AUGUSTA, Maine — This past summer, Gov. Paul LePage addressed lawmakers to evaluate the hits and misses of the legislative session.
A significant failure, in the governor’s opinion, was the Legislature’s inability to lower the state’s energy costs.
At the time, LePage blamed lawmakers for balking at his proposal to scrap a state mandate to increase power derived from renewable energy sources. Lawmakers countered that doing so would jeopardize a forward-thinking energy policy, cost jobs and do little to lower electricity prices.
Now LePage is advancing a policy that lawmakers might be more willing to embrace: the expansion of natural gas.
The administration has indicated that it’s weighing public-private partnerships — that is, taxpayer investment — to entice gas companies into expanding pipelines to serve industrial users. The administration believes the plan could lure manufacturers turned off by the state’s energy prices while eventually providing greater access to more affordable heating fuel for people dependent on high-priced oil.
Republicans and Democrats say the plan could be a big win for Mainers. But they caution against over-promising on natural gas, a finite resource priced by volatile commodity markets.
Pittsfield Rep. Stacey Fitts, the Republican co-chairman of the Legislature’s Energy Committee, said the state should remain wary of swapping dependence on one fossil fuel for dependence on another.
“When you lay out energy policy, you look longer-term,” Fitts said. “I don’t think you can look at it on a day-by-day basis, flavor of the month. When we do that, we get into bad decisions.”
The discovery of abundant domestic reserves and new, if controversial, methods of extraction have held down the price of natural gas.
Between 2000 and 2005, natural gas and oil prices ran parallel. In 2006, the price of oil spiked. Today, oil is nearly three times more expensive per unit than natural gas.
The split has been good for states that use natural gas to heat or cool their homes or industrial facilities. However, oil-dependent Maine remains at a disadvantage. The state’s rural geography has made it less appealing for gas companies to expand infrastructure.
Only recently have gas companies begun entering the state’s southern population centers.
The administration hopes to change that. LePage has established a working group to determine so-called anchor customers, high-energy users that would make infrastructure investment by gas companies profitable.
Paper mills have already been identified. Converting the mills to natural gas, along with other anchor customers like universities, hospitals and state buildings are considered prerequisites to getting natural gas into homes.
“You need a sufficient volume to make [expansion] economically sustainable,” said Ken Fletcher, commissioner of the Office of Energy Independence and Security.
That’s where the state comes in. Fletcher said converting mills from biomass or oil could require public investment in the form of a state-backed loan or access to the low-interest bond market. Without that public investment or guarantee, the economically fragile mills in the state could have a difficult time securing private loans.
Fletcher said the state could also use revolving loans for pipeline expansion. Doing so would allow the state to reinvest tariffs collected on gas use for additional projects.
Proponents note that the state is not new to public-private partnerships for energy projects.
Earlier this year, the Finance Authority of Maine backed a $5.2 million loan to assist Woodland Pulp LLC convert from oil to gas. The state could be asked to invest in larger projects, including an 80-mile proposal advanced by Kennebec Valley Gas Co.
Municipalities also are considering partnerships. Voters in Madison next month will be asked to approve a $72 million bond to fund a pipeline running through 12 communities.
Leveraging public investment has its risks, particularly when a private partner is a paper mill. Fletcher said due diligence is required before putting taxpayers on the hook.
Lawmakers could be asked to consider how deeply the state should get involved when the governor unveils his energy proposal sometime in January.
Gorham Sen. Phil Bartlett, a ranking Democrat on the Energy Committee, said natural gas expansion was a good opportunity. However, he said, the administration should not expect natural gas expansion to yield lower electricity prices.
LePage has often railed against the state’s electricity rate, which at 13.09 cents per kilowatt-hour is about 4 cents above the national average. However, Maine has the second-lowest rate in New England, a region with some of the highest electricity prices in the country.
According to ISO New England, which operates much of the New England power grid, natural gas plants supply more than 60 percent of the region’s electricity and about 42 percent in Maine.
The popularity of natural gas has steadily increased. Ten years ago, oil-fueled generators produced 20 percent of the region’s electricity. It’s now less than 1 percent.
Bartlett and others believe the region’s reliance on natural gas is driving up electricity costs. They say the only way to lower and stabilize prices is to diversify the state’s energy portfolio with renewable sources.
Renewables also face challenges, specifically getting power to the grid. A recent report by ISO New England noted that less than 1 percent of the region’s renewable capacity has been integrated into the power supply.
Still, advocates for renewable energy believe those sources are the only way to lower Maine’s electricity prices.
Jeremy Payne, with the Maine Renewable Energy Association, said the reason some states sport low electricity prices is because they’re sitting on coal, natural gas or oil reserves. Maine, he said, is sitting on different resources: wind, hydropower and biomass.
Payne believes natural gas and fossil fuels aren’t going to leave the marketplace any time soon. However, he and others hope LePage recognizes the value of renewables in the state’s energy policy.
“Lowering electricity costs is a laudable goal,” Payne said. “But we’re never going to get there by standing in the way of renewable energy investment and inflation-proof fuels.”
For now, it appears the administration is weighing all of its energy options.
“The administration’s position is that we really need a diversity of choices,” Fletcher said. “I don’t think there’s any one solution. It’s a combination of solutions.”
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