The shippers are contracted with the owners of the pipeline to pay for the transportation capacity on the pipeline. The rate of return is used along with the total cost of the pipeline and other factors to determine a transportation rate for the pipeline. The final cost of the MVP is yet to be determined and the final rate will not be established until three years after commercial operation begins. However, if we take the original published transportation rate and prorate it for the increase in estimated cost of the project compared the cost used for the original rate, we can get a rough estimate for the firm transportation rate.

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For example, the rate times the amount of pipeline capacity reserved (10,000 Dth/d for Roanoke Gas) times 20-years for the first contract, yields what Roanoke Gas has committed to pay the MVP, regardless of how much of the reserved capacity is actually used.

 

The rate must be paid in full for 20 years even if only some or none of the reserved capacity is used. Based on the current estimated costs for the project, $5.7 billion and growing, Roanoke Gas expects to be able to pass through to its customers the $100+ million it is obligated to pay the MVP in the first 20 years. State corporation commissions will decide whether to allow utilities to pass along the more expensive costs from the Mountain Valley Pipeline onto their customers instead of the less expensive costs from existing pipelines.

 

Remember, the rate only covers the cost of reserving capacity on the pipeline to move the gas. The actual price for the gas is charged separately by the gas producer.