January 20, 2020
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Shorter approval pipeline, risky subsidies aren’t the key to lower electricity prices

Nick Sambides Jr. | BDN
Nick Sambides Jr. | BDN
These 6-inch-wide natural gas pipes were delivered Wednesday and Thursday, Feb. 27, 2014, to Lincoln as Bangor Gas Co. started preparing to extend a natural gas system to Lincoln Paper and Tissue LLC.

There is no doubt that Maine needs to continue to diversify its energy mix and that natural gas will play a large role in that effort. However, fast-tracking approval of pipelines, which could make it easier for gas companies to take private property, is a risky way to do this. Adding to the risk, the Maine Public Utilities Commission is currently considering charging all the state’s electricity users a surcharge to build more natural gas infrastructure, much of it out of state.

Without guarantees that spending ratepayer money and approving new gas infrastructure projects will lower prices, Maine regulators and lawmakers are wise to look for alternatives and to ensure that Maine does not go it alone. The best solution would be federal policy that incentivized natural gas companies to serve all of the United States before they are permitted to build terminals to export gas to other countries.

Gov. Paul LePage is correct that Maine’s energy prices are higher than the national average, but the state’s electricity rates are the lowest in New England, especially among industrial users, which make up the largest segment of energy consumers. Nearly half of Maine’s electricity generation comes from burning natural gas, with the rest coming from hydroelectric facilities and renewable sources, mainly biomass. The region has high energy prices because it doesn’t have low-cost coal or huge government-funded hydroelectric projects that feed electricity-generating plants in other parts of the country and in Canada.

Late last year, the six New England governors agreed to jointly ask ISO-New England, the manager of the region’s power grid, to begin work that was to lead to a formal request for proposals to increase the flow of natural gas from the Pennsylvania region either with a new pipeline or upgrades to existing infrastructure.

The governors argued that bringing more natural gas to New England and using it to generate electricity would decrease electricity rates for homes and businesses and help the region avoid price spikes, especially during the winter.

The project would be paid for by the states collectively through their tariff contributions to ISO-New England. The costs would be passed on to ratepayers, though the thinking is that all states would eventually see lower electricity rates.

Using electricity ratepayer money to buy capacity on yet-to-be-built pipelines is a subsidy. (Notably, one of LePage’s complaints about wind power is that it is subsidized.) Worse, it is a subsidy — at great ratepayer expense — with no guarantee that Maine will get more natural gas or that electricity rates will decline.

This is likely why Massachusetts Gov. Deval Patrick, a Democrat, withdrew his support for the regional plan this summer. In an August letter to Patrick, Gov. Paul LePage called this a “colossal mistake.”

The governor highlights winter price spikes as a major reason to build additional pipeline capacity. But last winter, there was a major spike in prices for natural gas to generate electricity even in Pennsylvania, home to the Marcellus shale gas that Maine and New England wants more of. So, factors other than the proximity to gas are clearly affecting prices.

Jon Chesto, managing editor of the Boston Business Journal, called the governors’ plan “bold” and noted it had “never really been tried before.” But, he added in an August post, “without Massachusetts involved, it’s almost impossible to pull off.”

The LePage administration is undeterred. Last week, the governor wrote to Democrats Chellie Pingree and Mike Michaud urging them to drop their opposition to a bill that would require quick decisions on natural gas projects.

Under HR 1900, the Federal Energy Regulatory Commission would have 12 months to issue or deny a permit for natural gas pipeline projects. A year is reasonable for small projects. But some projects, especially those that cross state lines and involve numerous regulatory agencies, will take longer. Approval for a pipeline through heavily populated areas, one that traverses hundreds of miles, or travels through sensitive natural areas and waterways, will likely take longer. So will projects that face a lot of opposition. If FERC has only a year to decide, it would be forced to prematurely deny approval for some projects.

The bill also would rush other agencies to approve pipeline projects. It proposes that reviews for water quality, air quality, endangered species, among others conducted by other federal agencies, must be done within 90 days or they will be deemed approved.

Thorough reviews are necessary not just to protect human health and the environment but because FERC pipeline permits grant eminent domain authority to the companies that hold them. That authority should only come after thorough review and ample time for public comment.

Lowering energy prices is necessary but complex work. At minimum, Maine consumers shouldn’t be put at elevated risk in the process.

 



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