WARNING! DoesaDangerofOverbuildof

NaturalGasInterstatePipelinesLieAhead?

CarolynElefant,LawOfficesofCarolynElefantPLLCMarch2016

IsthereanydoubtthatFERCpipelineproject

developmentissharplyacceleraDng?

SourceforAllTables:h;p://ferc.gov/industries/gas/indus-act/pipelines.asp

FERC State of the Markets Presentation, March 2015

e"

WHAT EXPLAINS THE UPWARD TREND?

LNG Export

MARCELLUS EXTRACTION

Clean power plan & gas /

electric connection

State PRE-APPROVAL OF COST RECOVERY FOR

CONTRACTS – EXAMPLES:

•  InvesGgaGonofMas.sDPU(Oct.2,2015)(findingelectriccompaniescanenterintolongtermcontractsforgas)

•  FloridaPower&Light,December18,2013(findingSabalTrailprojectisprudentbecauseitisneededandistheleastcostalternaGve)

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.......

FERC, give me my pipeline!! And some eminent domain with

that too.

...to this.

3 PROBLEMS WITH PIPELINE

OVERBUILD

FERC’S TOOLS FOR GUARDING AGAINST

OVERBUILD G

Tools: NaturalGasAct CerDficatePolicyStatement RatemakingAuthority

What SecGon7(e)publicnecessity&conveniencestandardrequiresshowingofneed.Showingof“public”needheightenedbySec.7(h)eminentdomainauthority

NoratepayersubsidizaGonBalanceneed&impacts:Needshownby:Subscribedw/precedentKsMarketstudiesorEIAdataProofoflowerelectricrates(notjustspeculaGon)StateCommissionfindings?

ReturnonEquityBillingdeterminantsbasedonfullcapacityNoratepayersubsidizaGon

Pros Minimizesoverbuildifonly“necessary”infrastructureisbuiltAllowsconsideraGonofotheracGviGesthatinformneed(CityofPi)sburghv.FPC)

RoadmapforprojectcriGcsAllowsforbroadconsideraGonoffactorsthatinformneed

FERCcouldmanipulateROEstobalanceneed(reduceROEforunsubscribedprojects)Billingdeterminantsensurespipelinepaysforoverbuild

Cons LacksproporGonality–can(anddo)buildforpeakLimitedprotecGonforcompressorstaGonsw/landacquiredbyK

PrecedentKs=CEIIIfnoratepayersubsidies,FERCinclinedtopresumethatpipelinespend=need.FERCunlikelytogranthearingstoadjudicatecontestedissueofneed.Casespecific–nobigpictureview

NoprotecGonforretailcustomerslockedintostate-PUCapprovedKsFERCnotinclinedtocutpipelinerequestedROE(e.g.,SabalCP15-17ExcepGonsforreliability(rolledinratesallowed)arelargeenoughtoswallowtheruleagainstsubsidizaGon

STOP

SUGGESTIONS TO

PIPELINEOVERBUILD

I. Adjudicative Proceedings for Need at FERC Usediscovery&cross-Xtoprobepipeline’sclaimedneed&explorealternaGveNecessarydueprocessprotecGonforlandowners

II. Electric-Gas Coordination and Operational Changes Be;ergas-electriccoordinaGoncanmiGgatecostincreases OperaGonalchangesarepreferabletodealingwithpeakdemandthannewinfrastructure

III. Proper Alignment of Rate Incentives -ROEstoohigh,capitalstructurestooequity-thick

IV. Enforce Non-Discrimination Tariff Policies

-MayaddresssomestatePUClong-termKapprovalsthatallowpreferenGaltreatmentV. Programmatic Approaches:

AshbackerDoctrine–Singlehearingtocompare2mutuallyexclusivepipelines

ProgrammaGc/RegionalEISANDCerGficateProceeding Basis: (1)FERC’sreliabilityplanningobligaGonsunderCleanPowerPlan (2)RecognizeddiscreGonforregionwidesoluGonsper PermianAreaBasin,(USSup.Ct.1968).

SUGGESTIONS TO ADDRESS OVERBUILD

CONTACT INFORMATION: CAROLYNELEFANT

LawOfficesofCarolynElefantPLLCWashingtonDC&BethesdaMD

202-297-6100carolyn@carolynelefant.com