Estimated Savings for New York Consumers from the Millennium Pipeline Eastern System Upgrade Project

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Concentric independently evaluated and estimated the potential savings benefits to energy market participants as well as greater economic benefits in New York associated with Millennium’s Eastern System Upgrade project (the “ESU project”). As proposed, the ESU project would increase natural gas deliverability on the existing Millennium Pipeline (located in the Southern Tier and Hudson Valley areas of New York) by approximately 200,000 Dth/day from Corning, NY to its interconnect with Algonquin Gas Transmission in Ramapo, NY. The ESU project is expected to come online in September 2018. Concentric’s assessment involved conducting a natural gas market simulation to quantify the impact the expansion project would have on gas prices, as well as estimating the impact on electric prices, and overall economic impacts.

To conduct its natural gas price impact analysis, Concentric used GPCM, which is the industry-standard gas market simulation software. GPCM is a network optimization model that simulates flows of gas in the North American natural gas market to develop long-run price forecasts. The model provides a high degree of granularity and close approximation of the capabilities and constraints of real world operating assets, as well as the microeconomic principles that underlie competitive markets, all of which make it an ideal tool for analyzing the impact of changes to pipelines and other infrastructure assets. The GPCM model reflects all the primary components of the North American natural gas network, including supply, pipeline transportation and storage, and demand.

To conduct is electric price impact analysis, Concentric evaluated the historical relationship between natural gas prices and electric prices separately for each zone. Based on this analysis, Concentric developed factors that were used to estimate the reduction in electric prices resulting from the reduction in natural gas prices if the ESU project is built. These electric price reductions were multiplied by forecasted electric consumption by zone to determine the electric price benefits to New York consumers associated with the ESU project.

To examine the broader economic benefits resulting from the ESU project, Concentric used IMPLAN, a widely-accepted and utilized software model. IMPLAN is a production-based, input-output model that accounts for all of the dollar flows between the different sectors of the economy within a specified geographic region. Through this approach, and for a specified region, IMPLAN is able to model how dollars injected into one sector of the economy are subsequently spent and re-spent in other sectors of that region’s economy, generating what is known as “economic multiplier” effects.

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