The preliminary conclusions are in on Maine’s proposed gambit to invest ratepayer money on natural gas pipeline expansion—it’s not worth the risk. Those were the findings of the Maine Public Utilities Commission (PUC) staff in its recommendations to the Commission issued last night. The staff report finds that the cost of using ratepayer money to subsidize investment in natural gas pipeline capacity is likely to outweigh any benefits from such unprecedented public funding. The principal reasons for this risk imbalance are the uncertainty associated with the effects of changing gas and electric markets as well as the impacts of a number of natural gas pipeline proposals that are pending and could affect the outcome of any investment by Maine. The PUC staff’s conclusions are correct and reflect the positions taken by CLF in the proceedings that led up to the report, that exposing ratepayers to the risks inherent in energy markets is the wrong approach.
CLF advocated that, rather than seek to intervene in the energy markets, Maine and the other New England states should instead ensure proper management of those markets to create incentives for the private sector to make economic investments in necessary energy infrastructure that are consistent with state law and policy. As noted in the PUC report, private investment in incremental increases in our natural gas pipelines is now emerging as the natural gas market is churning out new privately-financed pipeline proposals, suggesting that public investment is both unnecessary and risky in light of rapidly changing market conditions. Maine should step aside and allow the private markets to do their thing.
For example, Spectra Energy, parent company of Algonquin Gas Transmission (AGT) which owns existing pipeline in southern New England, and Maritimes & Northeast, a Maine pipeline owner, on Monday filed a proposal with the Maine PUC that discloses its intention for a 200,000-300,000 Dth/day expansion of its Algonquin line in 2017 (without the need for any New England state to purchase capacity) and another expansion of that line in 2018 of between 200,000-1,000,000 Dth/day depending upon market interest.
These announcements mean that commitments to build and expand pipeline are being made in the private markets and that public investment is neither necessary nor advisable. The Spectra projects are in addition to its already subscribed 342,000 Dth/day Algonquin Incremental Market (AIM) project and Tennessee Gas Pipeline’s 72,000 Dth/day CT Expansion project, both of which are already undergoing FERC review and are expected to be in-service in 2016 and 2017 respectively. Consequently, New England can expect natural gas pipeline capacity increases over the next several years of 342,000 Dth/day in 2016, 272,000-372,000 Dth/day in 2017 and 200,000-1,000,000 Dth/day in 2018. All told, this could realistically mean that upwards of 800,000 Dth/day of new pipeline capacity, a 25% overall increase, could be in place in New England by 2018, without ratepayers shouldering any of the expansion cost.
So what do these proposed, market-based increases in capacity mean? Well, they have lots of implications, but let me touch upon just a few:
- They would avoid speculative gas subsidies on the backs of Maine and New England ratepayers. Most importantly for purposes of the Maine PUC’s pending decision and any action by the New England states collectively, it means that the private market is working and private investment in natural gas pipeline is occurring such that ratepayers need not bear the cost of a contract for capacity.
- They could allow the focus to remain on clean energy and efficiency. Maine and the other New England states can return their focus to maximizing energy and gas efficiency programs that save ratepayers money and reduce overall energy consumption, pursuing clean energy solutions designed to help the region meet its commitment to reducing greenhouse gas emissions by 80% by 2050 and ensuring that we make the best and most efficient use of existing gas infrastructure.
- They would avoid unpopular and costly pipeline overbuilds. The proposed 800,000 Dth/day of new capacity is entirely comprised of incremental, smaller expansions of existing pipelines all of which would be in-service by 2018. This eliminates the need for the highly controversial, massive, greenfield Kinder Morgan Tennessee Gas Pipeline (TGP) Northeast Direct project, which would over-supply the region with gas by building out new infrastructure for up to 2.2 million Dth/day of capacity, killing the chances that the New England states can achieve their greenhouse gas emission goals and requirements and subjecting us to future costs associated with climate change.
- This would be a win for incrementalism. Properly conditioned, incremental expansion of gas pipeline is far preferable to additions of new, capacious pipelines located in undeveloped areas that are environmentally sensitive. Considering capacity additions in small increments ensures that each increment is fully analyzed and that capacity is added based on need and only after cleaner alternatives have been ruled out. Of course, even incremental expansions would need to be conditioned and designed to reduce greenhouse gas emissions and support the development of more energy efficiency and renewable resources, but they certainly provide a much more efficient route to addressing existing deliverability issues without overbuilding.
The PUC should listen to the implications of these proposed projects and the findings of its own staff and should close the natural gas contract docket and call off its effort to speculate with the public’s money.