Precedent Agreements for KM/TGP NED Project - in New Hampshire

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1 Precedent Agreements for KM/TGP NED Project - in New Hampshire In order to issue a Certificate of Public Convenience and Necessity FERC requires binding Precedent Agreements between the pipeline applicant and Project Shippers. These long-term agreements to ship specific quantities of gas are used as evidence of a need for a pipeline. Kinder Morgan / Tennessee Gas Pipeline has listed Liberty Utilities in New Hampshire as one of the Project Shippers for its NED project. Public utilities require approval of their state Public Utilities Commissions before they can sign such binding Precedent Agreements. The state PUC determines whether such an agreement would be in the best interests of the consumers. In the case of Liberty Utilities, the New Hampshire Public Utilities Commission (NH PUC) is the relevant commission. On December 31, 2014, Liberty Utilities filed a Petition for Approval of a Firm Transportation Agreement With Tennessee Gas Pipeline Company, LLC with the NH PUC, thus opening. The entire NH PUC docket for this application (DG ) is publicly accessible at: In addition to the applicants there are 3 interested parties: NH PUC Staff OCA (Office of Consumer Advocate) established by NH RSA 363:28 as an independent agency administratively attached to the public utilities commission which shall have the power and duty to petition for, initiate, appear or intervene in any proceeding concerning rates, charges, tariffs, and consumer services before any board, commission, agency, court, or regulatory body in which the interests of residential utility consumers are involved and to represent the interests of such residential utility consumers PLAN-NE (Pipeline Awareness Network for the North East) which was granted standing as an intervenor based on some of its members being customers of Liberty Utilities. Each party assigned its own expert to study and submit a report about the application. These experts were: NH PUC Staff: Melissa Whitten (consultant) OCA: Dr. Pradip K. Chattopadhyay (Assistant Consumer Advocate/Rate and Market Policy Director) PLAN-NE: John A. Rosenkranz (consultant) The experts submitted their reports on. Their direct testimony adds up to 108 pages, not including supplementary data - too much to include here. Instead I have only included each report s title-page and its final summary / conclusions / recommendations sections. Links to the complete reports are included in each title page. Each of the three experts recommended against approval of the application. Hearings before the Massachussetts Utility Commissions concerning public utilities in Massachussetts wishing to sign Precedent Agreements with NED were scheduled to take place after the NH PUC hearing.

2 NEW HAMPSHIRE PUBLIC UTILITIES COMMISSION LIBERTY UTILITIES (ENERGYNORTH : NATURAL GAS) CORP. D/B/A LIBERTY : UTILITIES : Petition for Approval of a Firm Transportation Agreement With Tennessee Gas Pipeline Company, LLC REDACTED DIRECT TESTIMONY OF MELISSA WHITTEN ON BEHALF OF THE THE STAFF OF THE NEW HAMPSHIRE PUBLIC UTILITIES COMMISSION Full testimony (56 pages) available at: M%20WHITTEN.PDF REDACTED Testimony of Melissa Whitten Page 53 of 56 VIII. SUMMARY AND RECOMMENDATIONS Q. Please summarize your conclusions and recommendations for the Commission? A. I have identified several concerns with the Company s Filing. These are: a) The Company indicates that it can continue to obtain firm citygate deliveries to meet design day deficits in the near term and does not indicate that it cannot continue to do so at least to cover a portion of the forecasted demand deficit; b) The PA assumes 115,000 Dth/d of capacity only 50,000 of which will replace existing capacity under the TGP Dracut contract, leaving 65,000 Dth/d of incremental capacity that results in excess capacity of as much as 55,000 Dth/d in the first year of the FT-NED agreement; c) The Company s very aggressive and speculative forecast of growth in Design Day Demand reduces this excess capacity slowly over time but some remains even after 20 years; d) As a result, in order to make sure that the PA represents the least-cost, or even just the best-cost alternative, the Company would have to be certain that it could recoup a significant percentage of the total costs of the excess capacity through cost-mitigation measures. However, this would require an even more speculative assumption about the future value of excess pipeline capacity in the secondary market; e) The Company s argument that the reliability benefit from having a second high-pressure interconnect on the west side of its system is a sufficient reason to impose the cost of the FT-NED contract on all firm ratepayers, even though it will retain all of its needle peaking capacity including the four propane air plants,

3 whose cost is also borne by ratepayers, has not been demonstrated to support a conclusion that the contract is the least cost alternative; f) Additionally, the Company argues that the high-pressure interconnect will allow for cost-effective distribution system expansion to add new customers to the system, without providing any details about its growth expectations or a fully-developed plan estimating the cost to obtain targeted levels of new customer growth and the required investment in distribution system expansion to serve these customers. Based on these observations, and considering the findings summarized above, it is clear that the Company s stated need for 65,000 Dth/d of incremental capacity is not supported. Instead of providing an analysis based on industry best practices rooted in the IRP process, the company has effectively presented a procurement effort in lieu of a plan. Further, the justification for the PA is based on an aggressive single-scenario demand forecast that would leave the Company with substantial excess capacity that it would not completely absorb or grow into over the life of the contract. As a result, in order to make sure that the PA represents the least-cost or even just the best-cost alternative, the Company would have to be certain and the Commission would have to be assured - that the Company could recoup a significant percentage of the total costs of the excess capacity through cost mitigation measures. However, this certainty is not attainable, as any mitigation expectations require an even more speculative assumption about the future value of excess pipeline capacity in the secondary market, in order to be considered offset by the what the Company views as substantial benefits to customers over time, if the Company s demand forecasts come to pass. Therefore, I respectfully recommend that the Commission deny the Company s petition as-filed, or in the alternative require the Company to prepare an amended filing that includes: 1) A fully-developed range of demand forecasts that are based on appropriate long-term drivers of customer count and use-per-customer by rate class, 2) An adequate and viable plan that quantifies the costs and the benefits of pursuing market growth, including the cost of extending the Company s distribution system; 3) A fully-developed range of supply-side portfolio configurations, including varying levels of capacity for the NED project while retaining the vintage Dracut capacity; 4) A proposal to mothball the propane air plants that will not be required to meet design peak day requirements once the FT NED capacity becomes available, except for any plants that the Company needs for distribution system pressure support; and 5) A revised PA that maintains as much flexibility as possible to minimize risk to ratepayers should the deadline for notification to TGP change. Q. Does this conclude your testimony? A. At this time, yes it does. I reserve the right to amend or expand this testimony if additional information becomes available.

4 STATE OF NEW HAMPSHIRE PUBLIC UTILITIES COMMISSION In the matter of Liberty Utilities (EnergyNorth Natural Gas) Corp. d/b/a Liberty Utilities Petition for Approval of Firm Transportation Agreement DIRECT TESTIMONY OF Dr. Pradip K. Chattopadhyay Assistant Consumer Advocate/Rate and Market Policy Director May 1, 2015 Full testimony (24 pages) available at: %20CHATTOPADHYAY.PDF Page Q. Please summarize your position with respect to the Company s petition requesting the approval of the PA agreement. A. Contrary to what the Company has stated, I do not believe it has met the burden of proof in determining that 115,000 Dth per day (while eliminating existing Concord Lateral contracts) is an appropriate capacity level to contract with NED. Given my analysis above, it is extremely important that Liberty Utilities is directed by the Commission to analyze different levels of capacities, in decrements of 5,000 Dth/day, relative to the PA s proposed level of 115,000 Dth/day. It is my recommendation that capacity levels as low as 80,000 Dth per day should be examined. I also urge the Commission to properly account for economic efficiency considerations in analyzing the appropriateness of a contract to ensure that current ratepayers are not unfairly burdened. Any consideration of non-cost factors should be properly explained and viewed in conjunction with the cost analysis that the OCA is urging the Commission to direct Liberty Utilities to conduct. Q. Do you want to bring to attention any other point? A. I am cognizant, based on Attachment PKC-3, that... the Precedent Agreement filed for approval in this docket does not contemplate any volumes below I 00,000 Dth and would require renegotiated terms and conditions to address any lower volume. Dafonte, page 3 of 3. Whether or not the appropriate contract level requires renegotiated terms should not drive the Commission s decision. I strongly urge the Commission to require the Company to properly meet the burden of proof in determining the appropriate level of contract by providing additional analysis requested above. Q. Does this conclude your testimony? A. Yes.

5 STATE OF NEW HAMPSHIRE PUBLIC UTILITIES COMMISSION Liberty Utilities (EnergyNorth Natural Gas) Corp. d/b/a Liberty Utilities Approval of Tennessee Gas Pipeline, LLC Precedent Agreement TESTIMONY OF JOHN A. ROSENKRANZ ON BEHALF OF PIPE LINE AWARENESS NETWORK FOR THE NORTHEAST, INC. Full testimony (28 pages) available at: REDACTED VERSION %20ROSENKRANZ.PDF Page 25 Q. Given your analysis, what are your recommendations? A. EnergyNorth s proposal to contract for 115,000 Dth/day of capacity in Tennessee s NED expansion project is not in the interests of EnergyNorth s customers and should not be approved. The additional fixed pipeline charges associated with extending the transportation path for 50,000 Dth/day of existing transportation service from Dracut, MA to Wright, NY is likely to be exceed the potential savings in gas commodity costs. The proposed addition of 65,000 Dth/day of firm transportation service from Wright is more than two times the quantity of incremental firm gas supply resources that EnergyNorth needs to meet design day requirements over a 10 year planning horizon and should be rejected as well. Q. Does that conclude your testimony? A. Yes, it does.