Natural gas from a pipeline being built through Southwest Virginia is needed to reliably serve the customers of Roanoke Gas Co. and to meet future demand, the company says.
Without drawing from the Mountain Valley Pipeline, company President Paul Nester said in pre-filed testimony with the State Corporation Commission, the utility is concerned that it could not provide gas to all of its customers on the coldest days of the year.
The company’s defense of its involvement with the controversial pipeline — made as it proposes a rate increase to the SCC — is also based on providing an energy infrastructure that will help draw new industries to the region.
“Southwest Virginia has more than enough constraints on economic growth without its premier MSA [metropolitan statistical area] flat-lined due to a lack of reliable and affordable energy supply,” John Williamson, chairman of the company’s board, wrote in a January letter to Gov. Ralph Northam that was included in nearly 200 pages of documents filed Tuesday with the SCC.
“MVP is critical to that adequate energy supply.”
The arguments come one month after a staff analysis by the regulatory agency questioned whether the growth of Roanoke Gas’ customer base is strong enough to support an investment by its sister company in the 303-mile pipeline.
Roanoke Gas is a subsidiary of RGC Resources. Another subsidiary of the company, RGC Midstream, is a 1% partner in Mountain Valley, a $5 billion project that its partners say will provide a needed supply of gas to the Mid-Atlantic and Southeastern regions of the country.
The SCC will hear testimony Aug. 14 on the proposed base rate increase, which began as a nearly 11% hike but is now closer to 9%. A decision is expected later in the year.
Critics of the pipeline argue that Roanoke Gas already has an adequate supply from the Columbia Gas and East Tennessee pipelines and that tapping into the beleaguered Mountain Valley project will lead to higher rates for customers.
“Using existing pipelines that have been mostly paid for by previous customers is much cheaper than using a new pipeline, such as the MVP,” Thomas Hadwin, a former electric and gas utility executive, said in written comments.
But in their testimony this week, Roanoke Gas officials said they have asked about additional capacity from the pipelines and were told none was available — both in 2015, when the company entered into a contract with Mountain Valley, and again this month.
The two pipelines provide a total of 78,606 dekatherms a day of natural gas during peak demand months. One dekatherm is 1,000 cubic feet of gas. Roanoke Gas has exceeded the maximum provided by the Columbia Gas and East Tennessee lines on 21 days in the past five years, according to Paul Schneider, an engineer for the company.
When demand exceeds supply, the company relies on a reserve of liquefied natural gas held in a tank that has a capacity of 25,000 dekatherms a day.
Based on growth projections, the company says it needs an additional 10,000 dekatherms a day from Mountain Valley to meet demand.
Roanoke gas currently has 27 customers — including hospitals, Hollins University and large industries such as Steel Dynamics — that have alternative sources of fuel and have agreed to have their natural gas service interrupted during peak demand times. The last time Roanoke Gas had to interrupt service was in February 2015.
Without the Mountain Valley Pipeline, the company is concerned about its ability to serve all of its other customers, which include homes, Nester said in his testimony.
In recent years, the company’s load has grown with the opening of large accounts in Botetourt County, including the Eldor Corp. automotive parts factory and the Ballast Point Brewing Co.
An expansion of the Fralin Biomedical Research Institute at VTC in Roanoke will call for even more gas, the company says.
And a planned service expansion into Franklin County would likely not be possible without tapping into Mountain Valley at the Summit View Business Park, Nester said.
While Roanoke Gas is growing, the SCC and the company are at odds over how quickly. A staff analysis by the agency projected growth at no more than 2% annually; the company puts the figure at nearly 10%.
Those and other disputes are expected to come up at the Aug. 14 hearing.
Roanoke Gas has said its involvement with the pipeline will not lead to higher rates for customers. But if it did, those costs would have to be covered through a separate gas cost increase.
The base rate proposal currently under consideration by the SCC is for costs associated with ongoing infrastructure investment programs and increases in operations and maintenance expenses.
In an earlier ruling, SCC hearing examiner Alexander Skirpan said he agreed with Roanoke Gas that “this case is not about investment in MVP.”
However, he wrote that construction of two gate stations to handle gas from the pipeline, one at Summit View and the other in eastern Montgomery County, can be an issue in the proposed rate increase.
Despite the suspension of key permits, Mountain Valley says it plans to complete the pipeline next year.
Since work began last year, Mountain Valley has violated state regulations meant to control erosion and sedimentation more than 300 times, according to a lawsuit filed by the Virginia Department of Environmental Quality and the State Water Control Board.
Those lapses came during record rainfalls, Williamson wrote in his letter to Northam.
“There is no reason, beyond political and environmental hysteria, that the pipeline cannot be safely and prudently completed with the state providing reasonable and diligent oversight,” he wrote.