PUC Staff Gives Nod to Plan for Electricity Customers to Fund Gas Pipelines

Sep 17, 2015

Two electric utilities, Eversource Energy and National Grid, have teamed up with a pipeline developer, Spectra, to propose an upgrade to a natural gas pipeline that passes through Eastern Massachusetts. But before that project can proceed, Eversource needed a question answered from regulators: legally, can an electric utility buy space on a natural gas pipeline?

Earlier this week, the staff of the New Hampshire Public Utilities Commission issued a report which states the state’s electric utilities may already have the legal authority to do so, as long as it is used to lower their customer’s electric rates.

It’s a proposal that is concerning for pipeline opponents.

In the last decade, dozens of natural gas fired power plants have popped up in New England, and coal and oil fired power plants have begun to retire, but natural gas pipelines have not expanded in step with those power plants. New Hampshire regulators are grappling with potential solutions, and electric utilities and pipeline developers both have been pushing to let the utilities buy capacity.

Lauren Collins, spokesperson from Eversource, says ideally gas-fired power plants would have paid for pipeline themselves, but they haven’t and as a result winter electric rates have been crazy in recent years.

“It hasn’t been happening organically and it definitely hasn’t been happening at a rate where we can guarantee our customers some stability,” explains Collins.

The solution the electric utilities have proposed: let us buy space on a pipeline, and then sell it to the power plants, there-by ensuring adequate pipeline space and low prices. And the staff at the PUC seem to believe this could be legal.

“I think that they’re agreeing with us that there needs to be a mechanism in place to make this happen,” says Collins.

The report says as long as the utilities can prove that buying pipeline will actually reduce costs for electricity customers and they won’t be stuck with an unused pipeline years down the road, it should be legal.

Opponents Unconvinced

“Color me skeptical,” says Dan Dolan, president of the industry group that represents existing power plants, the New England Power Generators. He points out the problem with this proposal is if utilities guess wrong, and buy too much space on the pipeline electric ratepayers are stuck with the bill.

“I think it’s enormously difficult to do the type that the staff report assumes can be done,” he explains pointing to the historically volatile energy market, “I simply think it’s a bad deal for consumers and something that could be very costly and very risky.”

You’d be forgiven if you thought this report was exclusively meant to answer this question of whether it is legal for electric utilities to buy space on a natural gas pipeline. It’s titled an “Investigation into Potential Approaches to Mitigate Wholesale Electricity Prices,” but it very quickly became a conversation all about pipelines, much to the dismay of those who don’t want to see a new pipeline built in Southern New Hampshire.

Pat Martin, a pipeline opponent from Rindge was hoping someone would come forward with aggressive energy efficiency plans to reduce demands on the pipelines that already exist. But she was disappointed.

She says building new infrastructure is what utilities are comfortable with. “It’s what they’re used to… it’s how the industry has functioned,” she says.

Martin says utilities have had an open invitation from the PUC on how to restructure their business into something that would get serious about efficiency and other demand-side responses to supply-side problems. They’ve been told “we need you to change, tell us how we can help you change so you that you still make money but we use less energy and we use more renewable energy,” she says, “They have not acted on that, it’s just dead in the water at this point.”

But the pipeline developers and their allies contend that if you look at the trends in the region, it’s undeniable that some new pipeline needs to be built.

Not only are coal and oil plants retiring, but as more renewable energy comes online, the plants that remain need to be able to fire up and shut down very quickly to balance out the wind and the sun… just like gas-fired plants.

Anthony Buxton is with the Coalition to Lower Energy Costs, a pro-development group that gets some of its money from pipeline developer Kinder Morgan. Buxton believes both the Spectra expansion and the Kinder Morgan pipeline should be built

“In an ideal world what we’ll do is we’ll have enough gas-pipeline capacity to fuel our existing gas-fired power plants. And then we’ll keep building renewables in the form of solar, and wind and demand response and efficiency, and we’ll build it and built it and build it over time. And we will eventually come to the point where we minimize the reliance on gas infrastructure.

But before Eversource can go ahead and start asking for competitive bids for pipeline space the Public Utility Commissioners still need to weigh in. And should they agree with their staff the Spectra proposal wouldn’t be the only one bidding, the controversial Kinder Morgan project in Southern New Hampshire likely be in the game too.