FOR IMMEDIATE RELEASE:
Thursday, November 17, 2016
Contact: Jonathon Berman, (202) 495-3033, jonathon.berman@sier
Sierra Club Files Antitrust Complaint Concerning the NEXUS Gas Pipeline
Washington, DC -- The Sierra Club has filed a complaint against Michigan’s largest electric utility, DTE Electric Company, alleging that a 250-mile, multi-billion dollar gas pipeline project owned by its affiliate, NEXUS Gas Transmission, LLC, threatens to monopolize the market for the generation of electricity in Michigan. The complaint alleges that the pipeline project, if permitted to continue, will raise retail electricity customers’ rates above competitive levels and exclude more cost-effective energy suppliers, including renewable energy sources.
The complaint was filed with the Federal Energy Regulatory Commission (FERC), United States Department of Justice, and the Federal Trade Commission. It alleges that while electric utilities like DTE Electric have legal monopolies to sell electricity to ratepayers, they cannot use that monopoly to gain control over the market for generating capacity. According to the complaint, the NEXUS project uses DTE Electric’s power to charge ratepayers for the project’s above-market costs in order to expand its presence in the generation market. DTE Electric already controls about 50% of the local electricity generation market, according to the complaint.
“The dirty and dangerous NEXUS project is a payoff scheme for corporate polluters with Michigan consumers footing the bill,” said David Holtz, Chair of the Michigan chapter of the Sierra Club. “Solar and wind power continues to be a better and cheaper alternative to dirty fuels, which only gives further indication as to the real reason behind this pipeline.”
The Sierra Club’s complaint comes on the heels of an antitrust complaint filed with the Federal Trade Commission by a retired Department of Justice Antitrust Division attorney regarding the Atlantic Coast Pipeline Project, a 600-mile proposed gas pipeline co-owned by electric utilities Dominion Resources and Duke Energy. According to the latter complaint, the Atlantic Coast Pipeline gives Dominion and Duke unlawful monopoly power in the market for utility-scale electricity generation.
“Our complaint shows that there is no plausible competitive justification for DTE Electric to make a long-term commitment to buy gas at above-market prices,” said Pat Gallagher, Director of the Sierra Club’s Environmental Law Program. “The federal competition authorities should take notice because ratepayers, the environment, and competition in the generation market all are harmed by this deal.”
Both complaints add to increasing scrutiny and criticism of the overexpansion of gas pipeline capacity throughout the United States. The Sierra Club’s complaint refers to statistics published by the United States Energy Information Administration showing that 46% of the nation’s gas pipeline capacity is unused, even as new pipeline projects continue to be approved by federal regulators. The Club’s complaint highlights perverse incentives toward overbuilding gas pipelines that arise when the pipelines are owned and operated by utility affiliates, pointing out that the Federal Energy Regulatory Commission typically allows high profit margins on new pipeline projects, even as state regulators permit developers to pass off the costs of pipeline construction to retail ratepayers. According to the complaint, “the combination of abnormally high profit margins with the ability to shift project risks to ratepayers creates a powerful incentive to overbuild natural gas pipelines.” The Complaint charges that DTE Electric has taken the trend of overexpansion one step further by using this low-risk, high-profit transaction structure to gain control over the market for the generation of electricity in Michigan.
The Club’s FTC complaint in the FERC proceeding is part of a motion to dismiss filed on November 16 by Michigan members who oppose NEXUS’ application for a certificate of public convenience and necessity. There, the Club charges that DTE’s ratemaking scheme is clearly not in the public interest. “DTE’s machinations fall well short of the Commission’s expectation that the pipeline must not penalize existing customers,” said Terry Lodge, attorney for the Michigan Sierrans. “NEXUS flatly refuses to consider any alternatives but a greenfield pipeline, built on the backs of residential and business customers. We believe that violates the Commission’s environmental and consumer-protective mandates and are asking FERC to say ‘no’ to NEXUS.”
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About the Sierra Club
The Sierra Club is America’s largest and most influential grassroots environmental organization, with more than 2.4 million members and supporters nationwide. In addition to creating opportunities for people of all ages, levels and locations to have meaningful outdoor experiences, the Sierra Club works to safeguard the health of our communities, protect wildlife, and preserve our remaining wild places through grassroots activism, public education, lobbying, and litigation. For more information, visit http://www.sierraclub.or
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