A study released this week concludes that should the Atlantic Coast Pipeline ever be built its affiliated utility customers will have difficulty in convincing state regulators to pass on the project’s costs to utility customers.  In short, “the project does not represent good value to the ratepayer.”

“The Vanishing Need for the Atlantic Coast Pipeline” was released by Oil Change International and the Institute for Energy Economics and Financial Analysis.  Among key findings in the study were:

  • Six companies, all of whom are regulated utility affiliates of the pipeline’s sponsors, have contracted for 96% of the pipeline’s capacity.
  • Atlantic Coast Pipeline, LLC will recover the costs of the pipeline through rates charged to the pipeline’s customers. Given that the vast majority are regulated utilities, these costs will have to be approved by state utility regulators in Virginia and North Carolina.
  • Electric utility subsidiaries of Duke and Dominion in Virginia and North Carolina have contracted for 68% of the pipeline’s capacity. Yet, the argument by these utilities that they need new natural gas pipeline capacity has been significantly weakened since the ACP was first proposed.
  • In its most recent long-term Integrated Resource Plan (IRP), four out of five of Dominion’s modelled scenarios show no increase in natural gas consumption from 2019 through 2033.
  • Dominion’s 2018 IRP was rejected by Virginia state regulators, in part for overstating projections of future electricity demand. This implies that future natural gas consumption will likely be even less than forecasted in the IRP.
  • The most recent IRPs of Duke Energy Progress and Duke Energy Carolinas show that previously planned natural gas plants have been delayed further into the future. We also find that Duke also has a history of overstating its forecast of electricity demand.
  • Over the next decade, it is likely that the demand for natural gas in Virginia and North Carolina will be further eroded as renewable energy and storage technologies continue to rapidly decline in price.

The study recommends that investors ask hard questions of the ACP-LLC joint venture partners:

  • What is the risk that state regulators will disapprove, or partially disapprove, recovery of project costs from ratepayers?
  • Does the Virginia State Corporation Commission’s rejection of Dominion’s 2018 Integrated Resource Plan and its order that Dominion develop a revised load forecast change the perception of the risk that the SCC will not fully approve the pass-through of ACP project costs in rates?
  • Without rate recovery, or with partial rate recovery, does the project still make sense?
New Study Reinforces the Lack of Need for the ACP
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