November 5, 2014
When Don Sage of Concord, N.H., learned his electric bill could rise by as much as $40 a month he got flustered. He and his wife make do on a bit less than $30,000 a year in Social Security payments, and they pay close attention to their electric bills.
“When the invoice comes in the mail to get paid, I have a target amount that we can fluctuate up or down, based on our fixed budget,” Sage says. “They don’t need my permission to hike up their rates, but the fact is we’re the ones that are paying these increases.”
Utilities in New England have announced electricity rates hikes on the order of 30 percent to 50 percent, making prices some of the highest in the history of the continental United States.
For Sage and other consumers, these changes seem to have come out of nowhere, but in reality, they have been a long time coming. Between the years of 2000 and 2013, New England went from getting 15 percent of its energy from natural gas to 46 percent. That’s dozens of power plants getting built.
But the pipelines to supply those power plants? Not so much.
At the same time, with the fracking boom just a few hundred miles west driving down gas prices, more and more homeowners were switching to natural gas for heating.
So now when it gets cold and everyone turns on their heat, the pipelines connecting New England to the Marcellus Shale are maxed out.
Power plant operators are left to bid on the little bit of gas that’s left over for them, and the prices can get out of hand.
“In New England, this winter, based on what’s been recently trading, is likely to have the highest natural gas prices on planet Earth,” says Taff Tschamler, chief operating officer of energy supplier North American Power.
Gas for January delivery is trading at nearly $19 per million BTUs. Gas in Japan, which relies entirely on imported gas and often has the world’s highest prices, is forecast to cost less than $18 this winter.
Big pipelines in New England are on the drawing board, but they won’t be built until 2018 at the earliest — and that’s only if they don’t get swamped by local opposition.
How To Cope
So what’s a region to do? For one, if you import gas and plug it into the pipeline network at a different spot, you can avoid the bottleneck.
Distrigas, New England’s only liquefied natural gas import terminal, is just north of Boston. Tony Scaraggi, the company’s vice president of operations, says even with last year’s frigid winter, New England only hit its maximum pipeline capacity for 40 days.
“That’s equivalent to like, two and a half to three LNG tankers coming in. So you gotta compare that to the cost of a $2 to $3 billion pipeline,” Scaraggi says.
He says burning more expensive foreign natural gas for those 40 days is still cheaper than building an oversized pipeline.
The environmental community is weighing in on the question, too.
Peter Shattuck with Environment Northeast put out a paper arguing the region could save money by using less power.
“If demand for gas remains low, because of things like energy efficiency, distributed generation, renewable heating technologies like heat pumps and biomass, we may not need any infrastructure overall,” Shattuck says.
So while it’s certain that some pipelines will get built, the big question is how much additional capacity, and who will pay.
A plan from the six New England governors to subsidize bigger pipes was tabled recently when Massachusetts announced it wanted to study the question further before committing.
Ultimately, whether electricity prices continue to rise in New England next winter and the winter after that will come down to weather.
“At any rate, what I think we’re hoping for is that the good Lord who protects drunks and the United States will also protect New England,” says Peter Brown, an energy attorney with the law firm Preti Flaherty.
In other words, pray for a warm winter.