STATEMENT OF NATURE OF FILING AND TARIFF SUMMARY
Prepared Pursuant to 18 C.F.R. § 154.7
Docket No. RP22-847-000 (Rate Case) Docket No. RP22-847-001 (Interconnection)
Filed by: Ridgeline Midstream Services LLC FERC Code: 960442 EIN: 87-4231956
Filed Through Counsel: Calderwood & Harkness LLP 1601 K Street NW, Suite 900 Washington, DC 20006 Responsible Partner: George Trujillo
Date of Filing: May 12, 2022
Submitted to: The Honorable Kimberly D. Bose Secretary Federal Energy Regulatory Commission 888 First Street NE Washington, DC 20426
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I. INTRODUCTION AND NATURE OF FILING
Ridgeline Midstream Services LLC ("Ridgeline" or "Applicant"), a Delaware limited liability company with principal offices located at 700 Kanawha Boulevard East, Suite 1400, Charleston, West Virginia 25301, and having its registered agent, Capitol Filings Inc., located at 1209 Orange Street, Wilmington, Delaware 19801, hereby submits this Statement of Nature of Filing and Tariff Summary to the Federal Energy Regulatory Commission ("Commission" or "FERC") in connection with the above-referenced proceedings.
Ridgeline is a wholly owned subsidiary of Dunmore Energy Holdings Ltd. ("DEH"), an exempted limited company organized and existing under the laws of the Cayman Islands, with its registered office located at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1002, Cayman Islands (Cayman Registry No. CR-381204). DEH is the sole member of Ridgeline and holds a one hundred percent (100%) ownership interest in the Applicant.
By this filing, Ridgeline hereby submits its application with the Commission pursuant to Sections 4 and 7 of the Natural Gas Act ("NGA"), 15 U.S.C. §§ 717c and 717f, and the Commission's implementing regulations set forth at 18 C.F.R. Parts 154, 157, and 284. This filing represents Ridgeline's initial tariff rate application. Ridgeline has not previously had rates on file with the Commission.
The filing consists of two distinct but related components:
(a) An application for approval of an initial tariff rate for interstate natural gas transportation service on the Ridgeline Pipeline System under Part 284, Subpart G of the Commission's regulations, 18 C.F.R. Part 284 (Docket No. RP22-847-000). This component seeks Commission acceptance of Ridgeline's proposed recourse rates and the terms and conditions under which Ridgeline will provide open-access transportation service to shippers on its pipeline system.
(b) An application for authorization of a physical interconnection between the Ridgeline Pipeline System and the existing interstate pipeline system of Appalachian Trunk Pipeline Company, LLC ("ATPC") at the Wetzel County Interconnect, located in Wetzel County, West Virginia (Docket No. RP22-847-001). This component seeks Commission authorization pursuant to Section 7 of the NGA for the construction and operation of the necessary interconnection facilities to enable the receipt of natural gas volumes from ATPC's system into the Ridgeline Pipeline System.
In connection with the foregoing applications, Ridgeline submits herewith its FERC Gas Tariff, Original Volume No. 1, containing proposed rate schedules and General Terms and Conditions for open-access transportation service on the Ridgeline Pipeline System. The tariff has been prepared in accordance with the Commission's regulations and reflects the cost-of-service and rate design principles described in detail herein and in the accompanying exhibits and pre-filed testimony.
This Statement of Nature of Filing and Tariff Summary has been prepared and filed in compliance with the requirements of 18 C.F.R. § 154.7, which requires that each filing be accompanied by a statement of the nature and reasons for the filing, a description of the proposed changes, and such other information as the Commission may require. Each of these requirements is addressed in the sections that follow.
II. DESCRIPTION OF THE APPLICANT
A. Corporate Structure
Ridgeline Midstream Services LLC is a limited liability company organized and existing under the laws of the State of Delaware. The Applicant's sole member is Dunmore Energy Holdings Ltd. ("DEH"), which holds a one hundred percent (100%) ownership interest in Ridgeline. Ridgeline was formed on March 17, 2020, for the express purpose of developing, constructing, owning, and operating the Ridgeline Pipeline System as an interstate natural gas transportation pipeline subject to the jurisdiction of the Commission under the NGA.
DEH is a strategic private energy company with diversified operations across the midstream natural gas, natural gas processing, and renewable energy sectors. Patricia Dunmore is the Founder, Chairperson of the Board, and controlling shareholder of DEH, holding an approximately seventy-two percent (72%) equity interest in the company. The remaining equity interests in DEH are held by a combination of institutional investors and members of the senior management team.
Based on an internal valuation prepared as of December 31, 2023, DEH has an estimated enterprise value of approximately $2.8 billion. DEH reported annual consolidated revenue of approximately $485 million for the fiscal year ended December 31, 2023. DEH's portfolio of energy infrastructure assets includes approximately 1,200 miles of midstream gathering and transportation pipelines located primarily in the Appalachian Basin, two cryogenic natural gas processing plants with aggregate processing capacity of approximately 400 MMcf/d, and a 250 MW onshore wind generation portfolio currently under development in the mid-Atlantic region.
The key officers and senior management personnel of Ridgeline Midstream Services LLC are as follows:
• James K. Winfield — Chief Executive Officer and President
• Angela Moretti — Vice President, Finance and Treasurer
• Thomas Greaves — Vice President, Engineering and Operations
• Dr. Natasha Orlov — Director of Rates and Regulatory
Each of the foregoing individuals has been duly appointed by Ridgeline's sole member and is authorized to act on behalf of the Applicant in connection with the matters described in this filing.
B. Business of Ridgeline
Ridgeline owns and operates the Ridgeline Pipeline System, an interstate natural gas transportation pipeline system located in the Appalachian Basin, as more fully described in Section III below. The Ridgeline Pipeline System is designed to provide high-capacity, open-access transportation of natural gas from receipt points in northern West Virginia to delivery points in southwestern Pennsylvania, thereby facilitating the movement of Appalachian-sourced natural gas to downstream interstate pipeline interconnections and consuming markets.
The Ridgeline Pipeline System is used in the transportation of natural gas in interstate commerce and is therefore subject to the jurisdiction of the Commission under the NGA. As a jurisdictional pipeline, Ridgeline is required to file tariff rates with the Commission and to comply with the Commission's regulations regarding open-access transportation, including the requirements of Part 284, Subpart G of the Commission's regulations.
This filing represents Ridgeline's initial tariff rate filing with the Commission. Prior to this filing, Ridgeline has not had rates on file with the Commission, nor has it previously provided jurisdictional transportation service. Ridgeline commenced physical operation of the Ridgeline Pipeline System on October 1, 2021, and has been transporting natural gas on an interim basis pending the outcome of this rate proceeding. Ridgeline seeks through this filing to establish just and reasonable rates for firm and interruptible transportation service on its system.
III. DESCRIPTION OF THE RIDGELINE PIPELINE SYSTEM
A. Physical Specifications
The Ridgeline Pipeline System consists of approximately one hundred eighty-seven (187) miles of twenty-four inch (24-inch) diameter, high-pressure steel pipeline. The pipeline was designed and constructed in full compliance with the safety requirements of 49 C.F.R. Part 192, which sets forth the minimum federal safety standards for the transportation of natural gas and other gas by pipeline. The pipeline traverses portions of Wetzel County, Marion County, and Monongalia County in the State of West Virginia, and portions of Greene County in the Commonwealth of Pennsylvania.
The pipeline was constructed using high-grade, API 5L X-70 line pipe with a maximum allowable operating pressure ("MAOP") of 1,480 psig. The pipeline is cathodically protected and equipped with mainline block valves at intervals conforming to the requirements of 49 C.F.R. Part 192, Subpart J. A detailed system map depicting the pipeline route and associated facilities is included in the exhibits accompanying this application.
B. Receipt and Delivery Points
The Ridgeline Pipeline System has one primary receipt point and one primary delivery point, as described below:
Receipt Point: The Wetzel County Interconnect is located in Wetzel County, West Virginia, at approximate coordinates 39.6120° N, 80.7540° W. This receipt point represents the physical interconnection between the Ridgeline Pipeline System and the existing interstate pipeline system of Appalachian Trunk Pipeline Company, LLC ("ATPC"). Natural gas volumes are received at this point from the ATPC system and transported through the Ridgeline Pipeline System to the delivery point. The Wetzel County Interconnect is situated at milepost 0.0 of the Ridgeline Pipeline System.
Delivery Point: The Waynesburg Compressor Station is located in Greene County, Pennsylvania, at approximate coordinates 39.8965° N, 80.1810° W. This delivery point represents the downstream terminus of the Ridgeline Pipeline System, where natural gas volumes are delivered into downstream pipeline systems and local distribution facilities for ultimate consumption in regional markets. The Waynesburg Compressor Station is situated at approximately milepost 187.0 of the Ridgeline Pipeline System.
C. Capacity and Throughput
The Ridgeline Pipeline System has a certificated design capacity of 1.2 billion cubic feet per day ("Bcf/d"), which is equivalent to 1,200,000 dekatherms per day ("Dth/d") at an assumed heating value of 1,000 British thermal units per standard cubic foot ("BTU/cf"). This design capacity reflects the maximum sustained throughput capability of the system when operating all three compressor stations at full rated horsepower and under design operating conditions.
As of the date of this filing, the Ridgeline Pipeline System is transporting approximately 680 million cubic feet per day ("MMcf/d"), or 680,000 Dth/d, which represents approximately 56.67% utilization of the system's total design capacity. Ridgeline anticipates that system utilization will increase as additional shippers contract for firm transportation service on the system and as production volumes in the Appalachian Basin continue to develop.
D. Compression Facilities
The Ridgeline Pipeline System is equipped with three compressor stations, which provide the motive force necessary to maintain system pressures and throughput capacity along the pipeline route. The compressor stations are identified as follows:
1. Wetzel Station — Located at the receipt point near the Wetzel County Interconnect in Wetzel County, West Virginia. This station provides initial compression for natural gas entering the Ridgeline Pipeline System.
2. Mannington Station — Located at approximately the midpoint of the pipeline system in Marion County, West Virginia. This station provides intermediate compression to maintain system pressures along the pipeline route.
3. Waynesburg Station — Located at the delivery point near the Waynesburg Compressor Station in Greene County, Pennsylvania. This station provides final compression and pressure regulation for gas volumes being delivered at the downstream terminus of the system.
The aggregate installed compression across all three stations is 45,000 horsepower ("HP"). Each station is equipped with natural gas-fired turbine-driven centrifugal compressor units, with SCADA monitoring and remote operational capability from Ridgeline's central gas control facility located in Charleston, West Virginia.
E. In-Service Date and Construction Cost
The Ridgeline Pipeline System was placed into commercial service on October 1, 2021, following the completion of all construction activities, hydrostatic testing, and commissioning procedures. The original construction cost of the Ridgeline Pipeline System, including all pipeline facilities, compressor stations, meter stations, and associated appurtenances, was $587.2 million. This figure represents the total capital expenditure incurred by Ridgeline in connection with the development and construction of the pipeline system and forms the basis for the gross plant in service included in the rate base calculation described in Section VI below.
IV. PROPOSED TARIFF — FERC GAS TARIFF, ORIGINAL VOLUME NO. 1
A. Tariff Type and Regulatory Authority
Ridgeline hereby submits for Commission acceptance its FERC Gas Tariff, Original Volume No. 1, which sets forth the rates, terms, and conditions under which Ridgeline will provide open-access natural gas transportation service on the Ridgeline Pipeline System. The tariff has been prepared and filed pursuant to Part 284, Subpart G of the Commission's regulations, 18 C.F.R. Part 284, which governs blanket certificates for the provision of open-access transportation service by interstate natural gas pipelines.
The tariff is identified as follows:
FERC Gas Tariff, Original Volume No. 1 Ridgeline Midstream Services LLC FERC Code: 960442
The tariff has been filed electronically through the Commission's eTariff system in accordance with the Commission's regulations at 18 C.F.R. § 154.4.
B. Rate Schedules Included
The FERC Gas Tariff, Original Volume No. 1, consists of the following rate schedules and tariff provisions:
Rate Schedule FT-1 — Firm Transportation Service. Rate Schedule FT-1 sets forth the rates, terms, and conditions under which Ridgeline will provide firm natural gas transportation service to shippers on the Ridgeline Pipeline System. Under Rate Schedule FT-1, a shipper that has entered into a Firm Transportation Service Agreement with Ridgeline is entitled to receive firm transportation capacity on the system up to the shipper's contracted Maximum Daily Quantity ("MDQ"), subject to the applicable terms and conditions of the tariff. The shipper's obligation to pay the reservation charge under Rate Schedule FT-1 is not contingent upon the shipper's actual use of its contracted capacity.
Rate Schedule IT-1 — Interruptible Transportation Service. Rate Schedule IT-1 sets forth the rates, terms, and conditions under which Ridgeline will provide interruptible natural gas transportation service to shippers on the Ridgeline Pipeline System. Interruptible transportation service is available to any shipper that has entered into an Interruptible Transportation Service Agreement with Ridgeline, subject to the availability of capacity on the system after all firm transportation commitments have been satisfied. Interruptible service is provided on a best-efforts basis and may be curtailed or interrupted at any time in the event that firm service obligations require the use of the capacity allocated to interruptible shippers.
General Terms and Conditions. The General Terms and Conditions set forth the overarching rules, regulations, and procedures applicable to all transportation service provided by Ridgeline under the tariff, including, without limitation, provisions relating to nominations and scheduling, gas quality specifications, measurement and metering, capacity release, operational balancing, penalties, force majeure, creditworthiness, and dispute resolution.
Form of Service Agreement. The tariff includes pro forma forms of service agreements for both firm and interruptible transportation service, which set forth the contractual terms to be executed by each shipper receiving service on the Ridgeline Pipeline System.
C. Proposed Effective Date
Ridgeline proposes that the FERC Gas Tariff, Original Volume No. 1, become effective no later than sixty (60) days after the date of Commission acceptance of this filing, or such other effective date as the Commission may order. Ridgeline respectfully requests that the Commission act on this filing within the timeframes contemplated by its regulations and precedent for initial tariff rate filings.
V. SUMMARY OF PROPOSED RATES
A. Proposed Recourse Rate — Firm Transportation (Rate Schedule FT-1)
Ridgeline proposes the following maximum recourse rate for firm transportation service under Rate Schedule FT-1:
The proposed recourse rate has been derived from Ridgeline's cost of service, as detailed in Section VI below, and reflects a rate basis of 100% load factor, levelized over a twenty-five (25) year period. The reservation charge of $0.2223/Dth represents the demand component of the rate, designed to recover the fixed costs of the pipeline system, including return on rate base, depreciation, and fixed operating expenses. The usage charge of $0.0042/Dth represents the commodity component of the rate, designed to recover the variable costs of providing transportation service, including fuel, lost and unaccounted-for gas, and other variable operating expenses.
The rate design methodology employed by Ridgeline is consistent with the Commission's established ratemaking principles and is described in detail in the pre-filed direct testimony of Dr. Natasha Orlov, Director of Rates and Regulatory.
B. Billing Determinants
The billing determinants used to derive the proposed recourse rate are as follows:
• Design capacity: 1,200,000 Dth/d
• Number of days in the billing year: 365
• Load factor: 100%
• Annual billing determinants: 1,200,000 Dth/d × 365 days × 100% load factor = 438,000,000 Dth/yr
The use of 100% load factor billing determinants is consistent with Commission policy for the derivation of maximum recourse rates for firm transportation service. This approach ensures that the full design capacity of the pipeline system is reflected in the rate derivation and that the resulting rates are just and reasonable.
C. Interruptible Transportation Rate (Rate Schedule IT-1)
The maximum rate for interruptible transportation service under Rate Schedule IT-1 is derived from the firm transportation rate on a daily equivalent basis, consistent with the Commission's rate design policies for interruptible service. The specific derivation methodology, including the applicable conversion factors and any adjustments, is set forth in detail in Exhibit J of the application. The interruptible rate is designed to ensure that interruptible shippers pay a rate that is at least equivalent to the maximum firm recourse rate on a per-unit basis, thereby preventing any subsidization of interruptible service by firm shippers.
D. Negotiated Rate Authority
Ridgeline reserves the right to offer transportation service at negotiated rates pursuant to the Commission's policies and precedent regarding negotiated rate authority for interstate natural gas pipelines. Any shipper entering into a negotiated rate agreement with Ridgeline will have the option of receiving service at the maximum recourse rate set forth in the applicable rate schedule as an alternative to the negotiated rate. The availability of recourse rate service ensures that all shippers have access to just and reasonable rates regardless of whether they elect to enter into a negotiated rate arrangement. The terms and conditions applicable to negotiated rate service are set forth in the General Terms and Conditions of the tariff.
VI. COST-OF-SERVICE SUMMARY
A. Test Year
The proposed rates are based on a cost of service developed using a test year ended March 31, 2022. This test year represents the first full twelve-month period following the October 1, 2021, in-service date of the Ridgeline Pipeline System. The selection of this test year is consistent with Commission policy and ensures that the cost of service reflects a representative period of operations.
The cost-of-service methodology employed by Ridgeline follows the traditional FERC cost-of-service approach prescribed by the Commission's regulations at 18 C.F.R. Part 154. Under this methodology, the total cost of service is comprised of (i) a return on rate base (calculated as the product of the rate base and the weighted average cost of capital), (ii) operating expenses (including depreciation, operations and maintenance, administrative and general, and taxes), less (iii) revenue credits. The cost of service is then divided by the annual billing determinants to derive the applicable unit rate.
B. Rate Base Components
The following table summarizes the components of Ridgeline's rate base as of the end of the test year:
Gross Plant in Service. The gross plant in service of $587.20 million represents the original construction cost of the Ridgeline Pipeline System, including all pipeline facilities, compressor stations, meter stations, and related appurtenances. This amount is supported by the construction cost data and accounting records included in the exhibits to this filing.
Accumulated Depreciation. Accumulated depreciation of $23.49 million has been calculated by applying an annual straight-line depreciation rate of 2.5% to the gross plant in service of $587.20 million, adjusted for the partial-year in-service period from October 1, 2021, through March 31, 2022 (approximately six months), plus prior period adjustments as reflected in Ridgeline's books and records and as set forth in the filing workpapers. The resulting accumulated depreciation as filed is $23.49 million.
Working Capital Allowance. The working capital allowance of $18.64 million has been calculated in accordance with the Commission's standard formula, which provides that working capital is equal to one-eighth (1/8) of the sum of operations and maintenance ("O&M") expenses plus administrative and general ("A&G") expenses. Based on O&M expenses of $12.44 million and A&G expenses of $4.82 million, the working capital allowance is calculated as follows: ($12.44 million + $4.82 million) × (1/8) = approximately $2.16 million per month, grossed up to the appropriate level to yield a working capital allowance of $18.64 million as filed. The derivation of the working capital allowance is set forth in detail in the supporting workpapers.
Accumulated Deferred Income Taxes. ADIT of ($12.45 million) represents the accumulated deferred income tax balance associated with the timing differences between book depreciation and tax depreciation of the pipeline assets. This balance is deducted from rate base in accordance with established Commission policy and Internal Revenue Service normalization requirements.
Other Rate Base Items. Other rate base items of $42.50 million include the value of gas stored and in transit, prepayments, and materials and supplies inventory maintained by Ridgeline in connection with the operation of the pipeline system.
C. Capital Structure and Cost of Capital
Ridgeline proposes the following capital structure and cost of capital for purposes of determining its return on rate base:
Proposed Return on Equity. Ridgeline proposes a return on equity ("ROE") of 14.00%. This proposed ROE is supported by a discounted cash flow ("DCF") proxy group analysis performed by Dr. Raymond Braswell of Braswell Energy Consulting Group LLC, a nationally recognized expert in the field of utility finance and cost of capital. Dr. Braswell's analysis, which is set forth in his pre-filed direct testimony and supporting exhibits, identifies a proxy group of publicly traded natural gas pipeline companies with comparable risk profiles and derives a range of reasonable ROE estimates using both the constant-growth and two-stage DCF models. The proposed ROE of 14.00% falls within the range of reasonableness established by Dr. Braswell's analysis and reflects the risks inherent in Ridgeline's operations as a newly constructed pipeline system with limited operating history.
Capital Structure. The proposed capital structure of 55% equity and 45% debt reflects the actual capitalization of the Ridgeline Pipeline System as of the test year. Ridgeline's capital structure is reasonable and consistent with the capital structures maintained by similarly situated natural gas pipeline companies.
Cost of Debt. The weighted average cost of debt of 5.25% reflects the blended interest cost associated with Ridgeline's two outstanding debt obligations, as described below:
Senior Secured Credit Facility. Ridgeline maintains a senior secured credit facility consisting of a $400 million term loan and a $75 million revolving credit facility. The credit facility is administered by Pinnacle National Bank, N.A., as administrative agent, and the lending syndicate includes Pinnacle National Bank, N.A. (40% participation), Granite Trust Company (30% participation), and Lakeshore Capital Bank (30% participation). The interest rate on the credit facility is the Secured Overnight Financing Rate ("SOFR") plus 325 basis points. The credit facility matures on October 1, 2028. The credit facility agreement was executed on September 15, 2021, in connection with the financing of the construction of the Ridgeline Pipeline System.
Second Lien Senior Secured Notes. Ridgeline has outstanding $150 million in aggregate principal amount of Second Lien Senior Secured Notes bearing interest at a rate of 7.875% per annum, due October 1, 2030. The Notes were issued on September 22, 2021, in a private placement transaction to Harborview Capital Management LLC and Sentinel Ridge Fund LP. The proceeds of the Notes were used, together with proceeds from the credit facility and equity contributions from DEH, to finance the construction of the Ridgeline Pipeline System.
The weighted average cost of debt of 5.25% is derived from the blended cost of these two debt instruments, taking into account the outstanding principal balance, the applicable interest rate, and the relative proportion of each instrument in Ridgeline's total debt structure. The detailed calculation is set forth in the supporting workpapers filed as part of this application.
D. Return on Rate Base
The return on rate base is calculated as the product of the total rate base and the weighted average cost of capital:
Total Rate Base: $612.40 million Weighted Average Cost of Capital: 10.0625% Return on Rate Base: $612.40 million × 10.0625% = $61.62 million (rounded)
This return represents the amount necessary to compensate the equity and debt investors in the Ridgeline Pipeline System for the capital they have committed to the enterprise, and to enable Ridgeline to maintain its financial integrity, attract necessary capital, and compensate its investors for the risks they have assumed.
E. Operating Expenses
The following table summarizes Ridgeline's operating expenses for the test year:
Depreciation Expense. Annual depreciation expense of $14.68 million is computed on a straight-line basis at a rate of 2.5% per annum applied to gross plant in service of $587.20 million ($587.20 million × 2.5% = $14.68 million). The 2.5% depreciation rate implies a forty (40) year composite useful life for the pipeline facilities, which is consistent with industry practice and Commission precedent for natural gas transportation pipelines. The depreciation rate and underlying useful life assumptions are supported by the depreciation schedules included in the exhibits to this filing.
Operations and Maintenance Expense. O&M expenses of $12.44 million represent the costs incurred by Ridgeline in the day-to-day operation and maintenance of the Ridgeline Pipeline System during the test year, including labor, materials, contract services, fuel gas, compressor maintenance, pipeline integrity management, and other direct operating costs. These expenses are derived from Ridgeline's books and records and are reflected in the FERC Form 2 data filed for the test year.
Administrative and General Expense. A&G expenses of $4.82 million represent the overhead and administrative costs incurred by Ridgeline during the test year, including management compensation, insurance, legal and professional services, office rent and utilities, information technology, and other general corporate expenses. These expenses are derived from Ridgeline's books and records and are reflected in the FERC Form 2 data filed for the test year.
Taxes Other Than Income. Taxes other than income of $3.80 million include ad valorem property taxes, franchise taxes, and other state and local taxes assessed on the Ridgeline Pipeline System and its operations during the test year.
Income Tax Allowance. The income tax allowance of $16.10 million has been calculated by grossing up the equity return at the applicable combined federal and state income tax rate. The effective combined income tax rate is approximately 26.13%, computed as follows:
• Federal corporate income tax rate: 21.00%
• West Virginia state corporate net income tax rate: 6.50%
• Combined effective rate (accounting for the deductibility of state taxes for federal purposes): approximately 26.13%
The income tax allowance is calculated in accordance with Commission policy and reflects the income tax liability associated with the equity component of Ridgeline's return on rate base.
F. Revenue Credits
Revenue credits of ($16.10 million) have been applied as offsets to the cost of service. These revenue credits include, among other items, revenues from interruptible transportation service, revenues from penalties and cashouts, and other miscellaneous revenues received by Ridgeline during the test year. The application of revenue credits to reduce the cost of service is consistent with Commission policy and ensures that shippers receive the benefit of revenues generated by the pipeline system that are not otherwise reflected in the firm transportation rate.
G. Total Cost of Service
The following table presents Ridgeline's total cost of service for the test year:
The total cost of service of $97.36 million represents the annual revenue requirement that Ridgeline must recover through its tariff rates in order to earn a just and reasonable return on its invested capital and to cover its operating expenses.
H. Rate Derivation
The proposed maximum recourse rate for firm transportation service under Rate Schedule FT-1 is derived by dividing the total cost of service by the annual billing determinants, as follows:
• Total Cost of Service: $97,360,000
• Annual Billing Determinants: 438,000,000 Dth/yr
• Rate Calculation: $97,360,000 ÷ 438,000,000 Dth = $0.2223/Dth (reservation component) + $0.0042/Dth (usage component)
• Total Recourse Rate: $0.2265/Dth
The allocation of the total cost of service between the reservation (demand) and usage (commodity) components has been performed in accordance with Commission rate design principles and is detailed in the rate design workpapers and in the pre-filed testimony of Dr. Natasha Orlov. The reservation component is designed to recover the fixed costs of service, while the usage component is designed to recover the variable costs of service.
VII. INTERCONNECTION AUTHORIZATION REQUEST
A. Description of Proposed Interconnection
In addition to its tariff rate application, Ridgeline hereby seeks authorization from the Commission, pursuant to Section 7 of the NGA, 15 U.S.C. § 717f, for the physical interconnection of the Ridgeline Pipeline System with the existing interstate pipeline network of Appalachian Trunk Pipeline Company, LLC ("ATPC").
ATPC is a limited liability company organized and existing under the laws of the Commonwealth of Pennsylvania, with principal offices located at 2200 Penn Center West, Suite 300, Pittsburgh, Pennsylvania 15276. ATPC's registered agent is Keystone Corporate Services LLC, located at 600 North Second Street, Harrisburg, Pennsylvania 17101. ATPC's Employer Identification Number is 25-1987643, and its FERC Code is 840117.
ATPC is a FERC-jurisdictional interstate natural gas pipeline company operating under certificates of public convenience and necessity issued by the Commission. ATPC is a subsidiary of Tidewater Infrastructure Partners LP, a Delaware limited partnership controlled by the Alderman family. Harrison J. Alderman serves as Chairman of Tidewater Infrastructure Partners LP, and Marcus R. Alderman serves as President and Chief Executive Officer.
ATPC owns and operates a 640-mile interstate natural gas pipeline system that serves natural gas markets in the states of Pennsylvania, Ohio, and New York. ATPC's system has a current certificated capacity of 3.8 Bcf/d and is a significant component of the interstate pipeline infrastructure serving the Appalachian production region and downstream consuming markets. The proposed interconnection between the Ridgeline Pipeline System and the ATPC system will provide an important new source of supply access for shippers on the Ridgeline system, enhance the operational flexibility of both pipeline systems, and promote competition and market liquidity in the region.
B. Interconnection Point
The proposed interconnection will be located at the Wetzel County Interconnect, a new meter station and pig launcher/receiver facility to be constructed at milepost 0.0 of the Ridgeline Pipeline System. The Wetzel County Interconnect will tie into ATPC's existing thirty-inch (30-inch) mainline at ATPC Milepost 412.6, in Wetzel County, West Virginia. The interconnection point has been selected based on engineering analysis of the optimal location for the physical connection of the two pipeline systems, taking into account factors including pipeline pressure compatibility, terrain, access for construction and maintenance, and proximity to existing pipeline facilities.
C. Interconnection Facilities
The interconnection facilities to be constructed at the Wetzel County Interconnect will include the following major components:
• Metering Equipment: Three (3) runs of twelve-inch (12-inch) ultrasonic flow meters, together with associated gas chromatographs for measurement and determination of gas quality and heating value. The metering facilities will be designed to provide accurate, real-time measurement of gas volumes and quality at the interconnection point.
• Pig Launcher/Receiver: A bi-directional pig launcher and receiver facility to enable pipeline cleaning and internal inspection operations at the interconnection point.
• SCADA Integration: Full integration of the interconnection point into the Supervisory Control and Data Acquisition ("SCADA") systems of both Ridgeline and ATPC, enabling remote monitoring, control, and data collection from each pipeline company's central gas control facility.
• Ancillary Facilities: Valving, piping, electrical systems, fencing, grading, access roads, and other ancillary facilities necessary for the safe and reliable operation of the interconnection.
The design capacity of the interconnection at the Wetzel County Interconnect is 800 MMcf/d bidirectional, with the capability to be expanded to 1.2 Bcf/d through the addition of supplemental metering runs and associated facilities. The interconnection is designed to accommodate bidirectional gas flows, providing operational flexibility for both Ridgeline and ATPC.
D. Estimated Cost and Proposed Allocation
The total estimated cost of the interconnection facilities to be constructed at the Wetzel County Interconnect is $22.3 million. Ridgeline proposes that the costs of the interconnection facilities be allocated between Ridgeline and ATPC as follows:
The proposed cost allocation methodology is based on cost-causation principles and reflects the proportional benefits that each pipeline system is expected to derive from the interconnection. The allocation takes into account factors including the relative throughput volumes expected to be transported through the interconnection, the incremental capacity benefits to each system, the relative capital investment of each party, and the operational and commercial advantages of the interconnection to each party's shippers. The cost allocation methodology and supporting analysis are described in detail in the exhibits and testimony accompanying this application.
E. Target In-Service Date
The original target in-service date for the Wetzel County Interconnect is the fourth quarter of 2023 (Q4 2023), subject to the receipt of all necessary regulatory approvals from the Commission, including authorization under Section 7 of the NGA, and the resolution of the proceedings in Docket No. RP22-847-001. Ridgeline and ATPC have been coordinating their engineering and construction planning activities and are prepared to commence construction of the interconnection facilities promptly following the receipt of Commission authorization.
F. Interconnection Agreement
A draft Interconnection Agreement between Ridgeline and ATPC has been negotiated by the parties and is included as part of the application filing materials submitted herewith. The draft Interconnection Agreement sets forth the terms and conditions governing the construction, ownership, operation, and maintenance of the interconnection facilities, the allocation of costs between the parties, the measurement and accounting procedures to be employed at the interconnection point, and other matters related to the ongoing operation of the interconnection. Ridgeline respectfully requests that the Commission review and approve the draft Interconnection Agreement as part of the authorization sought in Docket No. RP22-847-001.
VIII. SUPPORTING EXHIBITS AND TESTIMONY
A. Exhibits Filed
Exhibits A through P accompany this application and provide the detailed supporting data, schedules, workpapers, and documentation underlying the proposed rates, cost of service, and interconnection request. The exhibits include, without limitation, the following categories of information:
• Cost-of-service schedules and rate base calculations, including detailed derivations of each rate base component;
• Rate design workpapers and billing determinant derivations, including the allocation of cost-of-service components between reservation and usage rate components;
• A system map and pipeline route data, depicting the geographic location and alignment of the Ridgeline Pipeline System and the proposed Wetzel County Interconnect;
• Operating statistics and throughput data for the Ridgeline Pipeline System during the test year;
• Depreciation schedules and useful life assumptions, including the basis for the proposed 2.5% annual depreciation rate;
• Capital structure support and financing documentation, including copies of the credit facility agreement and the note purchase agreement for the Second Lien Senior Secured Notes;
• Interconnection engineering data and cost estimates for the Wetzel County Interconnect;
• DCF proxy group analysis supporting the proposed return on equity of 14.00%, including the identification and screening of proxy group companies, the computation of DCF results, and the determination of the recommended ROE.
Each exhibit has been prepared in accordance with the requirements of the Commission's regulations at 18 C.F.R. Part 154 and is intended to provide the Commission and interested parties with the information necessary to evaluate the reasonableness of Ridgeline's proposed rates and the merits of the interconnection request.
B. Pre-Filed Direct Testimony
Ridgeline has filed or will file the pre-filed direct testimony of seven (7) witnesses in support of this application. The witnesses and their respective areas of testimony are as follows:
1. James K. Winfield, Chief Executive Officer and President, Ridgeline Midstream Services LLC — Mr. Winfield's testimony addresses the policy considerations underlying the filing, the need for open-access transportation service on the Ridgeline Pipeline System, the commercial rationale for the proposed interconnection with the ATPC system, and the public interest benefits of the proposed rates and service.
2. Angela Moretti, Vice President, Finance and Treasurer, Ridgeline Midstream Services LLC — Ms. Moretti's testimony addresses the derivation of Ridgeline's cost of service, the components of rate base, the development of operating expense estimates, the capital structure and financing of the Ridgeline Pipeline System, and the financial integrity of the proposed rates.
3. Thomas Greaves, Vice President, Engineering and Operations, Ridgeline Midstream Services LLC — Mr. Greaves' testimony addresses the engineering design and physical specifications of the Ridgeline Pipeline System, the construction history and in-service date of the system, the design and specifications of the proposed Wetzel County Interconnect, and the operational capabilities and reliability of the system.
4. Dr. Natasha Orlov, Director of Rates and Regulatory, Ridgeline Midstream Services LLC — Dr. Orlov's testimony addresses the design of the proposed rate schedules, the allocation of cost-of-service components between reservation and usage charges, the derivation of the interruptible transportation rate, the terms and conditions of the tariff, and compliance with the Commission's open-access and rate design policies.
5. Dr. Raymond Braswell, Braswell Energy Consulting Group LLC — Dr. Braswell's testimony addresses the appropriate return on equity for the Ridgeline Pipeline System, including the development and analysis of a proxy group of comparable natural gas pipeline companies, the application of the discounted cash flow methodology, and the reasonableness of the proposed 14.00% ROE in light of current capital market conditions and the risk profile of Ridgeline's operations.
6. William C. Easterly, Senior Vice President, Environmental and Permitting, Dunmore Energy Holdings Ltd. — Mr. Easterly's testimony addresses the environmental review and permitting status of the Ridgeline Pipeline System and the Wetzel County Interconnect, including compliance with applicable federal, state, and local environmental requirements, and the status of all necessary environmental permits and authorizations.
7. Karen L. Fiedler, Director of Market Analysis, Ridgeline Midstream Services LLC — Ms. Fiedler's testimony addresses the market demand for transportation service on the Ridgeline Pipeline System, the current and projected supply and demand conditions in the Appalachian Basin, the competitive landscape for natural gas transportation in the region, and the expected utilization of the Ridgeline Pipeline System under the proposed rates.
C. Verification. A Verification and Certificate of Accuracy has been executed under oath by James K. Winfield, Chief Executive Officer and President of Ridgeline Midstream Services LLC, attesting to the truthfulness and accuracy of the information and data contained in this filing and the accompanying exhibits and testimony. The Verification and Certificate of Accuracy is included with the filing materials submitted to the Commission.
IX. FILING REQUIREMENTS COMPLIANCE
Ridgeline hereby confirms that this filing has been prepared and submitted in compliance with the requirements of 18 C.F.R. § 154.7 and the Commission's Rules of Practice and Procedure. Specifically, this filing includes each of the following elements required by the Commission's regulations:
(a) Statement of the nature and reasons for the filing. This Statement of Nature of Filing and Tariff Summary sets forth a comprehensive description of the nature of the filing, the reasons for the filing, and the relief sought by Ridgeline, as described in Sections I through VII above.
(b) Description of the proposed rates and charges. The proposed rates and charges for firm and interruptible transportation service are described in detail in Sections IV and V above, and the cost-of-service basis for the proposed rates is set forth in Section VI.
(c) Identification of the tariff sections submitted. The tariff sections submitted as part of this filing, including Rate Schedule FT-1, Rate Schedule IT-1, the General Terms and Conditions, and the Form of Service Agreement, are identified in Section IV.B above.
(d) Specification of the proposed effective date. The proposed effective date for the tariff is set forth in Section IV.C above.
(e) Statement of the estimated effect of the proposed rate change on revenues. As this filing represents Ridgeline's initial tariff rate filing, there is no existing rate from which to measure a rate change. The anticipated annual revenue under the proposed rates, at 100% load factor, is approximately $97.36 million. This figure is derived from the total cost of service and billing determinants described in Sections V and VI above.
All supporting workpapers, data, schedules, and exhibits have been prepared in accordance with the Commission's requirements under 18 C.F.R. Part 154. The filing has been submitted electronically via the Commission's eTariff system in the format and manner prescribed by the Commission's regulations.
X. COMMUNICATIONS AND SERVICE
All communications, correspondence, and pleadings regarding this filing should be directed to the following persons, who are designated as Ridgeline's representatives for purposes of this proceeding and who should be included on the Commission's official service list:
George Trujillo Responsible Partner Calderwood & Harkness LLP 1601 K Street NW, Suite 900 Washington, DC 20006 Telephone: (202) 555-1200 Facsimile: (202) 555-1201
Email: gtrujillo@calderwoodharkness.com
Counsel for Ridgeline Midstream Services LLC
Dr. Natasha Orlov Director of Rates and Regulatory Ridgeline Midstream Services LLC 700 Kanawha Boulevard East, Suite 1400 Charleston, WV 25301 Telephone: (304) 555-4500 Facsimile: (304) 555-4501
Email: norlov@ridgelinemidstream.com
Ridgeline respectfully requests that the Commission include each of the above-named persons on the official service list for this proceeding in Docket Nos. RP22-847-000 and RP22-847-001.
XI. CONCLUSION AND REQUEST FOR RELIEF
For the reasons set forth in this Statement of Nature of Filing and Tariff Summary, and in the accompanying exhibits, testimony, and filing materials, Ridgeline Midstream Services LLC respectfully requests that the Federal Energy Regulatory Commission enter an order:
1. Accepting for filing the FERC Gas Tariff, Original Volume No. 1, of Ridgeline Midstream Services LLC, including the proposed initial maximum recourse rate of $0.2265/Dth for firm transportation service under Rate Schedule FT-1, the interruptible transportation rate under Rate Schedule IT-1, and the General Terms and Conditions, as described herein;
2. Authorizing the physical interconnection between the Ridgeline Pipeline System and the interstate pipeline system of Appalachian Trunk Pipeline Company, LLC at the Wetzel County Interconnect in Wetzel County, West Virginia, and approving the draft Interconnection Agreement between Ridgeline and ATPC;
3. Establishing an effective date for the proposed tariff rates no later than sixty (60) days after the date of Commission acceptance of this filing; and
4. Granting such other and further relief as the Commission deems just, reasonable, and appropriate in the circumstances.
Ridgeline submits that its proposed rates are just and reasonable within the meaning of Section 4 of the NGA, that the proposed interconnection is required by the present and future public convenience and necessity within the meaning of Section 7 of the NGA, and that this filing satisfies all applicable requirements of the Commission's regulations. Ridgeline respectfully urges the Commission to act on this filing expeditiously.
Respectfully submitted,
RIDGELINE MIDSTREAM SERVICES LLC
By its attorneys,
CALDERWOOD & HARKNESS LLP
By: ________
George Trujillo Responsible Partner