Gary Anglebrandt CommunicationsSpecial coverage on the knotty world of energy utility and gas pipeline businesses
In 2017, two big natural gas pipelines are scheduled to go into service, increasing the volume of natural gas entering Michigan by up to 35 percent.
That’s the scenario developing out of separate proposals, one by the developers of Nexus, a $2 billion pipeline backed by Detroit-based DTE Energy Co., and the other by developers of Rover, a $4.2 billion pipeline backed by Dallas-based Energy Transfer Partners LP.
Two big natural gas pipelines are scheduled to go into service in 2017, increasing the volume of natural gas entering Michigan by up to 35 percent. What’s driving the expansion? And how will this translate into our power bills? Listen to Gary Anglebrandt talk about his report (Soundcloud) on the pipelines, then read the story here.
According to data provided to Crain’s from IHS Inc. and Platts, there are five major interstate natural gas pipelines that come into Michigan, with a combined capacity of about 8 billion cubic feet per day.
The proposed Rover and Nexus pipelines would increase that capacity by 35 percent.
How will Michigan absorb all this? Some, of course, will go to utilities. DTE Energy Co.’s electric and gas utilities already are signed up as Nexus customers. Consumers Energy is staying mum on whether it plans to sign up for either pipeline. If it does not, it still could end up buying gas from one of the other pipes’ “shippers,” or customers, many of which are natural gas producers.
The pipeline business is a good one to be in if a company can swing it.
Plans for new interstate pipelines must be approved by the Federal Energy Regulatory Commission, which then regulates the pipeline’s ensuing activity. The trade-off is that pipeline owners get a guaranteed rate of return. FERC — not the pipeline owner — sets the fee, known as a tariff, that pipeline companies charge customers, called shippers.
In doing so, FERC takes into account the “cost of service” that it took to get the pipeline built and sets a tariff that allows the company to recoup those costs, plus some extra as a return on investment. A typical return is in the range of 10 percent.
Stop to reflect on any number of experiences in your life, and coal most likely played a silent but essential role in it.
Coal has been the main source of fuel for power plants for as long as we’ve had them. These plants keep the lights on at schools, jobs, homes, weddings, hospitals.
On top of that, they’re really cool to look at.
Any discussion of Michigan’s utilities and their priorities must include the state’s consumer choice program.
When asked about their legislative preferences, both DTE Energy Co. and Consumers Energy Co. circle back to reliability and affordability. It is their obligation to provide electricity not only at affordable prices, but to show clear planning toward future demand.
To them, the Electric Customer Choice program is the fly in the ointment.
Michigan’s utilities aren’t actually monopolies. Current law forces them to concede 10 percent of the market to competitors. For the most part, these are trading outfits that don’t produce energy; they buy and sell it, aiming to offer better deals to their mostly commercial customers.
In the legislative debate in Lansing over revamping the state’s energy regulations, Republican lawmakers are proposing replacing renewable energy mandates with something called an “integrated resource planning process.”
The state’s two major utilities, DTE Energy Co. and Consumers Energy Co., support this plan, while renewable energy promoters see the loss of a straightforward 10 percent renewable mandate — and in its place comes murky jargon.
So what’s an IRP? Integrated resource plans came about in the 1980s to keep electricity bills low while strengthening the reliability of the grid — which is to say, cut costs but don’t cause blackouts.
In the first quarter of next year, businesses and residents in Washtenaw, Lenawee and Monroe counties can expect to see construction begin on a pipeline that will bring natural gas from 250 miles away.
The Nexus pipeline is a joint-venture project between Detroit-based DTE Energy Co. and Houston-based Spectra Energy Corp., which are equally splitting the $2 billion project cost. Nexus will pipe natural gas sourced from Appalachian fracking fields in Ohio and Pennsylvania — part of the Marcellus and Utica shale basins that are among the country’s richest sources of natural gas.
Nexus will start in eastern Ohio, run across the Buckeye State and enter Michigan in Lenawee County before moving on to Monroe and Washtenaw counties. Fifty-five of the 250 miles will be in Michigan.
