March 22, 2019
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Winter energy crisis averted, but long-term strategy still needed

Ashley L. Conti | BDN
Ashley L. Conti | BDN
Gas prices at C.N. Brown's gas station in Pittsfield are seen Tuesday for $1.94 per gallon. Gas prices continued to fall another 8.5 cents per gallon in the last week in Maine.

Mainers can be forgiven for thinking that the energy crisis predicted for this winter was overblown. Instead of a double-digit increase in electricity prices, which experts warned was forthcoming, the Public Utilities Commission last week approved double-digit decreases for standard offer customers of Emera and Central Maine Power Co.

Gasoline prices are at their lowest levels since early 2009, and they’re continuing to drop. Heating oil and natural gas have also declined, saving customers in New England billions of dollars on heating costs. Heating oil prices are at their lowest level in six years, saving Maine consumers $300 million, according to the Associated Press.

This unexpected good news does not, however, negate the need for Maine to continue to pursue additional — and diverse — sources of energy while also incentivizing conservation.

So, what happened? The unexpected drops show how difficult it is to predict the future of energy markets, which are affected by weather, international politics, production, natural disasters and other unforeseen events.

About 443,000 residential customers of CMP will pay 6.54 cents per kilowatt hour for 10 months beginning March 1, compared with the current rate of 7.56 cents per kilowatt hour — a drop of more than 13 percent — under rates approved by the Public Utilities Commission last Tuesday. Medium-class users, including small businesses, also will see a decrease of about 17.3 percent.

The next day, the PUC approved similar rate decreases for customers of Emera in the former Bangor Hydro Electric territory.

The reduced rates will be in effect from March through December and thus avoid the peak power months of January and February 2016, when prices for natural gas — the source for nearly half of the region’s electricity — are typically highest.

Mark Vannoy, chairman of the Public Utilities Commission, said last Tuesday that the state bid power supply prices for a 10-month period, rather than a full year, to begin a shift from the spring to the fall for future bids covering the winter months. The thinking is that moving the bidding window closer to the peak will reduce guesswork as to what prices will be during the winter, when prices are at their highest.

In Massachusetts, state regulators in September approved a 37 percent rate increase for electric customers of National Grid for six months beginning Nov. 1, believing that generation costs would spike this winter.

A major reason for the unexpected drop in electricity prices is the rapid decline in oil prices. In New England, the majority of electricity is generated by natural gas, which has also dropped in price. When demand rises and natural gas supplies are not sufficient to meet demand, oil-fired power plants are brought online and plants with dual-fuel boilers switch to oil. Oil has, for many years, been an expensive fuel source. Not now.

In the long term, however, the region’s electricity picture is likely to change. The region’s oil-fired plants, including one in Yarmouth, are old and will eventually be retired. Nuclear power plants are also being taken off line; Vermont Yankee stopped generating power last month, and the financial viability of other nuclear plants in New England is less than certain. Coal-fired plants are being retired. That leaves plants fired by natural gas and other sources to pick up the demand.

Natural gas accounted for 46 percent of the region’s electricity in 2013, up from 15 percent in 2000, according to ISO New England, the organization that oversees the New England power grid. Especially in Maine, natural gas pipeline capacity is limited, so when demand increases for heating during the winter months, supply falls short and drives up prices.

A regional approach to natural gas distribution is necessary. Late last year, the six New England governors agreed to jointly ask ISO-New England 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. Massachusetts later wavered, but that state’s new Republican governor, Charlie Baker, has said he is interested in a regional approach to increase capacity.

Not having an energy crisis this winter gives policymakers needed time to develop solutions that will benefit Maine residents and the environment without unwarranted financial risk.

 



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