Saltville Gas Storage Co. says that FERC’s rejection of its unique rate design for its high-deliverability gas storage field in southwestern Virginia will “chill” the development of more gas storage projects like its own.

Calling this an “issue of first impression,” Saltville said the Federal Energy Regulatory Commission needs to “refresh” its storage rate design policy to “accommodate the innovative service attributes of a rapid-response salt cavern facility such as Saltville.” Without some change, the agency “will stifle innovative, much-needed natural gas infrastructure development in the United States,”

In a June order granting Saltville a Section 7 (c) certificate to operate its storage facilities, the Commission objected to the company’s proposed rate design in which its capacity charges were based on the number of gas storage cycles or “turns” into and out of storage. FERC at the time said the unique design did not follow its guidelines requiring that 50% of the fixed costs of the project be collected based on deliverability and 50% be collected based on storage capacity [CP04-15].

The Commission ordered Saltville, which is a partnership between NUI Corp. and Duke Energy, to file rates that reflect the traditional storage rate design known as the “Equitable Method.” Saltville is seeking rehearing of the rate issue in the June order, and has asked FERC to respond expeditiously.

“Application of the Equitable Method’s 50/50 fixed cost classification between capacity and deliverability components is unfair and unworkable when applied to these types of storage facilities because no value is placed upon the third service component they offer — the right to inject gas at a specific entitlement level, or ‘injectability,'” said Saltville.

“Injectability is a necessary and valuable service component for rapid-response storage service customers and a defining characteristic of the innovative services that Saltville offers,” it noted. Saltville proposed that FERC adapt the “Equitable Method” to the realities of the rapid-response storage service by creating three, equally weighted reservation rate components — capacity, deliverability and injectability.

Rapid-response salt cavern storage facilities like Saltville’s offer customers and the marketplace service benefits that are generally not available from traditional storage facilities, such as year-round imbalance management, withdrawals to meet non-winter peak and seasonal needs for power generation markets, and commodity market support to improve liquidity and respond quickly to market signals, Saltville told FERC.

Saltville’s storage field is located in Smyth and Washington counties, VA, and will grow in phases over the next few years with an ultimate capacity of 5.8 Bcf of working gas, 220 MMcf/d of injection capability and 550 MMcf/d of deliverability.

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