Natural gas storage boon to power rates, company will claim at UARB9/12/2012
If Nova Scotia Power used natural gas storage, provincial electricity rates would be lower, according to a company proposing just such a Colchester County project.
That point is made by Alton Natural Gas Storage LP in fresh evidence filed with the provincial Utility and Review Board.
It comes in advance of a hearing on electricity rates slated to start Thursday. The board will review Nova Scotia Power’s request to raise rates by three per cent next January and in January 2014.
“If Nova Scotia Power was to enter into a commercially reasonable contract for natural gas storage with Alton prior to the end of October of this year, Alton would have the ability to move ahead with the project and continues to believe that it could provide some gas storage services to Nova Scotia Power by December of 2014,” said the statement Alton filed.
“Secondly, Alton wishes to reinforce to the board that the use by Nova Scotia Power of natural gas storage will reduce the cost of electricity to the ratepayers of Nova Scotia Power. Natural gas storage is a tool used by users of natural gas, including generators of electricity, throughout North America.”
Storing natural gas in underground caverns in a salt deposit near Alton, Colchester County, would “reduce the volatility of natural gas prices and also allow Nova Scotia Power to reduce natural gas costs,” according to Alton. It is co-owned by Veresen Inc. and AltaGas Ltd., which controls Heritage Gas Ltd., Nova Scotia’s natural gas distributor.
“Furthermore, the use of natural gas storage allows for security of gas supplies used to generate electricity at Tufts Cove, which is particularly important for government institutions such as hospitals and universities.”
The utility has talked with the gas storage outfit. But in regulatory filings of its own, it said the rate hearing is “not the appropriate place to discuss a proposed project that could be subject to future negotiations between N.S. Power and Alton.”
It also notes that Alton’s last proposal to Nova Scotia Power “indicated an in-service date of April 1, 2015,” and that it is unlikely that its project would be operational before the end of 2014.
“Since the status of this project is uncertain, and since it is not expected to be in service until 2015, if it proceeds at all, there is no impact on natural gas prices for 2013 and 2014 test years,” said documents the utility filed with the regulator.
Nova Scotia Power argues that Alton’s business case “relies upon a continued seasonal variance in New England pricing over and above the seasonal pricing at Henry Hub.”
“Should the seasonal variation in New England be reduced — perhaps by a build-out of additional pipeline capacity and the introduction of inexpensive Marcellus shale gas —then the business case for storage will be undermined.”
But Alton counters that: “Nova Scotia Power’s witnesses, in their own evidence, state that these
eventualities are unlikely and that winter demand will outstrip supply in the New England and Maritime markets in the foreseeable future.
“This demonstrates and reinforces the commercial advantages to Nova Scotia Power’s ratepayers of natural gas storage.”
Alton has asked the regulator to “direct Nova Scotia Power to evaluate and consider in a timely manner the use of natural gas storage as part of its ongoing fuel procurement policies and procedures.”
“Coupled with this, the board and Nova Scotia Power should explore avenues which would allow Nova Scotia Power to include natural gas storage in its rate base.”
While the utility said it “will continue to assess the potential benefits to customers of natural gas storage against the associated costs and risks” and that it remains open to talking with Alton, it isn’t any business of the review board.
“Board involvement in or direction about potential contractual negotiations for supply services relating to fuel procurement is neither warranted nor within the jurisdiction of the board,” Nova Scotia Power said.
As recently as last year, Alton said the storage project in Nova Scotia would cost more than $50 million.
But Alton president David Birkett would not say Tuesday if that figure is still accurate.
“The capital cost will depend on the size of the facility and how we customize it for our potential customers,” Birkett said.
Alton wants to build a 10.8-kilometre pipeline to connect the storage facility to Maritimes and Northeast Pipeline’s Halifax lateral.
Late last month, the province said it wants Alton to produce a report on alternative pipeline routes to avoid or reduce impacts on protected Crown lands, potential impacts on traditional and existing Mi’kmaq use of proposed project lands, and an analysis of potential impacts on drinking water supplies, proposed mitigation, and monitoring and reporting plans.
“Basically, after that is completed, all of the major approvals to construct will have been completed,” Birkett said.
(The Chronicle Herald)