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Maine regulators asked to decide whether to charge electricity ratepayers for natural gas expansion

By: Darren Fishell |

The Tennessee Gas Pipeline Co. has asked Maine regulators to make up their minds by the end of November about charging electricity ratepayers a new fee to pay for new natural gas capacity.

The company, owned by Houston-based energy company Kinder Morgan, on Thursday submitted to the Maine Public Utilities Commission a proposal outlining an offer for the state to buy capacity on its planned pipeline expansion through Pennsylvania, New York, Massachusetts, New Hampshire and Maine.

The PUC is considering whether and to what extent it should use authority granted by the Legislature to purchase up to $1.5 billion in pipeline capacity over 20 years. The sweeping omnibus energy bill passed last year allows the state to commit to buy up to 200 million cubic feet of natural gas capacity per day, spending up to $75 million annually to do so.

The proposal to state regulators comes after another Houston-based firm, Spectra Energy, announced an investment partnership on a $3 billion pipeline expansion project with Northeast Utilities, the region’s largest electric utility.

Kinder Morgan and Spectra are seeking to sign up a mix of local gas distribution companies and both likely will seek to have the state commit to capacity to support pipeline expansion plans. Tennessee said in a statement Thursday that it has early agreements with local distribution companies to provide 500 million cubic feet per day through its Northeast Energy Direct project. Spectra is now seeking agreements with local distribution companies.

Getting those capacity commitments is a necessary step for either project to move on to a filing with the Federal Energy Regulatory Commission, which would review and have the final word on a proposal from either company. Both plans have been proposed as a way to reduce the difference in natural gas prices between the Northeast and parts of the country that have greater pipeline capacity or more direct access to relatively new deposits of natural gas in Pennsylvania, New York and North Dakota.

The proposal from Tennessee Gas is the first to be laid at the feet of the Maine PUC. It offers to the state to purchase or cause to be purchased up to 200 million cubic feet of natural gas capacity per year, on undisclosed terms (the public overview of the specific proposal is entirely redacted).

Tony Buxton, a Portland attorney representing Kinder Morgan and the Industrial Energy Consumers Group, said that the Maine regulators are further along in considering a tariff on ratepayers to support natural gas expansion than other states.

“I called [Maine House Minority Leader Ken] Fredette and [Rep. Barry] Hobbins and [Sen. John] Cleveland and congratulated them, because Maine is driving this whole thing and influencing it dramatically because of the statute that they passed,” Buxton said of the regional effort.

Massachusetts last month backed out of a regional group considering a tariff organized through the regional power grid operator to support pipeline expansion. Buxton said that Massachusetts’ decision to halt its participation in the New England States Committee on Electricity delays the regional effort, but he thinks that it will move forward.

The Conservation Law Foundation, a leading critic of the NESCOE process, has raised concerns about Maine making early commitments to buy natural gas capacity before other states in the region determine if they will take a similar approach. The organization also has raised concerns about public access to details of talks at NESCOE and urged that the states give greater consideration to alternatives for addressing the region’s power needs, as Massachusetts is doing.

Shortages of natural gas during the cold snap last winter prompted concern from the region’s electric grid operator, ISO New England, because natural gas powers more than half of New England’s power plants. As home heating users get first dibs on natural gas coming to the region, high heating demand last winter pinched the amount of gas available for electricity generation, causing wholesale power prices to spike.

The day-ahead market for wholesale power in the region is set by the price of the most expensive fuel to fill out the projected power need for the next day.

The Tennessee Gas proposal would involve building out about 418 miles of new pipeline and expanding its existing pipeline that runs from New England to the Gulf of Mexico.

The Spectra proposal would expand its existing Algonquin and Maritimes and Northeast pipelines. Both companies have identified 2018 as a possible date by which gas could start flowing from those pipelines to customers.

Spectra has a separate proposal to allow two-way flow on its Maritimes and Northeast Pipeline that a company official said also could begin providing additional capacity if purchased by the Maine PUC as early as 2017.

PUC staff is scheduled to report Oct. 1 on whether and to what extent the three-member commission should use its authority to assess a tariff on electricity ratepayers to pay for new pipeline capacity.