Proposed Pipeline Would Increase Consumer Costs and Utility Profits Without Improving Reliability, Gas Expert Concludes

pinelands preservation alliance
Posted January 28, 2016

STOCKTON, NJ, (January 27, 2016) — The proposed Southern Reliability Link (“SRL”) pipeline would increase costs to consumers and the profits of New Jersey Natural Gas (“NJNG”) without providing more reliable gas supplies, according to an analysis by Skipping Stone, a national firm with expertise in energy market services.

Greg Lander, president of Skipping Stone, in a recent memo to the Pinelands Preservation Alliance summarizing an analysis of data NJNG submitted to government agencies to obtain project permits, estimates that NJNG residential sales customers would see their rates increased by almost seven percent in order to cover the $178 million cost of the proposed 28-mile pipeline and connections to an existing natural gas supplier.

“The gas industry expert analysis also shows that the SRL pipeline would not improve reliability as claimed, but instead would profit the company at ratepayer expense, while violating Pinelands protection rules,” said Carleton Montgomery, executive director of the Pinelands Preservation Alliance.

“The only rationale that Skipping Stone can identify for a stand-alone pipeline is to have the cost of this significant capital investment placed into NJNG’s rate base enabling NJNG shareholders to earn a greater return (in terms of dollars) than might otherwise be the case without the investment,” wrote Lander.

The 30-inch pipeline proposed by NJNG would cut through protected regions of the Pinelands National Reserve on its 28-mile route through six communities in Burlington, Monmouth and Ocean counties. The SRL pipeline application is being reviewed by the Board of Public Utilities (BPU), which is expected to rule on different aspects of the project today and in February. Three municipalities and many of the impacted counties’ residents and elected officials oppose the pipeline.

Redundancy Claim Not Credible

In its filings with the Board of Public Utilities and Pinelands Commission, NJNG seeks to justify the expense and impacts of the project solely on the basis that it would provide a redundant, back-up system to its existing customers in case of catastrophic failures in its gas transmission system. However, in the same documents, NJNG concedes that its existing transmission system is sufficient to serve all its current and anticipated future customers. In fact, NJNG shows that its existing system has far greater capacity than its ratepayers use or need, and that the existing system is already highly redundant and resilient.

According to Skipping Stone’s analysis of NJNG’s data on its existing pipeline network, NJNG already has a resilient and redundant system. NJNG has multiple north/south and east/west transmission pipelines covering its service area, and NJNG obtains gas from multiple suppliers at multiple points. The system, therefore, is already “conducive to quick repair/replacement,” and SRL is not needed to achieve resiliency.

“Since NJNG concedes it does not need more gas for its existing customers or new demand, and the new pipeline would not provide any missing resiliency for its system, we can only conclude that the purpose of this very costly development is simply to inflate the company’s rate base and profits at the expense of ratepayers,” stated Carleton Montgomery. “Adding insult to injury, the pipeline also violates the Pinelands Comprehensive Management Plan.”

Pinelands Preservation Alliance is a participant in the BPU review process and has submitted the Skipping Stone analysis as part of its filings with BPU.

 

About Pinelands Preservation Alliance
The Pinelands Preservation Alliance (PPA) is a private, nonprofit organization dedicated to preserving the natural and cultural resources of the New Jersey Pinelands. PPA is headquartered in Southampton, New Jersey.

About Skipping Stone
Skipping Stone is an energy markets consulting firm that helps clients navigate market changes, capitalize on opportunities and manage business risks. Its services include market assessment, strategy development, strategy implementation, managed business services and talent management. Market sector focus areas are natural gas and power markets, renewable energy, demand response, energy technology and energy management. For more information, visit SkippingStone.com. Skipping Stone owns and operates CapacityCenter.com, the only 24/7/365 natural gas interstate pipeline data center covering all the US pipelines. Its automated services monitor capacity release offers, system notices and deal award information, and streams available transactions and their details as they occur to its customers via email for trading, risk and regulatory compliance, as well as deal origination and valuation purposes.

CONTACT:
Carleton Montgomery
Phone: 609-859-8860
Email: carleton@pinelandsalliance.org

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