MORGANTOWN – Our coverage of the Hope Gas proposal to convert up to 629 farm tap customers in 22 counties to propane or electricity has looked closely at the complaints and questions about the plan.
Today, we take a deeper look at Hope’s point of view, drawn from testimony provided this week to the Public Service Commission by Jeffrey S. Nehr, Hope’s senior vice president for Gas Supply and Corporate Development.
Hope Gas is proposing to abandon in place or transfer to other companies certain gathering pipelines – it is calling them Red Lines – that it previously acquired from Equitrans and Dominion Gathering and Processing. Hope bought about 3,000 miles of pipeline, it said, with about 14,800 farm-tap customers.
Hope said some of those lines – about 1,068 miles – are no longer necessary or useful, and that providing safe, reliable, economic service to the farm-tap customers along those lines is in jeopardy because existing service “is either unsafe, unreliable, uneconomical, or any combination of the three.”
Nehr told the PSC that Hope didn’t buy the lines to serve producers; they were already seeing declining conventional gas production and lack of drilling to replace the production, and were uneconomical. “It should come as no surprise that Hope is proposing to convert farm tap customers to propane on sections of these facilities that are uneconomic to maintain or replace.”
PSC asked Nehr if the plan will create economic hardship for the customers. He said no, they will receive the same level of service and rates. “In fact, the affected customers will benefit from new furnaces and hot water tanks and all customers will receive the benefit of not paying for the maintenance or replacement costs of pipelines that have no useful purpose.”
Last week, the PSC consolidated Hope’s case to convert the customers with the separate case to abandon the Red Lines. Nehr told the PSC that the cases aren’t interdependent: Hope doesn’t need the OK to abandon the lines in order to start converting the customers.
He quoted his own prior testimony: “In their present condition, the Red Lines are uneconomical for Hope to continue to operate and maintain or replace. … Existing gas service to a given farm-tap customer on those lines is either unsafe, unreliable, uneconomical, or any combination of the three.”
PSC asked Nehr about a Consumer Advocate Division proposal for those customers who choose propane service to be required to find their own providers, or for Hope to set up a special propane rate just for them.
Nehr said CAD is ignoring the tiny number of customers to be affected – 0.4% of its total 133,000. It’s not practical to create a new rate schedule for so few.
CAD is also ignoring the human aspect, he said. Hope wishes it didn’t have to convert any customers, but it’s necessary. “Hope is also attempting to ease the resulting burden on those customers by converting them and allowing them to continue as propane-fueled customers that continue to pay only the rates that Hope’s other gas service customers pay. This is a small subsidy by Hope’s much larger customer base, but a very large help to the affected, converted customers.”
The small subsidy the whole customer base will pay, he said, is far smaller than what they would pay for Hope to maintain the Red Lines.
The CAD witness had told the PSC that the Red Lines include 265 customers who receive free gas from producers along the lines, and their fate was unclear. Nehr said they have three pathways: the producer supplying the free gas could take over that pipeline segment; the producer could move the customer to another pipeline; the customer could become a Hope customer and switch to propane at Hope’s expense.
Nehr also disagreed with a PSC staff suggestion to turn the project into an incremental pilot program because Hope’s plan is “completely unwieldy and far too complex.” He said staff isn’t accounting for the cost burdens of operating, maintaining and possibly replacing lines while the process drags on. Approving the conversion and then approving the line abandonment will save Hope customers more than $10 million per year and avoid replacing lies that serve only producers, not customers.
Staff wrongly believes, he said, “that a delay in ruling on Hope’s petitions will somehow facilitate allowing for a perfect (or more perfect) and complete plan for abandoning Red Lines to somehow materialize – that time will allow for a gathering of producers and affected customers and then a perfect (or near perfect) plan will appear.”
He said, “Hope has determined and can see what is necessary at this point in time, which is the need for the commission to authorize Hope to change the status quo, to authorize Hope to begin to take the necessary and detailed steps to convert affected farm-tap customers and to abandon Red Lines. The hard and detailed work yet to come with respect to both will be Hope’s to implement and manage.”
The process will take years to implement, he said.
Nehr took note of producer objections to the plan, countering that they have no incentive to take ownership of the Red Lines linked to their wells, or plug uneconomic wells, unless they’re forced to. “It is in the producer’s economic interest for Hope’s petitions to be delayed or denied. However, neither are in the best interests of Hope’s customers.”
Last week, the PSC, along with consolidating the two cases, canceled a scheduled Dec.. 9 hearing in the farm tap case and ordered Hope to hold three town hall-style meetings in convenient locations to explain its plans, answer questions, and present clear maps showing the lines in question and the affected customers.
PSC staff on Tuesday asked the PSC to tweak that order to require Hope to advise the PSC and parties associated with the case of the dates, times, and locations of the meetings, and to file with the PSC copies of the petitions, answers, and maps that will be given at the meetings.
