January 23, 2020
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Maine utility regulators split on new fee for natural gas pipeline capacity

PORTLAND, Maine — As natural gas industry executives noted that the Northeast received more than half of $19 billion invested nationally in pipeline expansion this year, Maine regulators moved a step closer to authorizing a new fee on electricity customers to help pump more natural gas to the region.

The level of buildout in the last year illustrates one moving target in the case that advanced last week after a 2-1 vote by the Maine Public Utilities Commission.

The commission on Thursday set out some details of how it will consider proposals from companies seeking money from Maine electricity customers to expand certain natural gas pipelines in the interest of reducing supply constraints that affect the price of gas and, as a result, electricity.

The case set in motion by the Legislature’s approval of using up to $1.5 billion of electricity customer money over 20 years for natural gas pipeline expansion elicited sharp disagreement between commissioners, with Commissioner David Littell penning a 37-page dissent last week regarding what he said “could be the largest ratepayer obligation in Maine’s history.”

“No commission or state has ever done a gas pipeline contract such as this, primarily because it is very risky,” Littell wrote, arguing that a cost-benefit assessment depends in part on speculation of natural gas prices 10 to 20 years into the future.

The commission will now move ahead to evaluating the costs and benefits of committing to new pipeline capacity for all classes of customers, soliciting proposals and responses to those proposals over the next six weeks.

The process has so far involved proposals from three companies — the Portland Natural Gas Transmission System, Tennessee Gas and Spectra Energy — which will each make the case that Maine’s investment in their projects will have the best return.

Gov. Paul LePage has previously stated a preference for the state using about $17 million annually of its $75 million authority to support an expansion plan from Spectra, which maintains the Algonquin and Maritimes & Northeast pipelines.

The cost-benefit evaluation comes amid a fundamental disagreement between Littell and the other two commissioners, Tom Welch and Mark Vannoy, about issues such as whether the PUC should consider other ways to address the region’s electricity needs and whether the case is itself deterring private investment in new pipeline capacity.

Welch, the commission’s chairman, and Vannoy voted to move forward with exploration of the fee on ratepayers based on their shared opinion that private investors are not likely to affect the regional natural gas supply soon enough to allay the wintertime spikes in natural gas and electricity.

Littell argued it’s still too early to say, based on the announcement of six expansion proposals that would add about 1.3 million cubic feet of gas per day if all are completed and in service. Another question still unanswered is whether those pipelines would serve local utilities like Bangor Gas or Unitil but also power generators in the region.

The disagreement is one instance of how commissioners decided to deal with an area of energy policy that’s rapidly changing nationally and across the region.

Marty Durbin, president of the American Natural Gas Association, said in a conference call Monday that pipeline companies have invested $19 billion in new projects this year, with about 57 percent of that amount focused on the Northeast and moving natural gas from the Marcellus Shale fields in Pennsylvania and New York.

Durbin said those projects will help more areas gain access to the cheap domestic fossil fuel, but that there are still hurdles to getting new pipeline projects online, an area where he said his group plans to work at the federal level in the coming year.

“Even if you go back five to 10 years, natural gas was not expected to be as large a part of the fuel mix for power generation,” Durbin said. “The rules in place weren’t assuming that you needed to have more infrastructure to bring [in] natural gas.”

One such rule from the Federal Energy Regulatory Commission requires pipeline companies to lock down long-term buyers for any proposed pipelines, terms that Durbin said don’t appeal to power generators that face high prices in the winter, when heating demand uses up most of the gas pumped into the region and their bidding on the last bits lead to price spikes.

That’s a key point of contention in the Maine case, where the majority opinion found that power generators haven’t signed long-term agreements for natural gas capacity because the regional electricity market does not encourage them to and they don’t have the credit to support such agreements.

As with other areas of the majority opinion, Littell argued the commission’s considerations in the first half of the case were too narrow, not considering topics such as alternative supports of natural gas capacity, including loan guarantees for power generators that don’t have the credit to enter long-term deals with pipeline companies.

Durbin did not say whether he thinks public support will be required to expand pipeline capacity in the Northeast, but said that consideration of expanding pipelines across the region is promising.

A New England governors’ collaboration stopped when Massachusetts Gov. Deval Patrick, a Democrat, backed out of the regional effort, but it’s likely to continue under the administration of Massachusetts Gov.-elect Charlie Baker, a Republican.

That process will also be a factor in evaluating the proposals coming to the PUC in the next three weeks, as pipeline companies were asked to submit information on whether their plans would allow for broader regional support.

Parties responding to any of the proposals will have another three weeks to submit testimony, a timeline that puts consideration of the proposals into 2015, after Welch’s departure from the commission at the end of this year. Depending on the speed of the review, the decision could also come after Littell’s term on the board expires in March.

The PUC order directs groups that oppose having Maine enter into an agreement that could tap electricity ratepayers for funding used to expand natural gas pipelines to “present evidence of what specific events or actions we should rely on to address the problem of high prices linked to insufficient pipeline capacity.”

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