Amidst the hue and cry in Augusta over hospital debt repayment and Medicaid expansion, it’s easy to overlook the constructive and bipartisan work that’s happening elsewhere.

Under the leadership of Sen. John Cleveland, D-Auburn, and Rep. Barry Hobbins, D-Saco, the Energy Utilities and Technology Committee is quietly developing omnibus energy legislation that combines elements from at least nine distinct bills.

Crafted with the participation of the governor’s office, the Public Utilities Commission, industry, utilities and environmental interests, the bill is ambitious and not without its detractors. Perhaps the most contentious elements involve the state’s potential intervention in the natural gas marketplace.

The increasing utilization of shale gas from deposits in Pennsylvania and beyond represent a potential economic game changer for all of New England, especially uniquely oil-dependent Maine.

With a cheap and abundant supply, natural gas is increasingly New England’s go-to fuel for regional power producers, accounting for 52 percent of all generation. The result is a powerful linkage between cheap natural gas and cheap electricity costs for consumers.

But there’s a problem.

Even as the region becomes increasingly dependent on natural gas, pipeline capacity into New England remains virtually unchanged, resulting in supply shortages and price spikes during periods of peak demand.

In fact, during the week of Jan. 21, as the region experienced below-zero temperatures, New England came close to rolling blackouts because of constrained natural gas supplies. It happened again on February 8. The results were natural gas prices reaching the equivalent of oil’s, with those prices passed on to electric consumers.

There is near-universal agreement that the situation is unsustainable and that new pipeline capacity entering the region will result in cheaper, more predictable generation and lower electricity rates.

But how that capacity gets built and who pays for it is a matter of significant complexity that has stymied private sector development to date.

A pipeline must sell 100 percent of its proposed capacity before it can begin construction, typically requiring contract commitments of up to 20 years in order to ensure recovery of capital costs.

Merchant generators are the logical and fastest growing end-users for any new capacity, but there is little incentive for them to enter into long-term contracts because of their ability to purchase cheap gas on the spot markets most days and their inability to recover fixed contract costs.

Given the 100 percent requirement and absent the generators, what other organizations or entities can enter into long-term contacts with the pipelines to purchase new capacity and facilitate the region’s desperately needed natural gas build-out?

That is the market conundrum that Maine’s omnibus energy bill hopes to address.

As currently conceived, the bill would authorize the Public Utilities Commission — with certain restrictions and after the governor’s approval — to enter into long-term capacity contracts with pipelines up to Maine’s current annual volume and then resell that capacity to facilitate reduced electricity costs.

Admittedly, this seems like a dramatic and unprecedented market intervention, putting the state squarely in the natural gas business by making long-term market bets, picking winners and losers, and reselling capacity. Does the state of Maine really believe that it understands the marketplace better than existing private sector participants?

But, interestingly, the PUC already enjoys similar powers in the electricity marketplace, directing electric utilities to purchase supplies for homes and businesses for the standard offer and to purchase renewable energy even if that supply is above market rates. The resulting costs are passed on to electricity consumers.

The omnibus legislation would authorize similar natural gas capacity purchases, with costs again passed on to Maine’s electric and gas rate payers. But the critical difference, as proponents see it, is that instead of increasing rate payer costs, natural gas capacity purchases are designed to lower electric rates over the long term by lowering generation costs.

What’s more, according to PUC Chairman Tom Welch, the legislation sends a strong market signal to other private and public sector participants that Maine is serious about facilitating new capacity construction; gives Maine a seat at the table as new projects are considered; and potentially positions the state to fully subscribe a pipe and bring a project to reality.

Detractors suggest that new pipeline capacity is already on the drawing board and it’s only a matter of time before it gets built by some combination of private gas companies, generators and industrial users.

Perhaps so, but it’s notable that that hasn’t happened yet. If it does, the PUC’s authority can remain happily unexercised until it eventually sunsets in 2019.

Maine sits at the very end of New England’s increasingly constrained natural gas marketplace. By granting the PUC this authority, Maine gives itself an opportunity to help shape its energy destiny.

Is public intervention ideal? Not at all. But neither is doing nothing.

Michael Cuzzi is a former campaign aide to President Obama, Secretary of State John Kerry and former U.S. Rep. Tom Allen. He manages the Portland office of VOX Global, a strategic communications and public affairs firm. He can be reached at:

[email protected]

Twitter: @CuzziMJ


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