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Eversource asks US President Biden to intervene to avoid New England gas shortage


Limited pipeline capacity, high gas-fired generation

Concerns also due to high LNG prices

  • Author
  • Tom DiChristopher    Corey Paul
  • Editor
  • Aastha Agnihotri
  • Commodity
  • Electric Power LNG Natural Gas Shipping

The top executive of the largest New England utility urged US President Joe Biden to use emergency authority to protect against a potential natural gas shortage in the region this winter.

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The plea by Eversource Energy CEO Joseph Nolan drew attention to concerns about grid reliability and high gas prices in the fuel-constrained Northeast. It came just a week after federal energy regulators cautioned that "fuel availability for power generation is a primary concern" in New England because of the region's dependence on natural gas for producing winter electricity and its limited natural gas transportation infrastructure.

The ISO New England grid operator and the Federal Energy Regulatory Commission "have acknowledged for many months that New England will not have sufficient natural gas to meet power supply needs for the region in the event of a severe cold spell this winter," Nolan wrote in an Oct. 27 letter to the president. "This represents a serious public health and safety threat."

The White House did not immediately respond to an Oct. 31 request for comment.

Winter reliability assessment

The FERC annual winter reliability assessment issued Oct. 20 found that New England's power grid remains particularly vulnerable to severe cold due to the region's limited natural gas pipeline capacity and high levels of gas-fired power generation.

New England residents also rely heavily on natural gas supplies for home heating needs in the winter, creating competition for the tight supplies. Massachusetts was the 11th-largest gas consumer for residential and commercial sector end use in 2020, while Connecticut ranked 25th. New York, the nation's top-consuming state in the residential and commercial categories, has also grappled with supply constraints due to limited pipeline capacity.

Many gas-fired generators in the region have a history of not contracting for long-term firm pipeline capacity, limiting their ability to secure and move gas to their facilities during extreme-cold periods, FERC said. Gas buyers can turn to three active liquefied natural gas import facilities with a combined capacity of about 2.2 Bcf/d, but the governors of six New England states have flagged added winter reliability concerns because of high global LNG prices.

"Generators and other customers without firm pipeline service must compete for the significantly reduced remaining pipeline capacity," FERC said. "Such customers must either pay higher prices for temporary releases of capacity from firm pipeline capacity holders, if available, or purchase natural gas at a premium from marketers."

Natural gas futures prices near Boston for winter 2022-2023 were $23.57/MMBtu, a 38% increase from last winter, FERC staff noted.

FERC also cautioned that beyond New England, the Midcontinent ISO regions, Texas and parts of the Southeast could also struggle with power capacity shortfalls in scenarios similar to the severe winter storm of February 2021.

Options for intervention by White House

Eversource asked the White House to start preparing to use emergency authorities under the Federal Power Act, the Natural Gas Policy Act, the Defense Production Act and the Jones Act to relieve the risk of winter electric reliability.

The 1920 Jones Act requires all goods shipped between two US ports to be carried on ships that are US-built and US-flagged, with majority US owners and crew. The US does not have any LNG tankers that meet the requirements of the Jones Act, and there are no plans to manufacture any, so the law means that New England would need to rely on foreign sources of LNG unless the White House issues a Jones Act waiver.

The US Department of Homeland Security recently approved a temporary Jones Act waiver for LNG shipments to assist Puerto Rico after Hurricane Fiona.

But even US LNG supplies could be costly this winter because of high spot prices amid surging global demand for LNG cargoes following the disruption of Russian gas supplies into Europe.

"Because of the war in Ukraine, imported LNG is not available to the New England region in the volumes necessary to meet this winter's needs without causing further stress on European markets and the American economy," Nolan said. "Additionally, increasing reliance on foreign-sourced natural gas poses a particular national security threat at this time given the war in Ukraine."

FERC Chairman Richard Glick on Oct. 20 described the New England region's reliance on LNG imports as "unsustainable."

"It's just crazy to be so reliant on LNG imports," Glick said.

S&P Global Commodity Insights reporters Corey Paul and Tom DiChristopher produce content for distribution on Capital IQ Pro.