Opponents worry pandemic will have ‘chilling effect’ on participation in gas expansion hearings

With utility regulators’ schedules in flux due to COVID-19-related shutdowns, Virginia Natural Gas is pushing to keep a pipeline expansion case on its original timeline even as opponents argue the pandemic will have a “chilling effect” on public participation.

On Tuesday, the utility, which serves about 300,000 customers in central and southeastern Virginia, asked the State Corporation Commission for “expedited consideration” of its application to build 24 new miles of pipeline and two new compressor stations while also expanding an existing station in Ladysmith.

The expansion proposal, known as the Header Improvement Project, is primarily driven by private investors’ plans to construct a large new natural gas plant in Charles City County known as C4GT — one of two such projects, along with the privately financed Chickahominy Power Station, proposed for Charles City over the past four years. 

Besides supplying C4GT with fuel, Virginia Natural Gas said the project will also provide additional capacity for Columbia Gas of Virginia and a natural gas subsidiary of Dominion Energy while adding “supply diversity” to the company’s portfolio.

“A delay to the current procedural schedule and contemplated approval date would threaten those benefits” and could force existing business agreements to be reworked, wrote the company in its April 21 filing. 

The request comes even as C4GT has asked Virginia Natural Gas for a “slight delay” of its own, according to testimony filed by Kenneth Yagelski, director of gas supply for AGL Services Company, the natural gas arm of Virginia Natural Gas’s parent company. 

Yagelski’s testimony attributed this delay to “uncertainty in the gas supply and financial markets caused by the spread of the novel coronavirus,” but further details of the request were redacted from the case files as confidential. In public portions of the filing he said that because the project has been planned as six discrete stages “with distinct and separate construction schedules and costs,” the company didn’t expect the C4GT delay to affect the overall schedule.

The C4GT plans have been public since September 2016, when the developers applied to regulators for a certificate of public necessity and convenience. 

But after winning that approval and necessary local permits, the project appeared to stall, and the developers sought an extension of its certification from the state last spring. Virginia Natural Gas’s unveiling of the Header Improvement Project this December signaled the first motion on the plans in months.

The pandemic’s ‘chilling effect’ on participation

This winter, regulators scheduled a public hearing on the proposed expansion for May 12, and an evidentiary hearing for May 13, with a deadline for public comments of April 28.

With the spread of the new coronavirus that causes COVID-19 shutting down normal operations and throwing the economy into turmoil, however, the State Corporation Commission has adjusted many cases’ timelines. After the John Tyler Building the SCC calls home closed to public traffic March 20, proceedings were shifted online. 

“The commission is proceeding with its case schedule to the best of its ability recognizing that the COVID-19 public health emergency requires reasonable accommodations to comply with social distancing and meeting limits of 10 people or less,” said Ken Schrad, director of the SCC’s Division of Information Resources, in an email.

Some hearings have been canceled, with parties agreeing to resolve pending issues through briefs submitted electronically. Others have had their deadline for public comment pushed back. One case, involving a petition by Dominion Energy, will be heard via Skype after a pre-hearing conference that tested the use of the technology.

The SCC has not yet made any decisions about the Virginia Natural Gas case, although its scheduled hearings are slated to occur just shy of a month before Gov. Ralph Northam’s stay-at-home order forbidding the gathering of more than 10 people in any place is set to expire. 

That has left some Virginia residents who oppose the pipeline expansions nervous they won’t have their day in court. 

“Community informational meetings are possible now only by live streaming, a promising process but largely limited to those citizens with ready access to high speed internet and who are familiar with live streaming platforms,” wrote Lynn Wilson, a Henrico resident who has been active in opposing the Charles City gas plant proposals, in an SCC comment. “Please carefully weigh the chilling effect of the state of emergency upon citizen participation in this case.” 

Several citizens, using boilerplate language provided by the grassroots Concerned Citizens of Charles City County, which was organized to oppose both C4GT and the neighboring Chickahominy Power Station, also voiced concerns about accessibility.

“Most residents in Charles City County have spotty internet and cell phone service, and moving this public hearing online or as a phone conference would still be inadequate and not an effective, inclusive democratic process,” these comments said.

Another, from Carole Moye of Charles City, put the matter more succinctly, saying only: “Delay the damn date.”

Holding ratepayers harmless

When the State Corporation Commission does hold hearings on the Virginia Natural Gas project, filings indicate arguments will primarily focus on ratepayer protections.

According to the utility’s plans, 95 percent (a figure revised slightly upward from an earlier estimate) of the project’s costs will be covered by C4GT, Columbia Gas and Dominion subsidiary Virginia Power Services Energy. The remaining 5 percent would be paid off by ratepayers. 

In prefiled testimony, commission staff voiced concerns about ratepayers being left on the hook for costs if the C4GT project were to fall apart.

Among the recommendations put forward were that the commission require Virginia Natural Gas to “hold its customers harmless of any financial loss due to a default by C4GT or if the C4GT Project is not built.”

The utility has been receptive to that idea, stating in rebuttal filings that the company “never had any expectation that its distribution customers would be exposed to the risk of financial loss in the event of a default by C4GT.”

Other staff suggestions received more pushback.

Likely the most contentious is one from SCC Division of Utility Accounting and Finance Deputy Director Scott Armstrong that would require Virginia Natural Gas to pay off the cost of the project over 20 years — the term of its initial contract with C4GT — rather than over its expected life, which depending on the component ranges from 30 to 70 years.

That depreciation schedule would increase the project’s immediate costs for all customers but over the long term would significantly bring down its expected lifetime costs, from about $1.4 billion to $913 million, Armstrong calculated.

If costs are paid off over the project’s lifetime, he wrote, “Staff is concerned that VNG’s distribution ratepayers may be left responsible for an inordinate portion of the remaining 43% of the lifetime [costs] should the relationship with C4GT not continue beyond 2042.”

Virginia Natural Gas, however, dismissed the recommendation as “unnecessary” because of its pledge to hold ratepayers harmless and argued it was better suited to a rate case where regulators determine exactly how much of its costs a utility can recoup from its customers than a case devoted to approving an infrastructure expansion. 

AGL Services Rates, Tariffs and Regulatory Planning Director John Cogburn said that paying down costs over 20 years rather than the project’s lifetime would mean “future customers will have effectively received a subsidy from current customers.”

It could also pose an existential threat to the entire project, he said: “There is a very real risk that if the entire cost of the Project is required to be amortized over 20 years that the Project will be cost prohibitive and not be completed.”