As natural gas brings down electricity and heating costs, Maine can’t get enough

A natural gas pipeline runs across the prairie near Sidney, Montana. Maine's natural gas demand is expanding beyond what its pipelines can support.
Kevin G. Hall | MCT
A natural gas pipeline runs across the prairie near Sidney, Montana. Maine's natural gas demand is expanding beyond what its pipelines can support.
Posted Feb. 03, 2013, at 7:55 a.m.

Maine is hungrily eyeing Pennsylvania.

That’s where the natural gas is.

With Maine increasingly reliant on natural gas for lower electricity rates, and with a growing number of homes hooking up to the heating alternative, how and whether to get more natural gas from there to here is a sizable challenge — but a growing number of people are contemplating it.

The nonprofit that runs the New England power grid is exploring incentives to encourage gas-fired power plants to commit to long-term contracts, which could in turn finance more pipelines. The Governor’s Energy Office is looking at ways to facilitate capital investment. The Maine House minority leader has a “bold proposal” — but he’s not sharing it just yet.

“I think we’re at a historic opportunity in Maine right now in terms of the issue of diversification,” said Rep. Ken Fredette, R-Newport, sponsor of “An Act to Facilitate Energy Cost Reduction.”

It’s already a busy gas landscape in Maine: One Boston company announced this week it will start trucking up compressed natural gas for big, commercial users. Two natural gas companies are set to start laying lines and to compete for homes and businesses in the Kennebec Valley. The LePage administration is looking at converting the State House and Cross Office Building to natural gas to save $1 million a year.

And for many Mainers, natural gas is keeping the lights on. In 2000, New England got 15 percent of its electricity by burning natural gas, according to ISO New England. Now that number is over 50 percent.

In Central Maine Power territory, the price of electricity through the standard offer is going down, again, on March 1. Officials credit natural gas.

And they’d like more of it. Now.

“We have this Marcellus Shale location down in Pennsylvania, one of the largest natural gas reservoirs in the country,” Fredette said. “The problem is, ‘How do you get it from there to here?’ Quite frankly, the other side of the question is, ‘What if we don’t?’ What if cheap natural gas gets to location X but not to Maine?”

Market forces

Three natural gas companies currently operate in the state: Bangor Gas serves five towns around Bangor, while Maine Natural Gas serves 10 towns from Bath to Augusta. Each has 2,000 to 3,000 customers, said Tom Welch, chairman of the Maine Public Utilities Commission.

The third, Unitil, is by far the oldest and largest. It has roughly 25,000 customers in 22 cities and towns, including Portland and Lewiston and Auburn.

“They’ve been in business in some form or another since they were manufacturing gas in the Portland area back before the turn of the 20th century,” said Public Advocate Richard Davies. “Some of their system, they discovered when they were doing some [recent] improvements on it, some of the pipes they were using were hollowed-out logs.”

In January, the PUC approved newcomer Summit Natural Gas of Maine’s request for a pipeline in the Kennebec Valley, where Maine Natural Gas also is laying pipe to expand service.

Even though Maine’s residential natural gas prices are the 11th highest in the country, it’s still between 40 and 60 percent cheaper to heat with natural gas versus heating oil, Davies said.

But because of Maine’s makeup — rural, spread out — only 5 percent do, a figure dwarfed by the rest of New England. According to the Northeast Gas Association, that number is 20 percent in New Hampshire, 32 percent in Connecticut and 49 percent in Massachusetts.

It’s a different story when it comes to making electricity.

For the past decade, electricity producers in the region have used increasingly less oil and more natural gas, until now about 52 percent of New England’s power is derived from the burning of natural gas. That fuel used to be priced in line with oil, CMP spokesman John Carroll said, until about 2009, when it went its own way. Oil has stayed up; natural gas has come down.

Welch estimated Maine consumers paid $200 million less for electricity in 2012 than they did three years before.

On March 1, the price of the standard offer residential electricity rate in CMP territory will drop for the third year in a row, from 7.4 cents to 6.8 cents per kilowatt-hour. The average home will save $3 a month.

“I would say almost 100 percent of that is attributable to the fall in natural gas prices,” Welch said. “Back in 2008, we were more than 40 percent higher than the national average [for electric rates]. Now, we’re less than 20 percent above the national average.”

Maine, with five gas-fired power plants, is tapped into the ISO New England grid with 8,000 miles of high-voltage transmission lines and more than 350 generators. Since the 1990s, the state has had two major pipelines: the Maritimes & Northeast Pipeline, bringing natural gas from eastern Canada, and the Portland Natural Gas Transmission System (PNGT), coming from western Canada.

The concern now, in some quarters: That’s not enough, and not just for Maine, but for all of New England.

“We’re looking at what we’re calling our strategic planning initiative, or challenges to the reliability of the power system, as we move forward, and one of the challenges is our growing natural gas dependency,” said ISO New England spokeswoman Ellen Foley. “One way to help with that challenge is to have more pipeline into New England.”

Much of the natural gas flowing this way now is already contracted for by companies that use it for home heating, she said. They pay a premium for that steady supply; most power generators don’t. For them, it’s a gamble: Without a contract, generators get that remaining gas for less, most of the time. When demand peaks on a bitterly cold day, they’re either out of luck or paying much higher rates.

To smooth out that supply, and electric rates, ISO New England is looking at performance incentives for power generators that could entice them to lock into gas contracts. If they’re willing to lock in, people who build pipelines could be willing to build more.

“We know there’s a possibility that there are some companies out there who would love to have someone come along and say, ‘We’d like to buy a certain percentage of your firm capacity in order to bring gas into the state of Maine or into New England,’” Davies said.

He was part of an informal group that included the PUC, the Governor’s Energy Office, CMP, lawmakers and other interests that met through the fall to talk about natural gas needs, resources and potential.

“We wouldn’t want to be in a situation where we’d have to say to people, ‘Sorry we can’t give you all of the electricity you need or all of the gas that you need,’” Davies said.

He’d like to see gas run to more homes and he’d like to see even lower electricity rates.

Natural gas is a finite resource, but projections are now that Marcellus, a deposit that stretches under Pennsylvania, New York and Virginia, could offer a 100-year supply, according to Welch.

He also supports building more pipelines into New England, but not any particular plan.

What’s here now is full, he said: “There really isn’t enough pipeline capacity coming up from the gas fields to satisfy all the need in New England, or all the desire.”

Gov. Paul LePage has said repeatedly that he wants more natural gas in Maine.

Accomplishing that may start close to home: The State House and Cross Office Building burn 200,000 gallons of heating oil a year at a cost of about $3.7 million, said Patrick Woodcock, director of the Governor’s Energy Office. Converting both to natural gas — a six-figure expense — is projected to save $1 million per year. The state is looking into it.

“It is a transformational event, what’s happened with natural gas reserves in the United States, and it really is an opportunity for Maine’s manufacturing sector as well as our long-term challenge with heating costs,” Woodcock said. “Unfortunately, we’re an outlier in the country in terms of residential energy costs and that has to be addressed for Maine’s economy.”

Interest around New England

Interstate pipelines are expensive ventures, at a cost of at least $1 million per mile, said Tom Kiley, president and CEO of the Northeast Gas Association.

“These pipelines are long, they’re big, there’s a lot of cost associated with that,” he said. “We’re talking in the hundreds of millions of dollars.”

He has heard Tennessee Gas and Spectra Energy talk about expanding into the region. There are also other means, besides new pipeline, of getting more gas here: Reverse the flow on some sections of pipe and send the gas from Marcellus to western New York, through Canada, down to New Hampshire and over to Maine via the PNGT line.

“I’m not saying that’s going to happen, but that’s physically possible,” he said.

Other Northeastern states also are considering whether to court and encourage natural gas.

Connecticut is working on its first Comprehensive Energy Strategy, which calls for, in a draft version, 300,000 more homes heating with natural gas, helping homeowners with the $7,500 conversion cost of moving from oil to gas and $1.4 billion for new gas mains.

In New York, the state Public Service Commission is studying state policies on natural gas use and weighing whether to formally encourage expansion there, saying the savings could be “significant.”

“Let’s face it, government has the ability on local levels to endorse programs, endorse pipelines,” Kiley said. “They can and do make a difference.”

Fredette, the Maine legislator involved in those fall talks, this week was reluctant to release details of his forthcoming bill, saying it was still being tweaked.

“At a fundamental level, it is about how we can facilitate natural gas coming into the New England region so that we can all share in lower costs for electricity,” he said. “It’s a bold proposal to have intervention of the state into the marketplace.”

He has a second bill that would create the Energy Authority of Maine, a body akin to the Maine Turnpike Authority, with oversight of a to-be-crafted 20-year energy plan for the state.

Fredette supports bringing more natural gas to Maine and talking about long-term opportunities with Hydro-Quebec to the north for hydropower.

“We could look back on this 10 or 20 years from now and say Maine had the opportunity to buy into a stable price source for electricity, a stable, secure price for natural gas, and we didn’t do it. And shame on us if that’s the case,” he said.

Sun Journal editor Scott Thistle contributed to this story.

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