New Jersey consumers pay far more for natural gas during peak periods than they should due to lack of pipeline capacity. Who’s really looking out for them?
Last month, in a filing that appears to have been choreographed to bolster complaints from the New Jersey Conservation Foundation and the Sierra Club, the New Jersey Division of Rate Counsel (NJDRC) stated PennEast has not demonstrated need. It was hardly a surprise. The NJDRC is part of New Jersey’s public advocate system; people within government whose role it is to challenge anything and everything done by government and those it regulates. It is run by Stephanie A. Brand, appointed to her current position during the Jon Corzine administration and revels in controversy. PennEast asked Concentric Energy Advisors to evaluate the NJDRC filing. The results raise a very serious question of who’s really looking for New Jersey consumers. It doesn’t appear to be the NJDRC.
The NJDRC comments, which may be found here, are, as Concentric Energy Advisors illustrated, self-contradictory. Readers who want to dig into the weeds of this one can do by going directly to these sources or simply read this summary, but one fact, in particular, got my attention. It is this (emphasis added):
…if there were in fact a “glut of underutilized capacity,” then there would not be the spikes in natural gas prices during peak demand periods that have been experienced in the Mid-Atlantic. As we have discussed previously, the high winter basis differentials that have been experienced in New Jersey and eastern Pennsylvania relative to the Marcellus and Gulf Coast indicates that there are pipeline constraints between producing areas and these markets when demand increases. For example, if all of the pipeline capacity was not fully utilized during the winter of 2013/2014, then natural gas prices in New Jersey and eastern Pennsylvania would not have climbed to over $120/dth, which is over 70 times higher than the average price of natural gas this summer in this same region when there have not been constraints.
That’s a pretty compelling point, isn’t it? New Jersey consumers are to be going to subject to wild price swings during peak periods of natural gas use (that’s also known as winter for those of you living inside the walls of Trenton government buildings) without additional pipeline capacity. The rest of the report provides additional evidence of need for the PennEast Pipeline but it’s hard to improve on that one.
What we see, repeatedly, with bureaucrats such as Brand is simply demagoguery designed to enhance the image of their office as super-smart, super-hero crusaders. There’s nothing smart about pretending average natural gas use is the criteria by which we should be evaluating need and ensuring we’re prepared. Only a manipulator does that. Someone truly looking out for New Jersey consumers would be saying delivery capacity is needed not only for the average but also the peaks, with insurance factors on top of that.
It reminds me, in fact, of the rules that typically apply to public water supplies where providers must be able to meet twice the ordinary demand with their best wells out-of-service. That ensures they can provide what’s needed during emergencies. Somehow though, this caution is thrown to the wind when it comes to natural gas for New Jersey consumers. It’s all left to pricing to sort out.
While I can applaud pricing as the proper basis for decision-making, their is a corollary principle. It is that the market should then be able to respond accordingly by supplying more product, which it cannot do in this instance without the ability to develop more pipeline capacity. The NJDRC, predictably, wants it both ways; they want to claim they’re saving consumers money by not allowing the building of a pipeline while saddling those same consumers with the high periodic prices that can be avoided with that pipeline. That’s par for the course with public advocate types who only have to address one side of the equation, but New Jersey consumers deserve better.