As Electricity Prices Rise, Policy Makers Ponder Solutions
Lawmakers, energy developers, and policy wonks descended on downtown Concord today for the annual New Hampshire Energy summit. The event couldn’t come at a more appropriate time, last week New Hampshire electric utilities – with the notable exception of the state’s largest, Public Service of New Hampshire – announced winter rate hikes ranging from twelve to fifty percent.
“In New England this winter, based on what’s been recently trading, is likely to have the highest natural gas prices on planet earth,” Taff Tschamler, Vice President of North American Power, told the assembled crowd. Gas for the winter months is trading at around $20 per million btu, compared to $3 or $4 in other parts of the country, and in New England electricity prices track gas prices closely.
There’s no mystery as to why. Gas pipelines are sized according to how many subscribers sign on to the line before it’s built. Subscribers are mostly of heating utilities – which can predict their customer base fairly accurately – who buy a chunk of the pipeline’s capacity big enough to supply all of their customers on cold winter days. Every day they sell whatever they aren’t using back into the market, which is how electricity plants buy their fuel. On really cold days there isn’t much left over and prices go through the roof.
“What I think we’re hoping for is that the good lord who protects drunks and the United States will also protect New England,” said Peter Brown, an energy attorney with Preti-Flaherty, “We had a very mild summer, so we had a lot of good storage of natural gas. Let’s hope we have a mild winter.”
The soonest that a new pipeline could be operational in the region is the winter of 2016-2017, when Spectra Energy’s Algonquin Incremental Market (AIM) project is slated to come online. That expansion, if approved, would increase the region’s gas capacity by 342 million cubic feet per day, or by around 10 percent.
The non-profit entity that operates the grid and the regional energy markets, , ISO New England, has taken steps to ensure that the lights stay on during the coming winters, while the states wait for more gas pipeline to be built. For the second year in a row, the ISO is encouraging plant operators to buy up reserves of oil and liquefied natural gas to be ready to fire up on cold days. If some of that doesn’t get used, the ISO will reimburse them depending on what’s leftover. If none of the extra fuel is used, which is very unlikely, the cost would be slightly more than $100 million dollars.
Rate Relief In New Hampshire?
“I think you can summarize at least the short-term in New Hampshire in three words: price, price and price,” Republican Senator Jeb Bradley told the New Hampshire Energy Summit.
Bradley gave the Republican perspective on action that is expected from policy makers in Concord in the energy field this session. He suggested that in order to help keep electric rates low, Public Service of New Hampshire should be forced to not be reimbursed for the full cost of an emissions control scrubber that the legislature mandated it build on its largest coal fired power plant, and which saw major cost overruns.
“Let’s remember there was a promise made of $250 million and no more than three tenths of a cent per kilowatt hour, and the actual cost was $422 [million]. We should find a number somewhere in the middle,” said Bradley.
But Bradley also had words of warning regarding another long-simmering dispute now before the PUC– whether PSNH should be forced to sell off the power plants that it still owns as environmentalists and competitors have argued. With the recent rate hikes, Public Service now has the lowest rate of any utility in New Hampshire.
“I think the Public Utilities Commission would be well advised to take a very slow approach, and see how the market in New England unfolds,” he said, “If some of the issues involving ‘price, price, price’ tend to resolve themselves over the next few years, that’s the time to move forward.”
The Democrats on hand focused their attention on building support for a new policy that would encourage saving energy.
“Conservation and energy efficiency are the cleanest and cheapest fuel that we have,” said Governor Maggie Hassan, “so we must come together to develop specific energy efficient targets, and develop a strategy for meeting them. The cheapest unit of energy is the one you don’t have to buy, and it’s helpful to think of energy efficiency as a source of energy itself.”
A study released last year found that New Hampshire could be cost-effectively doing ten-times more energy efficiency than it is now, and suggestions for new energy efficiency policies figure prominently in the state’s new 10-year energy plan.
But Representative David Borden, D-New Castle and chair of the House Science, Technology and Energy Committee, set his sights for the legislative session on a more humble target: increasing the dollars flowing into low-income weatherization programs, and didn’t advocate for a major overhaul of energy efficiency policy.
“I think it would be a big mistake to yank the tree up by the roots,” he told the crowd, “we need to just reform, small changes and so on, and think those through very carefully.”
With Democrats facing a difficult election in November, that may be the best they can hope for.