PORTLAND, Maine — Three companies have formally offered natural gas pipeline capacity to state regulators, who are considering whether they should charge a new fee to all of Maine’s electricity customers to help pay for projects designed to bring more natural gas into the Northeast.
On Monday, Houston-based Spectra Energy presented a plan for expanding existing pipelines spanning the Northeast, a shot back at the Houston-based Kinder Morgan, which delivered details of its proposal for a new pipeline to regulators last week.
“We wanted the state to understand that we have real tangible proposals for them to consider,” said Greg Crisp, Spectra’s director of business development.
Days before Kinder Morgan sent its plan to the Maine Public Utilities Commission, Spectra had announced Northeast Utilities, the region’s largest electric utility, would be a co-investor in one of the two projects it delivered to Maine regulators Monday. The Portland Natural Gas Transmission System previously submitted a proposal to regulators.
The companies’ proposals aim to address a regional natural gas delivery bottleneck that drives up the cost for the domestically abundant fuel and can lead to spikes in electricity prices during cold snaps, as was the case last winter.
Maine’s role would be to provide the financial commitment for additional capacity, with the idea that allowing for more natural gas to be pumped into New England would help lower energy prices throughout the region.
Maine was to be part of a regional effort to consider a tariff on ratepayers to expand natural gas capacity throughout the region, but Massachusetts’ withdrawal from that compact earlier this year stalled the process and has left Maine as the only state considering such a commitment.
Crisp of Spectra and Tony Buxton, an attorney representing Kinder Morgan, have said Maine deserves praise for taking that step, but Greg Cunningham of the Conservation Law Foundation said he’s concerned it poses undue financial risk for the state.
“It’s a huge risk and one that Maine shouldn’t have to undertake,” Cunningham said. “These market-based incremental projects are coming down the line and they are going to affect price.”
Spectra said in its presentation that neither the Atlantic Bridge or Access Northeast projects would require commitment from Maine to move forward, but investment in capacity from the state could increase the amount of capacity the company ultimately builds out.
The companies are competing, to some degree, for the limited resources of Maine’s Public Utilities Commission, which can commit to buy up to 200 million cubic feet of natural gas per day, spending up to $75 million per year to do so. State regulators could divide their commitment to that capacity among various companies.
Separately, the companies are pursuing contracts with local distributors of natural gas. Those contracts are required before either company can submit a plan to federal regulators. Those regulators require proof of commitments to natural gas capacity before a project can move forward.
The plans now before the PUC were presented in advance of a commission staff report due Wednesday on whether Maine energy customers would benefit by fronting the money for more natural gas capacity. Answering that question will depend on a variety of factors and will be the subject of the companies’ entreaties for ratepayer money.
Tennessee Gas Pipeline Co., a Kinder Morgan subsidiary, has argued that its proposal, which involves a new 418-mile pipeline and an expansion of its existing pipeline that runs from New England to the Gulf of Mexico, provides adequate volume from the Marcellus Shale to be “transformative” for Maine. Spectra’s proposal would expand its existing Algonquin and Maritimes & Northeast pipelines through two different projects it said can be scaled depending on demand.
Spectra has also suggested its pipelines connect to 60 percent of the region’s gas-fired power generators, a connection that it said would address regional electricity price spikes from gas shortages.
Both Spectra and Tennessee expect it will be at least three years before gas could start flowing from those pipelines to customers. Spectra has a separate expansion plan now with federal regulators to increase capacity of its pipeline from New York to Boston.
Also on Monday, Gov. Paul LePage sent a letter to the Federal Energy Regulatory Commission Chairman Cheryl LaFleur, asking her to expedite the review of Spectra’s New York-Boston expansion so that it may be in service by 2016. LePage argued that more still needs to be done to approve rapid, incremental expansion of the type Spectra has proposed.
Electricity price increases are expected this winter for residential customers and are already in place for medium-sized customers, a group that includes many businesses in the state. Standard offer prices in January will be 14 cents per kilowatt-hour, compared with 10 cents per kilowatt last year.
Timothy Schneider, Maine’s public advocate, said the same is true across the region, with bids coming in for residential prices in New Hampshire and Massachusetts at steep increases. That’s much of what’s driving the interest in natural gas pipeline expansion, but Schneider said there’s some concern that additional natural gas capacity might not be able to make up for power plants expected to go off-line in the coming years. And price spikes, like many things in Maine, depend in part on the weather.
“It’s a matter of how cold the winter is and how long the cold snaps last,” Schneider said.
That affects power prices because natural gas first goes to fill heating demand, straining the amount available to generate power.
Spectra and Tennessee have pushed for the PUC to make a decision before the end of this year. Following the report due Wednesday, interested parties will have a chance to weigh in on the process the commission sets out, which is planned in two phases.
The first would determine whether to use its power and to what extent to assess a tariff to pay for natural gas capacity and the second would solicit proposals like those the three companies have put before the commission.
Interested parties are expected to have a week from the date of the filing to submit responses to the staff report.