Dave Solomon's Power Plays: PUC staff backs Kinder Morgan's gas pipeline
Energy giant Kinder Morgan just acquired a powerful ally in its efforts to build a controversial new natural gas pipeline through southern New Hampshire.
The staff of the Public Utilities Commission has concluded that Kinder Morgan’s Northeast Energy Direct project is New England’s best bet for lowering electricity prices and improving grid reliability.
The findings in a 48-page report released on Wednesday don’t constitute an endorsement, and state regulators aren’t key players in the pipeline approval process. That’s really going to be up to the Federal Energy Regulatory Commission and the state’s Site Evaluation Committee.
But the unequivocal language by the professionals on the commission, who are generally considered objective third parties, will resonate in the debate.
Historically high electricity prices in New Hampshire during the past two winters triggered the investigation and subsequent report. The commission staff started in June, received 25 sets of comments and analyzed a variety of options to “mitigate wholesale electricity prices.”
They analyzed three different pipeline proposals and a variety of other ideas, ranging from more reliance on liquefied natural gas to doing nothing.
In addition to the NED proposal, the commission staff analyzed the Access Northeast plan proposed by Eversource and its partners; and a proposal by the Portland Natural Gas Transmission System, both of which rely on expanding existing pipelines rather than building new ones.
All three pipeline-based solutions propose to deliver significant new natural gas supplies to New England from the Marcellus Shale formation in northeastern Pennsylvania.
“We view Access Northeast and Northeast Energy Direct as two very cost-effective projects that will moderate future winter electricity prices, through the numbers clearly indicate that NED will provide the greatest benefits to regional electricity customers,” the report states.
It goes on to say, “The New England region as a whole stands to benefit from the NED project in two significant ways: by improving electric grid reliability and lowering gas and electricity prices to consumers.”
Reliability also an issue
The staff report largely ignores the Portland Natural Gas proposal, saying the company declined to provide enough information for a robust analysis. The Access Northeast expansion plan proposed by Eversource, Spectra Energy and National Grid was seen as addressing reliability, but doing less to lower prices.
While claiming that all three pipeline proposals have merit, the report suggests that the $2 billion NED project is in a league of its own.
“As a result of the NED project, (Kinder Morgan subsidiary) Tennessee Gas Pipeline will have the ability to physically deliver into every pipeline system serving New England, as well as to incrementally serve markets along its own pipeline system,” the report states. “In addition, the NED project will play a critical role in serving future new generation expected to be located near the Central Massachusetts hub area.”
Richard Kruse, vice president of regulation for Spectra Energy, said expansion of the existing Algonquin pipeline proposed by Access Northeast is the best bet for controlling prices because so many gas-fueled power plants are already located along the Algonquin line.
“You have to focus on getting the gas to the power plants,” he said. “Having a project that brings gas almost to the power plant, but does not get it to the power plant, won’t provide the price relief you are looking for.”
Katy Eiseman, president of the Pipe Line Awareness Network for the Northeast, said the PUC staff relied heavily on data from the consulting firm ICF International, which did studies for both Kinder Morgan and Access Northeast.
“Other reports, and commonsense, tell us that the so-called capacity constraints the pipeline companies talk about occur only in the winter. The electricity price spikes the PUC seeks to address are strictly a winter phenomenon,” she said. “We do not need a year-round pipeline solution, and all the societal costs that come with it, to address a winter peaking problem.”
Eiseman said increased LNG storage, gas and electric market reforms, and other targeted solutions, are less risky and less costly for ratepayers, landowners and the environment.
But the PUC staff was not keen on the LNG idea, stating, “LNG is a globally-priced commodity, and its availability in New England is dependent on worldwide demand ... There is no guarantee that the market conditions that enticed tankers to New England in the winter of 2014-15 will recur in future winters.”
One thing that everyone seems to agree on is that New England needs more natural gas or liquefied natural gas for electricity generation in the winter months, when most of it is now consumed for heating.
“Almost all of the stakeholders that addressed this issue directly expressed the opinion that the cause of the problem (high prices) can be attributed to a wholesale market imbalance of supply and demand for natural gas,” according to the PUC staff.