By Thomas Hadwin
Hadwin served as an executive for electric and gas utilities in Michigan and New York. He lives in Waynesboro.
Citizens of Roanoke must choose their energy and economic future. Existing businesses want to expand and new ones want to move here. RGC Resources will invest over $50 million to become a 1% owner of the Mountain Valley Pipeline (MVP) intending to make a big profit by owning part of a pipeline.
The MVP has been routed through the Summit View Industrial Park in Franklin County. Roanoke Gas claims it will be cheaper to use the MVP than expanding the existing system to serve this area. The shorter connections to the MVP are cheaper than a connection to the East Tennessee pipeline from Franklin County. But that’s not the whole story.
By connecting to the MVP, Roanoke Gas must pay at least $71 million over the next 20 years, even if only some or none of its capacity reservation is used. Escalating prices for the delayed pipeline will make the cost of that contract closer to $100 million. Roanoke Gas intends to spread these higher costs among its existing customers.
Is this even necessary? The greatest usage ever recorded for Roanoke Gas occurred in 2015. That day, unused system capacity was 122% of what the MVP would provide. On the worst day of the bomb cyclone, the surplus was 146% of the MVP and a surplus of 220% greater than what the MVP would provide existed during the highest usage day this year.
The MVP contract far overshoots the highest expected use and is very expensive. The East Tennessee Gas pipeline expanded its capacity by 36 times what the MVP would provide to Roanoke Gas. Smaller amounts could be added from East Tennessee when needed, saving gas customers money. East Tennessee wrote to Roanoke Gas saying that more gas could be provided by building improved connections to its system. One or more of the five existing connections might be expanded or a new connection to Franklin County could be added for a fraction of the $100 million required to use the MVP for just 20 years.
Columbia Gas, Roanoke’s largest supplier, expanded its system last year by 130 times what the MVP will provide. Transportation rates for Columbia Gas are $0.16 — $0.25/Dth and are $0.22/Dth on East Tennessee. The temporary rate for the MVP is $0.98/Dth, but will likely be $1.36/Dth or higher, if the pipeline is finished. Gas is purchased separately. All three pipelines get their supply from a similar area in West Virginia, so differences in delivered gas prices are due to the cost of transporting the gas, which is 500-800 percent higher using the MVP.
Roanoke Gas claims that the abundant new capacity on existing pipelines isn’t available. But the subscribers of most of this capacity are gas producers or marketing companies looking for customers. The MVP is fully subscribed too, but that doesn’t mean that its capacity is unavailable. Over 99 percent of its capacity is awaiting real customers. Those customers will be hard to find because the MVP will deliver gas to Transco that is priced 50-60 percent higher than the abundant supplies available in that system.
In its attempt to provide more energy, Roanoke Gas’s decision to use the MVP is putting the community and its shareholders in harm’s way. There is a better option.
Citizens and business owners in the Roanoke area want a prosperous future. That can be assured by learning to use less energy to produce more goods and services. This would create a competitive advantage for the area and generate many new jobs. Roanoke Gas could use its access to low-cost capital and partner with various energy service companies for energy efficiency projects that would require no upfront investment. More efficient use would lower gas demand and free up supplies to serve new customers without requiring more firm capacity, keeping energy costs low.
Investing in the community rather than the MVP would give Roanoke Gas the profit opportunity it expected from the pipeline project. But this alternative would be a true partnership with the community. Instead of just one winner, everyone would thrive.
Roanoke Gas has an opportunity to exit its contract with the MVP if the pipeline is not in operation by June 1, 2020. People in the community should encourage the company to do so, and embark on a different project that will be good for everyone.