Lawmakers are currently considering an omnibus bill that could give the state new, unprecedented authority within the New England natural gas and electricity markets. The energy bill combines components of 10 other pieces of legislation: It expands the mission of Efficiency Maine Trust and changes how Regional Greenhouse Gas Initiative money is spent. Most controversially, it gives the Maine Public Utilities Commission the authority to both negotiate and approve contracts to purchase a percentage of natural gas pipeline capacity either within or outside Maine. If that section is not substantially rewritten, it should be thrown out.
This is an ambitious bill, and the Joint Standing Committee on Energy, Utilities and Technology will be working during the coming days to refine it and address concerns. Committee members must analyze it carefully because, while this bill has some good elements supported by both parties, such as its funding of energy conservation programs and its directive to Efficiency Maine to focus more on fuel efficiency measures, one component in particular needs attention.
Committee members must fully understand what they are getting electricity ratepayers into by giving the state the authority to buy natural gas pipeline space and essentially contribute to the socialization of the energy market. We question whether the state has the expertise to determine whether contracting to buy pipeline capacity across New England will actually contribute to a meaningful expansion of natural gas infrastructure that will ease current constraints on interstate pipelines enough to reduce costs for Maine electricity customers — and to reduce costs in a way that offsets the state’s initial investment.
This part of the omnibus bill, which was originally proposed in legislation sponsored by House Minority Leader Ken Fredette, R-Newport, does not set up a system to fully measure the risks and rewards of such a complex figuring. It gives sweeping and stunning authority to the PUC. And it does not install needed safeguards to protect those who would ultimately pay if a pipeline deal failed: the ratepayers.
The problem the bill is trying to fix is a real one: New England has inadequate natural gas infrastructure, which affects the price of electricity. But the solution is not as clear. The New England States Committee on Electricity released a report April 16 detailing some potential solutions to ease the constraints on natural gas infrastructure. One proposed solution, for example, was to revise pricing policy to compensate generators for holding pipeline capacity. If Maine wants to be the only Northeast state to attempt to fix a complicated, regional problem by wielding its borrowing ability in the energy market, then at the very least politicians must ensure independent oversight of the process and protections for ratepayers. Maine does not have a strong record of predicting energy futures.
Proponents of having the state involved in procuring natural gas pipeline capacity — such as the Industrial Energy Consumers’ Group, which represents large electricity users like paper companies and manufacturers — have argued that until states find new ways to get more natural gas into New England, they will continue to pay an extra cost attributable to demand being greater than the supply of gas. There are no natural gas production fields in New England, and pipeline developers, they argue, are not expanding access between those fields and New England fast enough. Indeed, the natural gas industry benefits from the current cost spread. So, proponents argue, if the state has the ability to purchase a percentage of new pipeline capacity, and possibly sell it later, it could spur more pipeline investments.
But there are many risks, and so far the committee has not fully addressed them. Oversight, for example, is essential here, and the bill proposes to rely on the PUC for that purpose. While the PUC is a trusted entity now, there is no way to predict the competence of future commissioners, who are appointed by the governor. Under this bill, the PUC would have immense authority to draft a contract to purchase natural gas pipeline capacity, review and approve the contract, direct utilities to assess ratepayers for the costs of the contract, administer a fund to receive profits generated by the contract and adopt rules to implement the provisions of the omnibus bill. Energy committee members must determine whether this level of power is appropriate.
Because this bill is supported by many special interests and legislative leaders and is tied to other valuable proposals, it stands a chance of passing. If committee members do not have the political will to pull this provision and let regional authorities address pipeline capacity problems, they must do more to mitigate the risk to Maine ratepayers. At the very least they should install a sunset provision, insert a layer of independent oversight and limit the amount the state can borrow to purchase pipeline capacity. Otherwise, what may be intended as a way to ease the state’s electricity costs could actually cause them to increase even more.