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N.H. Regulators Question Viability of Upper Valley Gas Pipeline Proposal



Valley News Staff Writer
Tuesday, July 18, 2017

Concord — Consumer advocates and staff members for the state Public Utilities Commission recently said they would like Liberty Utilities to show more evidence that its proposed natural gas facility in Lebanon and pipeline to Hanover is financially viable.

In written testimony, staff from the Public Utilities Commission and Office of the Consumer Advocate said Liberty Utilities should secure customers before state regulators allow the company to begin construction of the natural gas facility and pipeline near the Lebanon landfill on Route 12A.

However, they took different stances on when the three-member PUC should grant Liberty a franchise which would allow it to operate the pipeline.

Pradip Chattopadhyay, an assistant consumer advocate, said on Monday the project shouldn’t be approved until Liberty signs enough customers to cover 100 percent of its direct costs over eight years for residential customers and six years for commercial customers.

“Approving Liberty Utilities’ proposed off-pipeline franchise without sufficient commitments from customers in the franchise area prematurely assumes away the possibility that other entities already provide or may provide more cost-effective alternatives to such customers,” Chattopadhyay wrote.

Meanwhile, PUC Assistant Director Stephen Fink recommended last week that the commission grant Liberty a franchise, conditioned on the company signing enough customers to pay off half of the project costs over 10 years.

The three-member Public Utilities Commission ultimately takes staff testimony and other evidence into account in determining whether to grant a franchise.

The Office of Consumer Advocate is an independent state agency that represents the interests of residential customers in utility matters before the PUC.

The staffers also expressed concern about Liberty’s inability to sign an anchor customer, its lack of a “comprehensive business plan” for the Lebanon project and data suggesting the project might not entice enough customers to switch from oil to natural gas.

Liberty’s current request for a natural gas franchise has been before the New Hampshire Public Utilities Commission since November. The commission is responsible for determining whether the company has the “managerial, technical and financial capacity” to run the project.

Under the project’s first phase, Liberty would contract with a natural gas provider to construct and operate a “turn-key supply operation” at the site along Route 12A. Expansion under future phases would then take the project along a route into downtown Hanover.

Liberty is hoping to begin construction in 2018 and would require about $9.7 million in investment to complete the first phase in five years, according to PUC staff testimony.

But state officials said they’re concerned about the project’s inability to attract an anchor customer and what it could mean for the pipeline’s long-term viability.

Liberty officials blame the franchise process for its inability to sign a large customer, saying lack of an agreement with regulators and the project’s unique nature is pushing companies to hold off. With no existing infrastructure for natural gas in Lebanon, they said, it’s difficult to estimate future rates.

“Because of the uncertainty at this time, we are unable to provide specific detailed information regarding projected revenues and construction costs that the PUC staff would like to see in a typical franchise proposal,” Liberty spokesman John Shore said in an email last week.

He added the company is open to refilling a business plan after gaining franchise approval, a recommendation made by the PUC staff. Doing so would allow Liberty to better gauge interest and market the project to potential customers, he said.

 

But it’s unclear which businesses in Lebanon and Hanover would sign up.

Dartmouth College, once considered a possible anchor customer, isn’t likely to adopt natural gas after a college task force in April released a road map for reducing greenhouse gas emission into 2050. The document said Dartmouth will instead be looking to biomass, biodiesel and solar energy as possible fuel sources.

The town of Hanover also committed during Town Meeting in May to transition the community’s electricity to 100 percent renewable sources by 2030, and heat and transportation by 2050.

In separate testimony to the PUC, Town Manager Julia Griffin said she hopes to work with businesses to transition their facilites to biomass or solar as part of the effort.

Brian Buckley, an attorney with the Office of Consumer Advocate, said there may be some truth in Liberty’s arguments, but alowing the company to begin construction before it has signed local customers could lead to rate increases in other markets.

If the PUC does grant approval to the project, the consumer advocate recommends any shortfalls in revenue be covered by Liberty’s shareholders, rather than ratepayers.

“We’re still sort of skeptical. We’re not quite there yet,” Buckley said of Liberty’s proposal.

PUC staff members also took issue with Liberty’s proposal in their testimony.

Fink worried the company didn’t file a “comprehensive business plan.” Instead, Liberty submitted one that “lacks sufficient detail to be considered comprehensive,” he said.

“A comprehensive business plan would provide greater assurance that the cost and revenue projections used in the financial analysis are reasonable and increase the probability of achieving the expected results,” Fink said.

Both groups also expressed concern over the cost of switching to natural gas from traditional heating sources. Liberty has calculated that by switching to natural gas, residential customers who use oil in Lebanon and Hanover could save 10 percent, and homeowners who burn propane could save 53 percent.

However, PUC staff members found that while propane customers would clearly benefit, the same could not be said definitively for oil customers.

Shore agreed with the PUC staff’s analysis that businesses and homes switching from propane would see “the greatest amount of savings.” Those on oil usually consider natural gas when their furnace is at the end of its life, he said, and could consider a switch then.

In his testimony, Fink also makes several recommendations to protect Liberty’s ratepayers. Once Liberty has garnered enough customers to begin construction, he said, the company should also be required to file a business plan and analysis to show it has done so.

The same customer requirements were also recommended before construction of any further phases moves ahead, Fink said.

Shore, the Liberty spokesman, countered that the company has already committed to sign customers before construction starts, although its proposal recommends a lower threshold than the OCA and PUC staff testimony.

He also said Liberty would be better positioned to calculate rates once it has completed engineering and marketing work, which occurs after the PUC approves a franchise.

“This would provide potential customers with the information they need to make an informed decision,” he said in an email.

“We appreciate the PUC Staff’s conditional support and look forward to working with them to address the concerns they raised in their testimony,” Shore said.

Liberty has until Aug. 24 to rebut the testimony submitted on Monday. A full hearing for the Public Utilities Commission is then scheduled for Sept. 7.

Tim Camerato can be reached at tcamerato@vnews.com or 603-727-3223.

Correction

Hanover Town Meeting in May voted for the town to get 100 percent of its electricity from renewable sources by 2030 and 100 percent of its heating and transportation fuel from renewable sources by 2050. An earlier version of this story gave an incorrect date for the goal set for heating and transportation.