January 24

New England governors start push to cut cost of power

Their first-of-its-kind plan calls for projects to expand transmission lines and gas pipeline capacity in the region by 20% in three years.

By Tux Turkel tturkel@pressherald.com
Staff Writer

The six New England governors have set in motion a first-of-its-kind plan to increase the region’s natural-gas pipeline capacity by nearly 20 percent in three years and build at least one major electric transmission line to bring renewable energy from Canada.

Utility customers would be asked to help pay for the projects, which together could cost billions of dollars, through electricity rates. But the costs soon would be recovered by savings on energy bills as the projects increase supplies of lower-cost power, said Tom Welch, chairman of the Maine Public Utilities Commission and an architect of the plan.

The plan, made public Thursday, requests that the operator of the region’s electricity grid, ISO-New England, seek permission from federal regulators to charge electricity customers for gas pipeline expansion.

“It’s an unprecedented and remarkable approach,” Welch said. “But it reflects the fact that the price of natural gas drives the price of electricity in New England.”

Natural gas now fuels more than half of all power-generating plants. A shortage of gas in the region on very cold days last year sent wholesale electricity prices up 57 percent over the 2012 average.

The plan announced Thursday represents a compromise among diverse political interests, but it won’t satisfy everyone.

Maine manufacturers that use a lot of energy say it wouldn’t bring enough gas into the region to erase the wide price difference between New England and other regions. Environmental activists who support a greater shift to wind, hydro and solar energy say it would make New England even more reliant on natural gas.

The request to ISO-New England was sent by the New England States Committee on Electricity, an obscure but influential organization that represents the states in regional matters regarding electricity. Welch represents Maine on behalf of Gov. Paul LePage.

The request follows a letter of commitment signed last month by the six New England governors, in which they pledged to cooperate on energy infrastructure issues. The governors acknowledge that the region’s electric and natural gas systems have become increasingly interdependent and that further investments in both are needed to reduce energy costs and attract business.

Not articulated in the letter, but underlying the greater political cooperation, is a geographic frustration. To the north, Quebec, Newfoundland and Labrador hold vast hydroelectric resources. To the south lie economical deposits of shale gas.

“We are so close to two world-class resources, but unfortunately, New England ratepayers aren’t benefiting from that position,” said Patrick Woodcock, LePage’s energy director.

NEW POWER LINES, NEW PIPELINES

Through the new plan, the governors will seek proposals for transmission lines to carry 1,200 to 3,600 megawatts of electricity from “no and/or low carbon emission resources.” For practical purposes, that means as many as three separate lines hooked up to hydro or wind power plants capable of electrifying hundreds of thousands of homes.

No specific route is mentioned, and no date is set. Various transmission projects already have been proposed in the region, but none has gained traction. A 1,200-megawatt line connecting Hydro Quebec to utilities in southern New England, called Northern Pass, is stalled by opposition over the route through New Hampshire’s White Mountains.

Maine has an energy-corridor law that would place any new interstate transmission lines underground, along highways. One proposal, the Northeast Energy Link, would run along Interstate 95 and the Maine Turnpike.

The process set by the governors now could allow states to assess the projects together and determine how costs might be shared among ratepayers.

The governors also want ratepayers to fund the cost of new gas pipeline capacity, with gas delivered at prices that are on par with a low, national benchmark. Wholesale gas prices in New England now are about five times as much as those in some southern states.

A new draft report prepared for the Maine PUC says, for instance, that if natural gas prices had been cut by 30 percent last year, overall energy prices in Maine would have fallen by nearly $50 million.

Specifically, the governors want firm pipeline capacity that’s one billion cubic feet per day above last year’s levels, or 600 million cubic feet a day more than what’s already proposed in expansion projects. That capacity should be online by the winter of 2017-18, the governors say.

New England now burns 4.5 billion cubic feet of gas a day. For comparison, that’s equal to about 31 million gallons of heating oil.

SOME WANT EVEN MORE GAS CAPACITY

Although no specific transmission line project is identified in the plan, Welch said three likely options exist: further expansion of Spectra Energy’s Algonquin Incremental Market project, which connects New York with a hub north of Boston; a new line across northern Massachusetts being considered by Houston-based Kinder Morgan Inc.; and an expansion of the Portland Natural Gas Transmission System through western Maine from Quebec.

Boosting the region’s gas capacity by 20 percent would help reduce costs, said Tony Buxton, a lawyer who represents the Augusta-based Industrial Energy Consumer Group, but it wouldn’t erase the price differential between the region and its competitors.

That differential, he said, cost Maine $360 million last year. His group, made up of paper mills and factories, is pushing for 2 billion cubic feet.

But Greg Cunningham, senior attorney for the Conservation Law Foundation, said even the governors’ proposal is excessive because it would increase the emissions associated with climate change. A better solution is increased efficiency, more renewable power, and market reforms that would lower gas prices to power plants, he said.

Cunningham’s group has filed a lawsuit in Massachusetts to block a new gas-fired plant from being built in Salem, even though it would replace a dirty-burning coal plant. Cunningham said his group might consider legal action against the governors’ plan, depending on the details.

But Woodcock said the plan represents political and practical compromises between developing more renewable power and accommodating the demand for natural gas already set in motion.

“It was extremely challenging to get to this point,” Woodcock said. “New England has made a decision that we are going to be using gas for a very long time. This is managing that decision.”

Tux Turkel can be contacted at 791-6462 or at:

tturkel@pressherald.com

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