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Tuesday, July 1, 2014

Panel discusses energy solutions in New England as extra winter costs are tallied

MANCHESTER – An unprecedented request to have electricity customers help pay to bring more natural gas into New England is being considered by officials as the region tallies the financial cost when half our power plants depend on a fuel we have trouble getting in mid-winter.

By some estimates, the region spent an extra $3 billion to generate electricity last winter because pipelines couldn’t bring in enough natural gas from shale fields in New York state and Pennsylvania to support home heating and electricity generation – and heating usually gets first dibs. The shortage sent short-term spot prices for natural gas soaring and also led to the burning of 2.7 million barrels of fuel oil in old, backup power plants during the coldest weeks to keep electricity flowing. ...

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MANCHESTER – An unprecedented request to have electricity customers help pay to bring more natural gas into New England is being considered by officials as the region tallies the financial cost when half our power plants depend on a fuel we have trouble getting in mid-winter.

By some estimates, the region spent an extra $3 billion to generate electricity last winter because pipelines couldn’t bring in enough natural gas from shale fields in New York state and Pennsylvania to support home heating and electricity generation – and heating usually gets first dibs. The shortage sent short-term spot prices for natural gas soaring and also led to the burning of 2.7 million barrels of fuel oil in old, backup power plants during the coldest weeks to keep electricity flowing.

The extra cost is being passed on to businesses that buy power on wholesale markets and increasingly to retail customers.

These details came out during a panel held Monday at Saint Anselm College by the New England Council and the New Hampshire Institute of Politics at Saint Anselm. Officials from five New England states and the entity that oversees the regional power grid discussed what was titled a “looming energy crisis.”

The crisis is spurred by the closure of nuclear and coal-fired power plants and the dominance of natural gas as a fuel for electricity production in New England. Gas-fired plants provided just 12 percent of the region’s electricity in 2000 but provide more than half of it today.

This has environmental benefits, since natural gas is much less polluting than the oil- and coal-fired plants it is mostly replacing, but regulators are trying to dampen the resulting financial cost of keeping the lights on by considering changes to the way that utilities, power plants and transmission companies are paid.

That includes a request to the Federal Electric Regulatory Commission for a tariff under which a charge could be added to electric rates to help pay for more gas pipelines. New Hampshire Public Utilities Commissioner Robert Scott said such a request, which would probably go before FERC this fall, was “unprecedented.”

The director of the Governor’s Energy Office in Maine argued that strong regulatory action was needed because free market solutions weren’t happening, partly because of a mismatch between the financial structure of power plants, which operate on a three- to five-year timeline, and of pipeline firms, which operate on a 15- to 20-year timeline.

“If there is a market solution to this, we’d like to know,” said Patrick Woodcock, who works for Maine Gov. Paul LePage, often considered the most pro-business governor in the region. “We can’t let New England be an economy that only operates nine months of the year.”

Merely building pipelines won’t be the whole solution, however, because power plant operators make the business choice of using the cheapest fuel at any given time, and in the midst of a cold winter in New England, this is often oil, leaving gas pipelines potentially under used.

Notably, Spectra Energy ramped back its Algonquin Incremental Market pipeline expansion in southern New England from 550 million cubic feet of gas per day to 342 million, because it couldn’t get enough electricity generators to sign long-term contracts.

ISO New England, which oversees the power grid, believes the region will see more “dual-fuel” power plants, which can switch from natural gas to oil and back as needed, despite environmental efforts to phase out oil-burning plants.

This is one of the concerns expressed by opponents of the Northeast Expansion pipeline being considered across northern Massachusetts, with a spur through Hollis to a Liberty Utilities facility on Route 101A in Nashua. Pipeline opponents argue that because the gas shortfall occurs only for a few weeks during the winter, burying a multi-billion-dollar pipeline is excessive. They fear its main purpose would be to allow export of natural gas, providing no benefit to the communities torn up by construction.

As a sign of how contentious and difficult the issue of gas-fired electricity has become, the three-hour meeting almost never mentioned Northern Pass. That proposal to bring hydropower down from Quebec via large transmission towers in New Hampshire has dominated energy discussions in the state for years.

The six New England governors have established a cooperative regional initiative designed to expand energy infrastructure – notably meaning gas pipelines and long-distance power lines – in New England. Its progress is being followed on a website called NESCOE, or New England State Committee on Electricity, at www.nescoe.com.

David Brooks can be reached at 594-6531 or dbrooks@nashua
telegraph.com. Also, folow Brooks on Twitter (@GraniteGeek).