The staff of the Maine Public Utilities Commission concluded Wednesday that the state’s electricity and gas customers won’t benefit from a plan to spend up to $75 million a year to help expand natural gas pipeline capacity in New England.
The conclusion of a long-awaited report stemming from 2013 legislation was welcomed by clean-energy advocates, who are pushing renewable energy over fossil fuels in order to fight climate change. It was denounced by businesses that use a lot of electricity and natural gas and are desperate to lower their operating costs.
The PUC staff concluded that low oil and gas prices, new pipelines under construction or being permitted, and other factors could temper winter price spikes in wholesale natural gas without ratepayers getting involved.
The report said, in part: “The record in this proceeding does not support a finding that (a pipeline contract) is reasonably likely to provide net benefits for Maine electricity and natural gas consumers under a sufficiently broad spectrum of future scenarios. Moreover, regional market conditions, rule changes and other events suggest that the price and volatility concerns that led to the (2013 law) may be addressed without (a contract).”
The staff recommendation isn’t binding, but it will carry weight when the three PUC commissioners meet soon to vote on how or whether to proceed. In order to approve a contract to expand pipeline capacity, commissioners would have to find that the investment would save ratepayers money overall. Deliberations in the case are expected this month or in July.
Between now and then, parties to the case will file legal arguments based on the staff conclusions.
MORE CAPACITY A LEPAGE PRIORITY
Upgrading the region’s pipeline infrastructure has been a priority for Gov. Paul LePage, who blames high energy prices for contributing to rural Maine’s economic malaise. A trade group representing manufacturers that use a lot of power also has lobbied hard for Maine to join a regional effort to greatly expand pipeline capacity as a way of assuring adequate supply on the coldest days of the year.
“It’s extremely disappointing that the PUC staff hired a consultant which produced the only report out of 30 that found no value in additional pipeline capacity,” Tony Buxton, a lawyer representing the Industrial Energy Consumer Group, said of studies done elsewhere in the region. “We will work very hard to do what the Legislature asked and solve the problem of volatile energy prices in the wintertime.”
The staff report also drew criticism from Tim Schneider, the state’s Public Advocate. His office had advocated for a small investment, contingent on other states making similar purchases and a demonstration of net benefits to consumers.
“We believe there is a strong case that electricity prices will be lower if the region has more gas pipeline capacity,” Schneider said. “This is why we supported Maine buying capacity as part of a regional effort. If Maine doesn’t buy capacity, it puts the regional effort at risk.”
But the conclusions were embraced by the Conservation Law Foundation. It favors meeting future demand through wind, solar and hydro power, as well as stepped-up energy efficiency.
“CLF commends the report conclusion that an unprecedented and highly risky contract for natural gas pipeline capacity paid for by Maine consumers is not in the public interest,” said Ben Tettlebaum, a staff attorney. “It is encouraging that commission staff acknowledges what CLF has been saying since the start of this proceeding two years ago. There is simply too much risk and uncertainty to justify an upwards of $1 billion gas industry handout with consumers’ hard-earned money.”
The law that led to the study was approved by the Legislature in 2013, when a frigid winter and skyrocketing natural gas prices in New England forced factories to curtail operations on the coldest days. Worried Maine lawmakers passed a bill they hoped would prod energy companies to expand the region’s pipeline capacity. The idea is that adequate gas supply in the winter, when demand is high for both heating and power generation, will keep wholesale energy prices from spiking to levels that are well above the national averages.
The bill directed the PUC to study whether it made sense for ratepayers, through utility contracts, to buy up to 200 million cubic feet of natural gas, at an annual cost of no more than $75 million.
But much has changed since 2013.
Natural gas wholesale prices are lower now than they’ve been in more than a decade. Slack demand during a warmer-than-average winter dropped wholesale electric prices in 2015 to the second-lowest level in 12 years.
Also down are prices for imported liquefied natural gas, which supplements domestic supplies.
A new, $1 billion pipeline expansion called the Algonquin Incremental Market Project is 60 percent complete and set to begin pumping in November.
KEY QUESTION FOR THE PUC
But at the same time, New England is losing generation from retiring nuclear power and oil units, and several new power plants planned for the future will burn natural gas.
So the PUC has to determine if Maine is at risk of experiencing another round of shortage-driven price hikes, or whether market conditions have changed in a fundamental way, making ratepayer investment unnecessary.
Those questions took on new urgency in May after Kinder Morgan, the nation’s largest energy infrastructure company, announced it was giving up on its Northeast Energy Direct pipeline proposal. The $3 billion project would have expanded the company’s Tennessee Gas Pipeline through Massachusetts and southern New Hampshire, bringing up to 1.2 billion cubic feet of shale gas from fields in Pennsylvania. It was one of three projects bidding to supply capacity to Maine in the case before the PUC.
The two remaining supply bidders in Maine are Spectra Energy’s Access Northeast project and the Portland Natural Gas Transmission System’s proposal, called Continent to Coast. Access Northeast would upgrade the existing Algonquin pipeline and add LNG storage to bring more gas to the region’s power plants. Continent to Coast would be able to transport gas into the Maritimes & Northeast Pipeline at Westbrook.
Parties in the case took various positions on these projects, and suggested a range of investments that would boost capacity. But in the end, the PUC staff said none of scenarios would benefit ratepayers. And it questioned whether it would be a good idea for Maine to be the first state in the region to make such a commitment.
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