NEW YORK — New England power generators need to lock into more natural gas pipeline capacity to avoid a supply squeeze and record prices seen last winter, Spectra Energy Corp.’s chief executive officer said Wednesday.
Houston-based Spectra, which operates about 22,000 miles of pipelines, said after quarterly earnings issued Wednesday that it committed $2 billion to six pipeline projects during the second quarter.
That includes $500 million to $1 billion to expand existing pipelines in New England with the Atlantic Bridge project, which will bring on 0.1-0.6 billion cubic feet per day of gas or more by November 2017.
The Northeast had the highest gas and power prices in the country in one of the coldest winters on record, as weather-driven demand spikes exacerbated the impact of pipeline constraints in Boston and New York City markets.
In New England, there was a supply squeeze as most of the gas transported to the region already was being used to heat homes and businesses.
“We increasingly see that power generators hold very small, in fact less than 15 percent, of the capacity to deliver on their obligations. That is not an acceptable situation, I think, for regulators and consumers,” Spectra CEO Greg Ebel said in an interview.
“I believe, particularly in New England, you will see the need for power generators to own some amount of capacity. And the way that’s done is to sign up for a certain amount of capacity for a full 365 days, which is no different than local distribution company contracts,” Ebel told Reuters.
He explained that while the distributors may not need all of the capacity all year round, they still lock into the pipeline space to ensure they can meet peak winter demand.
“It’s important that power regulators and generators make sure that they do hold enough capacity to meet their peak obligation, which they are being paid to deliver,” he said.
Spectra is pursuing $35 billion worth of projects it expects to put into service by 2020, including $6 billion committed last year.
Other projects executed in the second quarter were the Nexus pipeline between Ohio, Michigan and Ontario; the expansion of the Dawn to Parkway pipeline in Ontario; two expansions off the Sand Hills line, which carries natural gas liquids from the Permian Basin in New Mexico and Texas and Eagle Ford region in Texas to Gulf Coast markets; and converting a portion of the Ozark pipeline with Magellan Midstream Partners LP into a refined products pipeline.
And while other U.S. gas producers were expanding their links to Mexico, which is in the midst of a landmark energy reform aimed at opening its energy sector to private and foreign investors, Spectra was optimistic about its own chances.
“Our Texas Eastern pipeline goes right down to the Mexican border. I think we are well positioned for the Mexican energy policy changes, should they get fully executed,” Ebel said.