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Carolyn Elefant Speaks at IEEFA Conference

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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.

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Carolyn Elefant Speaks at IEEFA Conference

  1. 1. WARNING! Does a Danger of Overbuild of Natural Gas Interstate Pipelines Lie Ahead? Carolyn Elefant, Law Offices of Carolyn Elefant PLLC March 2016
  2. 2. Is there any doubt that FERC pipeline project development is sharply acceleraDng? Source for All Tables: h;p://ferc.gov/industries/ gas/indus-act/pipelines.asp
  3. 3. FERC State of the Markets Presentation, March 2015
  4. 4. e" WHAT EXPLAINS THE UPWARD TREND?
  5. 5. LNG Export
  6. 6. MARCELLUS EXTRACTION
  7. 7. Clean power plan & gas / electric connection
  8. 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. 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. 10. FERC, give me my pipeline!! And some eminent domain with that too. ...to this.
  11. 11. 3 PROBLEMS WITH PIPELINE OVERBUILD
  12. 12. FERC’S TOOLS FOR GUARDING AGAINST OVERBUILD G
  13. 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
  14. 14. STOP SUGGESTIONS TO PIPELINE OVERBUILD
  15. 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
  16. 16. CONTACT INFORMATION: CAROLYN ELEFANT Law Offices of Carolyn Elefant PLLC Washington DC & Bethesda MD 202-297-6100 carolyn@carolynelefant.com

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