April 09, 2020
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Maine regulators support using up to $75M from ratepayers for gas pipeline

A sign marking the location of a natural gas pipeline is seen in Golden, Colorado, Feb. 2, 2015

PORTLAND, Maine — Maine utility regulators advanced a plan Tuesday for electricity customers to pay for expanding Spectra Energy’s Algonquin natural gas pipeline, if other states follow suit.

The Maine Public Utilities commission voted unanimously that the state should use its authority to enter a contract with a pipeline operator. Two voted in favor of negotiating with Houston-based pipeline operator Spectra for capacity on its Access Northeast project.

The project would expand capacity on Spectra’s line running from eastern Pennsylvania to Massachusetts, where it connects with the Maritimes & Northeast Pipeline, which passes through Maine to the Canadian Maritimes.

The commission’s decision comes after more than two years of study and in opposition to a staff recommendation that Commissioner Bruce Williamson criticized Tuesday as “naive.”

While the decision confirms Maine’s willingness to have ratepayers backstop new gas capacity, it hardly puts a cap on the process that now depends on other states doing the same.

“There are so many more things that need to happen before a shovel gets turned or more gas begins to flow, and most of those things are outside of Maine’s control,” Tim Schneider, Maine’s public advocate, said.

The commission vote requires that Massachusetts, Rhode Island, Connecticut and New Hampshire agree to similar deals.

Mark Vannoy, chairman of the Maine Public Utilities Commission, said in a telephone interview that he expects similar processes in other states to take between a year and 18 months to catch up to Maine.

Meanwhile, the decision allows Maine electricity providers and Spectra to begin negotiations, according to a wide-ranging 2013 energy law. The law gave the commission authority to have utilities enter gas supply contracts worth up to $75 million per year for up to 20 years. The utilities could then recover up to $1.5 billion from ratepayers.

That law came in response to a spike in wholesale power prices during the winters of 2012-2013 and 2013-2014, as cold weather drove heating demand. In times of high heating demand, that can cut into gas capacity available to generate power.

That’s important because of how the region’s market rules work and because natural gas generates a large part of the region’s power. The final and highest bid to provide the next day’s power supply sets the price for all generators who place a bid. As natural gas makes up more of the regional power supply, it more often sets that price.

“If you have a spike in gas prices that affects a gas generator on the margin, then they set the price for that interval that gets multiplied across all the generators,” Vannoy said.

At this point, it’s not clear how much of that authority the commission has approved exercising, as the bids from Spectra and other suppliers are still confidential.

“Spectra is going to want to maintain their confidentiality until they can fill out their other contracts,” Vannoy said. “When they file with [the Federal Energy Regulatory Commission], I would hope at that point we can spell out for consumers what the costs are.”

The law also requires gubernatorial approval. Vannoy said the negotiated agreement will likely go to the governor’s office for approval before coming back to the commission.

Before his re-election, Gov. Paul LePage told the Bangor Daily News that he supported Spectra’s proposal, advocating then that the state put roughly $17 million of its annual contracting authority toward that project.

Patrick Woodcock, director of the governor’s energy office, said that without project details, which are still confidential, he could not comment on a specific project.

“The governor has supported all of the projects in the permitting process but has not engaged on any specific contract,” Woodcock wrote.

Vannoy and Williamson both supported ordering utilities to negotiate with Spectra.

Commissioner Carlisle McLean dissented in part, preferring a proposal from the Portland Natural Gas Transmission System, based in part on her determination that the Spectra project’s use of gas storage could expose it to legal challenges.

Despite that, she said she agreed that a contract with Spectra meets the cost-benefit requirements in state law. Vannoy and Williamson said the same of the PNGTS proposal, agreeing to keep that option open if the Spectra project falls apart.

Both projects aim to bring natural gas from the Marcellus shale region in Pennsylvania and New York east but using different pipeline systems. Spectra’s project is fed from lines to the southwest of Maine, while the PNGTS line comes from the northwest.

A third project, proposed by Kinder Morgan, sought support from Maine ratepayers but was canceled in April, it said, because too few local gas distribution companies signed on.

The public advocate’s office also argued for the PNGTS project but agreed with the commission’s general conclusion that Maine ratepayers would benefit from such a contract as long as other states sign on, too.

Commission staff, however, recommended against contracting with any pipeline company, writing in a June report that “the benefits of being the ‘first mover’ in the region in terms of committing to [long-term natural gas capacity contracts] are not obvious.”

Williamson sharply criticized the examiner’s recommendation in the case, saying “the press enjoyed the examiner’s report more than I did” and calling it “naive” for suggesting that rule changes in the regional power market could help address natural gas capacity issues.

Rule changes, he said, are imperfect for achieving a specific result and noted it could take years before that result is clear.

“Unintended consequences have occurred, so rather than be naive as the examiner’s report suggests we should be, I would say that prudence and a thought for the welfare of businesses and consumers in Maine dictates otherwise,” Williamson said.

Vannoy said he felt PUC staff played an appropriate role in the case, taking a strong stance on the topic.

“That’s the adversarial part of the process, and that lays out the facts so the commissioners can make a final decision,” Vannoy said.

That regional effort will also have to clear a challenge from two companies with nuclear and oil generators in New England.

NextEra Energy Resources and the PSEG Cos. filed a complaint to the Federal Energy Regulatory Commission that such contracts in Maine and potentially other states are part of a “state pipeline scheme” to unfairly subsidize natural gas generators, arguing also that such contracts fall within FERC’s jurisdiction.

Vannoy said he thinks “there’s a good argument to be made” that such contracts don’t count as setting wholesale power rates, which falls under FERC jurisdiction, adding that such a finding would have wider consequences for Maine’s energy efficiency funding that helps reduce power demand and, therefore, wholesale prices.

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