Energy Oligopoly in Virginia develops from FERC regulations

The much discussed Atlantic Coast Pipeline, designed to improve the reliability of gas delivery, is reaching the final stages before construction.  As the number of customers for Piedmont Natural Gas and Virginia Natural Gas continues to grow, the 550 mile long pipeline will allow for price stability and will ensure that customers will have continuous access to the natural gas to heat their homes and businesses, especially on the coldest day of the year. While at first met with fairly strong opposition, recent polls have shown a strong voter support for the pipeline.

So what's the holdup? In order to begin construction, the Atlantic Coast Pipeline must first be approved by the Federal Energy Regulatory Committee (FERC). As environmental assessments have already been completed, the final decision is left to the FERC. This committee was created to determine if there is a need for this additional infrastructure and whether this pipeline is an economic solution to the demonstrated need.

Tullock would argue that this additional step is unnecessary in the market economy and wastes resources by diverting them to get approval for this project. While the Virginia natural gas market is more similar to an oligopoly than a monopoly, the same rent-seeking problems exist. In order for companies to expand and grow, they must devote significant resources to "obtain rents," or permits, that allow them to expand. These permits have a negative social value and create dead weight loss because the resources and capital spent on obtaining them could have been put into the economy instead, thus creating additional growth. While I understand the need to regulate energy to create a safer community and to protect the environment, there is already strong demonstrated support from the market for this pipeline, leading me to think that Tullock would argue the additional analysis from the FERC is unnecessary.