Residential customers of Dominion East Ohio Gas Co. could face higher rates if a proposed gas storage lease agreement between the utility and its interstate pipeline affiliate is approved, the Office of the Ohio Consumers' Counsel (OCC) warned.

The joint agreement was filed March 26 at the Federal Energy Regulatory Commission (FERC). Under its terms, Dominion would lease 3-5 Bcf of its on-system storage space to Dominion Transmission Inc. (DTI). Dominion claims it is leasing excess storage, which became available as a result of poor economic conditions in the Northeast Ohio region. The pipeline carrier then would use the leased storage space to serve customers in the interstate market, OCC noted.

OCC, the state's residential utility consumer advocate, asked the Public Utilities Commission of Ohio (PUCO) to order an independent management performance audit and long-term forecast. OCC is seeking to determine the lease's impact on Dominion's residential customers and the utility's ability to serve Ohio customers in the future. The OCC also intervened and filed a protest at FERC May 3 to oppose the storage lease.

Dominion has on-system storage in Ohio and can inject gas into storage during the summer for later use during peak winter demand periods. The OCC is concerned that if Dominion is permitted to enter into an agreement of 15 to 20 years committing its on-system storage to an interstate company, Ohio customers may be forced to pay higher rates in the future as supplies become shorter in a rebounding economy.

"Regulatory agencies at both the state and federal level should take a close look at committing this amount of storage space to an affiliate operating outside Ohio," said Consumers' Counsel Janine Migden-Ostrander. "The length of the proposed agreement raises concern about Dominion's future commitment to provide an adequate supply of natural gas at reasonable prices to the citizens of Northeast Ohio."

OCC also argued that if the lease agreement is allowed to be finalized, the PUCO will lose the authority over a facility located in Ohio and paid for by Ohioans in their base natural gas rates.

Dominion also leases some of its natural gas supply from DTI off-system as it is currently seeking to offer its on-system supply to the company. The OCC suggested that if Dominion is able to show that it has excess capacity, it should reduce the amount of off-system storage it takes from DTI, or other interstate pipelines, and allow the transmission company to use that supply for its interstate customers.

Asked about the OCC filing, Dominion told NGI that the proposed lease arrangement provides the utility an opportunity to access new interstate markets with its storage capacity. "The FERC has made it clear that it supports new storage development, and Dominion East Ohio's ability to introduce new storage capacity into the market is consistent with FERC's interest," Dominion said.

In its filing at FERC the OCC argued that Dominion's application included incomplete information for the federal agency to make a decision. Dominion and DTI requested FERC approval by Sept. 1, which the OCC argued is insufficient time for FERC to review the potential impact of the loss this storage space could have on Ohio's residential ratepayers.

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