June 21, 2012

State picks gas company, and cost wins

Pipeline project goes to Maine Natural Gas

By Keith Edwards kedwards@centralmaine.com
Staff Writer

AUGUSTA -- The state government has selected a company affiliated with Central Maine Power Co.'s parent company to build a natural gas pipeline system in the Augusta area to distribute the gas to state property throughout the region.

Officials with Brunswick-based Maine Natural Gas, a subsidiary of Iberdrola USA, plan to begin construction on the east side of Augusta this summer, about 10 miles from a pipeline in Windsor.

In 2013, the company plans to bring the pipeline across the Kennebec River, extending along Western Avenue and Leighton Road to the state's west side properties, and continue into the north Augusta area. It will serve residential, commercial and industrial users "as soon as possible, and then continue to expand service to other areas in the Kennebec Valley for years to come," according to a news release.

Both phases are estimated to cost about $20 million.

The state's selection of Maine Natural Gas comes as an apparent blow to a competing and much larger proposal from Summit Natural Gas of Maine, which plans a $150 million natural gas distribution system in the region. That proposal would come from the same pipeline in Windsor, coming into Augusta and distributing natural gas to users south to Richmond and north to Madison.

There could be savings of between $2 million and $3 million a year if state property switched from fuel oil to natural gas, according to Alan Henry, director of special projects for the state Bureau of General Services.

"Now that we'll be getting it in Augusta -- we're hoping by the end of this calendar year -- then we can start converting these state facilities and start saving taxpayers' money," Henry said. "We do that, and we can start saving some of these programs that are being cut every year."

Maine Natural Gas already provides gas to nearly 2,900 users in Sagadahoc and Cumberland counties.

Henry said competing proposals from Maine Natural Gas and Summit Natural Gas of Maine were determined by the reviewing panel to be essentially even in terms of experience, references, job creation, fiscal stability and most other measures.

"It came down to cost," Henry said. "Theirs was cheaper than Summit's. They were very close other than that. We would have been very happy with either."

The per million British thermal unit price in the proposal from Maine Natural Gas was $11.98, compared to Summit's $12.67.

The first phase of Maine Natural Gas's winning pipeline project is expected to cost about $10 million and provide 22 jobs starting this summer. The second phase would get under way in 2013, also costing about $10 million, and creating about 20 jobs.

"We're pleased and we want to get this started, get pipe in the ground and start delivering savings to the state of Maine, residents, and businesses," Dan Hucko, spokesman for Iberdrola, said Wednesday. "We'll follow the pattern we've followed in other areas we've gone into. Put the main pipeline, the backbone, in the ground, then start very quickly to do distribution to residential and industry, and continue to expand that distribution network for years. That's our goal, to service as many people as we can."

Competing plans

The two gas companies, as well as Self-Gen, a Scarborough-based company that had proposed to partner with Summit, submitted competing bids for the state natural gas distribution proposal.

Colorado-based holding company Summit Utilities, owned by a JP Morgan investment fund, is in the process of buying Kennebec Valley Gas Co. That firm has been pursuing plans for more than a year to build a pipeline from Richmond to Madison, and has gotten tax breaks from most of the municipalities along the route to help finance the project.

(Continued on page 2)

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