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State Agency Votes to Intervene in Federal Rate Case for Major Pipeline Company

BPU wants to block a requested 60 percent increase in cost of delivering natural gas from the Gulf of Mexico to the Northeast.

The state yesterday voted to intervene in a case in which a major pipeline company is seeking nearly a 60 percent increase in the cost of delivering natural gas from the Gulf of Mexico to the Northeast.

The case, pending before the Federal Energy Regulatory Commission (FERC), involves a request by Tennessee Gas Pipeline for its first base rate increase in 16 years. The New Jersey Board of Public Utilities is opposed to the request.

While the impact on consumers amounts to no more than a $6.00 annual boost, the commissioners argued it could set a bad precedent for a half-dozen other major pipeline expansions in New Jersey pending before the federal agency.

"I am concerned that this could set the tone for other gas suppliers," warned Commissioner Joseph Fiordaliso before a unanimous vote to intervene and oppose the rate increase. "We have to take a stand to protect the ratepayers in the state."

Another Intervention

The action follows a previous step by the agency to intervene in an unrelated electric transmission increase sought by Public Service Electric & Gas (PSE&G) before the federal agency. That case involves a controversial high-voltage expansion project through the New Jersey Highlands.

The board also moved to intervene, although taking no formal position yet, in still another FERC case involving a bid by Spectra Energy, a Houston-based natural gas infrastructure company, to build a pipeline in parts of Hudson County. In this case, Spectra Energy wants to build a pipeline from Staten Island to Bayonne and then into downtown Jersey City, before crossing underneath the Hudson River to connect with Manhattan. The state Department of Environmental Protection (DEP) also has intervened in the case.

"For New Jersey, this is a hairy thing," said Commissioner Jeanne Fox, referring to the Spectra project. "I know the gas is needed, but there have to be alternative routes."

The two cases underscore how rising energy bills are frequently the result of actions by federal agencies and other organizations. But public anger over the steep cost of electricity and gas is largely focused on state regulatory agencies. With deregulation of the energy sector, those same state agencies, however, have control over a much smaller part of a customer's energy bill.

The situation led BPU President Lee Solomon to question why, with various pipeline projects seeking to connect with new sources of natural gas discovered in the Marcellus Shale region in neighboring states, prices will rise for consumers and not drop, despite the heightened competition.

If the rate increase for Tennessee Pipeline is approved by the federal agency as proposed, customers of Public Service Electric & Gas would see their gas prices climb by $6 a year; by $2.20 per year for New Jersey Natural Gas customers and by $4.32 for customers of Elizabethtown Gas.

The proposed rate case reflects the cost of building various pipelines to the Marcellus Shale, said Jerome May, director of the Division of Energy, but not the total request sought by the company. In its filing, Tennessee Pipeline is seeking to increase its revenue base to $2.65 billion, an increase of $1.157 billion, the bulk of which reflects added infrastructure from the Gulf of Mexico to Maine, according to state officials.

The Sierra Club of New Jersey, which has fought the Tennessee Gas project because it cuts through the heart of the Highlands, praised the state’s move. "Without this price increase the project would not be feasible," said Kate Millsaps, program assistant for the club.

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