the recent cold snap, trading between $4 and $6 per dekatherm.
“The problem is we don’t have the pipeline infrastructure to deliver these lower-cost supplies to consumers in Virginia and North Carolina,” Ruby stated. “While we’re still calculating the impact, having access to a lower-cost source would have saved consumers in our region hundreds of millions of dollars in fuel costs over just the last couple weeks.
“We’ve said for a long time that the pipelines serving our region are stretched too thin and cannot handle the coldest winter days,” he continued. “Our economy isn’t going to grow if we have to curtail our industries whenever it gets cold, or if consumer prices skyrocket when our pipelines are overstrained.”
Ruby stressed that investing in new infrastructure is the only way to solve these challenges.
“The Atlantic Coast Pipeline will open up access to lower-cost supplies in Virginia and North Carolina – access we currently do not have – and it will make service more reliable for consumers, especially when they need it the most on the coldest winter days,” he said.
Another example of the volatility of natural gas pricing comes from the City of Rocky Mount. Ruby provided a copy of a Jan. 8 press release from Rocky Mount Public Utilities (RMPU).
“Due to the higher pipeline capacity cost, RMPU must increase the Purchased Gas Adjustment (PGA) from $0.00 to $0.30 per therm beginning Monday, Jan. 8, 2018. This yields a residential gas rate of $1.41646/therm for the first 10 therms and $1.15183/therm for over 10 therms. The increase to the PGA means the cost of using 100 therms for a residential customer in January will increase from $121.83 to $151.83. The PGA increase will remain in place throughout the winter months,” the release stated.
According to its policy, the City of Rocky Mount does not profit from the fluctuations in gas costs. Instead, all costs associated with increases or decreases in the commodity price of natural gas are passed along to customers.
McGee noted the ACP would mitigate these types of price spikes by providing the infrastructure necessary to transport additional natural gas into the state from the abundant supplies of the Marcellus and Utica shale basins in the Appalachian region.
Transco is also the only significant interstate natural gas transmission line delivering fuel for the production of electricity to the Duke Energy Carolinas (DEC) and Duke Energy Progress (DEP) natural gas plants, and to wholesale municipal utilities.
Given existing and future consumer needs, McGee said DEC, DEP and Piedmont Natural Gas will require additional gas infrastructure and will be ACP’s largest customers, passing on fuel cost savings to their end-use (the consumer).
She touted the ACP will provide significant benefits to electric and natural gas end-users in the form of access to lower-cost gas supply, increased supplier diversity, improved gas transmission infrastructure in North Carolina, and increased operational flexibility and system reliability
“Importantly, the ACP will reduce customers’ exposure to natural gas market volatility and provide the capacity necessary to support a growing North Carolina market,” McGee said. “Also, because of the natural gas supply constraints during this extended cold weather event, power generators burned significant volumes of fuel oil to meet customer demand.
“Natural gas customers who are subject to daily market pricing, such as industrials, municipals, power generation, etc., are often negatively impacted by price spikes that result from inadequate transportation infrastructure (to get the natural gas from the well head to the market),” she added. “And as much as I cite the many benefits of renewables, solar does not help us meet early-morning winter peaks. When customers need heat and electricity the most, the sun is barely starting to rise over the horizon.”
When asked if the ACP, and its capacity to handle a greater volume of natural gas, will help reduce future vulnerability to natural gas transportation shortages and price volatility, McGee answered in one short sentence.
“Yes, absolutely,” she said, adding that the Polar Vortex of 2014 (and now the first major cold snap of 2018) “was a powerful illustration that more capacity was very much needed.”
Pending final approval, the 600-mile underground Atlantic Coast Pipeline will originate in Harrison County, WV, travel to Greensville County, VA, with a lateral extending to Chesapeake, VA, and then continue south into eastern North Carolina, ending in Robeson County. Two additional, shorter laterals will connect to two Dominion Energy electric generating facilities in Brunswick and Greensville counties.
Upon entering North Carolina, there will be a compressor station and regional office built just east of Pleasant Hill, near Highway 301, in Northampton County. This will create about 22 new jobs. Northampton County is projected to receive about $1.6 million per year in tax revenue from the pipeline once it is in service.
The entire pipeline project is an effort involving Dominion Energy, Duke Energy, Piedmont Natural Gas, and Southern Gas Company.