BREWER — Maine’s economy suffers from high energy prices and there have been a number of initiatives to respond to the situation. Three recent efforts – a New England states’ initiative to expand natural gas infrastructure, a southern New England utility-led proposal and Maine’s own omnibus energy law passed by the Legislature last year – attack the problem in somewhat different ways.
Previously, I have expressed concern about Maine “going it alone” in its efforts to expand natural gas pipelines into New England. I believe that it will take more than one state to have a meaningful impact. Indeed, it will take the whole region. Nevertheless, the Maine Public Utilities Commission is considering entering into a so-called energy cost-reduction contract, and that action demands careful scrutiny.
The price of natural gas in New England is substantially higher than what consumers in other parts of the country pay. In large part, that’s because pipelines in southern New England are full. There’s no room in the lines for any more gas. That’s not the case here: Maine has plenty of pipeline capacity.
Further complicating the situation is the recent news from the U.S. Energy Information Administration that natural gas reserves are at “the lowest level in 11 years.” This will, in some way, affect natural gas prices.
The Maine Energy Cost Reduction Act, part of the omnibus energy law, allows the state of Maine – specifically the Public Utilities Commission – to enter into contracts to purchase a total of 200 million cubic feet per day of natural gas, not to exceed $75 million annually. (To put this in perspective, Maine now uses 150 million cubic feet per day.) The cost of these contracts will be borne by Maine’s electric ratepayers.
The Legislature wisely included language in the law that requires the PUC to pursue regional and federal “market and rule changes” that will reduce the price difference for natural gas coming into New England.
The law also requires the PUC to explore opportunities for private companies to expand pipelines. And some modest regulatory changes in Maine could encourage such efforts by our local natural gas companies.
Initiatives proposed by the six New England governors to invest in more pipeline infrastructure would allow Maine’s electric ratepayers to help address what is clearly a regional problem while sharing the risks with ratepayers in other states. That sounds like a better deal than potentially saddling only Maine’s ratepayers with future costs that will yield many more benefits for our neighbors in Massachusetts and Connecticut than for us.
Already, three large utility companies based in southern New England have proposed a plan “that would enable the delivery of adequate gas supplies” to fuel the region’s electric power plants.
With all these different pieces in play, along with a desire to act quickly, it is critical that the PUC proceed cautiously in determining how to best invest ratepayer dollars in pipeline infrastructure. Should the commissioners decide to move forward, and that appears likely, I urge them to consider a few key points:
n This is uncharted territory. No commission in the country has committed electric ratepayers to own natural gas pipeline capacity.
n There will be a significant cost associated with such a commitment. The commission will be obligating electric ratepayers to a long-term contract that, over time, could cost more than $1 billion.
n The negotiation process for pipeline capacity requires an in-depth understanding of the natural gas market. Neither the PUC nor its staff has ever negotiated an agreement for firm capacity on a natural gas pipeline.
It seems that a reasoned, structured procurement process that considers all options would be the most prudent way to move forward.
At least two major energy companies – experienced players in the natural gas industry – are proposing pipeline expansions in New England. Following signals from private-sector decision-makers and observing regional market participants would make sense and, perhaps, could further diminish the risk to Maine ratepayers. The rigor of private-sector investment may help shape decisions by public officials, especially since some will no longer be around as Maine ratepayers struggle to pay for these decisions.
When entering into long-term contracts for pipeline capacity, the members of the PUC will be exercising powerful discretion over the future of Maine’s electric ratepayers. It will be an expensive and complex endeavor that demands a careful, deliberative process.
Circumventing an open, measurable process for the sake of expedience is fraught with peril that all too often wastes precious time and money. We cannot afford to let that happen.
— Special to the Press Herald