Liberty's Pipeline Push Relies on Rapid Expansion
This story starts with with John Ramaska, of Manchester, and any customer like him. A while back, he wanted to switch to heating his house with natural gas.
“My neighbor in back of me right over here has gas, so I’m in between gas and gas. No big deal, this is great!” he says, describing his thinking at the time.
But then he found out the pipe that connected him to the gas main wasn’t up to code, and he’d have to get a new hot water heater, and in the end Ramaska didn’t make the change.
“The long and short of it is that I wanted to do it, I would have spent a little bit of extra money, but it just didn’t rub right because they wanted to do this and do that,” he remembers.
Today, he says at his age, it would take too long to pay back the investment for a new boiler and a new pipe.
That was years ago.
Today, Liberty Utilities is telling regulators it’s getting aggressive about signing up folks like Ramaska. Liberty wants to use a big share of a controversial new natural gas pipeline that has been proposed for Southern New Hampshire.
Liberty says that pipeline – Kinder Morgan’s Northeast Energy Direct or NED – is the cheapest way to aggressively grow its customer base. Opponents of the pipeline say the company is overstating that growth in order to get the pipeline built. In the end it’ll be up to state regulators to sort this one out.
Mercedes or Honda?
Liberty says it has pumped up its sales force from 2 people to 10 in-state staff, and they are out pounding pavement.
"The company is trying to sell us a Mercedes when all we need is a Honda."
“With the 10 personnel in state we are actively going out on the road, actively meeting with engineers, town officials, and developers, looking for projects,” explained William Clark, Liberty’s Business Development Manager, before a hearing of the Public Utilities Commission Tuesday. The commission is weighing the proposed contract between Liberty and the Tennessee Gas Pipeline Corporation, which will operate the NED after Kinder Morgan builds it.
Liberty has 80,000 customers in communities in a strip up the center of the state. It says there are another 14,000 that live next to gas mains that they could sign up, and 80,000 more they could reach if they extended gas mains. So the company says in the future, it’s going to need a lot of space on the NED.
But not everyone buys that.
“The company is trying to sell us a Mercedes when all we need is a Honda,” says Susan Chamberlain, the state’s consumer advocate, “I think their growth projections are too aggressive.”
The problem is, according to Chamberlain, if Liberty buys a huge share in a brand-new pipeline, and then fails to grow its business, its customers will be stuck paying for a big empty pipe.
She says the company hasn’t done enough analysis to compare the cost of signing on to the NED pipeline to other proposals that are floating around.
“There are many different pipeline proposals out there right now, and it’s a moving target,” she says, “We know we’re in a period of transition right now, so we don’t know that it is the least cost means of supplying the customers.”
The communities in Southern New Hampshire that would be bisected by this massive pipeline have hired Massachusetts attorney Richard Kanoff to help make the argument that the contract is too big.
“I think they need far less even than a Honda,” he says.
Conflict of Interest?
Liberty wants to sign up for 114,300 dekatherms per day of pipeline capacity, and currently has 80,000 customers. Compare that to National Grid which has ten times as many customers and is contracting for only 186,000 dekatherms per day.
This contrast has led pipeline opponents to insinuate that there must be some reason that Liberty is buying such a relatively large amount of capacity. They point to the fact that Liberty’s parent company Algonquin Power Company, also called APUC, is an investor in the NED pipeline. They’ve got a 2% share, with an option to buy up to 10% of the project.
Kanoff finds this relationship troubling. “Because APUC is an owner of the NED project and will stand to significantly profit from its success. So whether that’s something that is a cause and effect is something that needs to be explored.”
So a developer – Kinder Morgan – is saying this project is necessary because companies – like Liberty – have signed on asking to ship more gas. But one of the shippers is controlled by a company – APUC – that will profit once the pipeline is built.
To opponents, it just looks bad.
But Liberty says there’s nothing illegal about the relationship, and it doesn’t mean that customers won’t benefit.
Liberty has been considering retiring some fifty-year-old propane and air pumping stations, which provide another 33,000 dekatherms per day. It also wants to replace another contract for 50,000 dekatherms per on another pipeline, the Concord Lateral, which starts in Dracut, Mass.
Liberty’s Vice President Chico DaFonte told regulators at the PUC on Tuesday that this agreement is the chance to get in on the ground floor with a pipeline straight to the Marcellus Shale: one of the richest gas fields in the world.
He called it “an opportunity to go from purchasing gas at one of the highest price-points in North America, which is Dracut, Massachusetts – to the absolute lowest price point in North America, which is something that would be inconceivable just a few years ago.”
So who’s right? Is this an over-sized boondoggle, or a way out of New England’s long energy squeeze?
It’ll be up to state regulators to decide. They have to decide whether to accept a settlement that was reached by Liberty and the PUC’s staff. Liberty is seeking a decision before the end of July.