SCC Sets Conditions that Must Be Met Before VNG Header Project Can Be Approved

Utilities

JUN 26, 2020

RICHMOND — The State Corporation Commission (SCC) has set several conditions that must be met before the Header pipeline project proposed by Virginia Natural Gas (VNG) can be approved. One condition includes strict provisions to protect VNG’s residential and small business customers from being “stuck with the bill” unfairly for costs of the project.

In a preliminary order on VNG’s application to build the pipeline, the SCC found that the need for the project is driven by a single customer, a proposed gas-fired, electricity generating plant known as C4GT. The SCC said, “Put simply, if C4GT is built, we find that the [Header] project is needed.  If C4GT is not built, the project is not needed.”

The SCC found that C4GT is supposed to pay for the vast majority of the costs of the Header project. But, C4GT is a merchant plant. That means the owners of C4GT pay 100 percent of the cost to construct the power plant and have primary responsibility for approximately 95 percent of the cost of VNG’s pipeline project.

The SCC said, “As a merchant plant, C4GT may operate for some years but, if it becomes unprofitable, may shut down, as many other merchant generators nationally have shut down when they became unprofitable. So it is imperative that VNG's other customers not be left ‘holding the bag’ for the costs of the project should C4GT cease operating before those costs have been fully recovered.”

To protect VNG’s residential and other business customers, the SCC required several financial conditions that must be satisfied before approval will be issued.

  • C4GT must provide proof that it has a firm financing commitment for construction costs.
  • VNG must recover the costs of the project over the same time period for which it has contracts with C4GT and other large customers to receive the payments necessary to pay for the project.
  • C4GT must reconfirm all contractual obligations to VNG necessary to pay its share of the Header project.
  • And, VNG must agree to a strict cap on the costs that can ever be shifted to residential and other business customers.

The SCC set other conditions that must be satisfied, including compliance with all environmental requirements set by the Virginia Department of Environmental Quality. The SCC noted that before the project could proceed, VNG would have to apply for and receive multiple environmental permits.

In addition to complying with conditions set by state environmental agencies, the SCC also required VNG to file additional information on environmental justice issues beyond that currently contained in the Commission’s case record.

On or before December 31, 2020, VNG is required to make additional filings with the SCC when the company believes it has complied with all conditions required before approval. Upon submission of such filings, the SCC will conduct an additional proceeding to address them.

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Case Number PUR-2019-00207 – Virginia Natural Gas - For approval and certification of natural gas facilities: the Header Improvement Project and for approval of Rate Schedules and Terms and Conditions for Pipeline Transportation Service

Contact: Ken Schrad (804) 3781-9858