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Connecticut encourages gas pipe project with direct link to generators

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Connecticut encourages gas pipe project with direct link to generators

Connecticutis thinking about making direct connections between natural gas infrastructure andelectric power generators a requirement for any new gas projects supported by state-approvedcontracts, a move that stands to benefit the proposed Access Northeast pipelineproject.

"NewEngland electric customers are subject to both pricing volatility and … reliabilityconcerns," Algonquin Gas TransmissionLLC wrote in comments to Connecticut. "To address these problems,the region must increase and improve natural gas-fired electric generators' directaccess to firm pipeline capacity."

's Algonquin claims"last mile"deliverability to generators as a big benefit to the Access Northeast project. The company agreed Connecticutshould not consider gas projects that cannot deliver gas directly to generators.

In addition,Algonquin said the state should only consider how gas projects improve electricreliability by making transportation and storage capacity available to electricdistribution companies, or EDCs.

"Forinstance," Algonquin wrote, "if a project will make additional naturalgas capacity available to both natural gas distribution companies and EDCs, onlythe volumes of capacity available to the EDCs should be considered in evaluatingthe project. In this way, the department can ensure that electric ratepayers donot pay for increased capacity intended to serve customers of the natural gas distributioncompanies and that it does not overestimate the benefits available to electric ratepayersfrom such a project."

d/b/aEversource Energy agreedwith Algonquin on many points. Eversource Energy is a partner with Algonquin andNational Grid plc in theAccess Northeast project.

"Thedraft RFP includes many attributes that should encourage the submittal of bids forthe development of gas infrastructure that will have the greatest potential to improvereliability and reduce prices in the wholesale electric market," Eversourcesaid, including the requirement that gas resources directly serve generators.

Indirect connections

Algonquinand Eversource submitted their comments to the Connecticut Department of Energyand Environmental Protection, or DEEP, after the department issued a , or RFP,for natural gas pipeline, storage and LNG import infrastructure. The infrastructureis supposed to help alleviate the high energy costs seen by consumers in the stateand the rest of New England in winter. These costs go up quickly when suppliersto gas-fired power generators are bumped off pipelines by gas utilities that needto ramp up gas deliveries to handle increased heating demand, and the generatorsmust then either pay more for gas or switch to expensive alternatives, such as fueloil. All New England states except Vermont are developing programs to encourageelectric distribution companies to buy firm gas transportation capacity on new pipelineprojects. The Connecticut RFP is one such effort, with proposals due by May 6.

In severalplaces in the draft document, the DEEP required that gas projects provide servicedirectly to generators' delivery meters on a "primary firm basis." Thisrequirement has the potential to exclude contracts with LNG import terminals andpipeline projects that rely on another operator's pipeline to get gas to the generators,and some parties warned the DEEP against this requirement.

"Therehas been no factual demonstration that the ongoing energy cost crisis is the resultof the inability of natural gas to reach individual generators," wrote theCoalition to Lower Energy Costs, or CLEC, a group of New England gas consumers,business interests and labor unions. "Indeed, the [ISO New England Inc.] markets operated for over ten yearswith no notable price issues arising from the lack of natural gas pipeline infrastructuredespite the lack of firm transportation to serve the electric generation market.Rather, the recent and ongoing energy cost crisis results directly from the lackof interstate natural gas pipeline infrastructure to bring gas into New Englandfrom producing regions.

"Whileundoubtedly there are individual generators with localized delivery limitations,this is not a widespread problem," CLEC said. "Once in the region, gasis able to move freely to reach a large number of generators in an amount that ismore than sufficient to address market price and reliability concerns."

's is developingthe Northeast Energy Direct project,a pipeline project that has attracted supportfrom gas LDCs in the form of commitments for firm gas transportation contracts,but like other New England projects, it has had more trouble attracting EDCs. Tennesseetold Connecticut that its facilities "directly serve a substantial amount ofgas-fired generation in New England," and they move more than half of all gasused in regional electric generation, "which is delivered to gas-fired generatorsthrough the facilities of downstream pipelines, including Algonquin."

Tennesseedid not specifically address the direct connection issue, but it agreed with CLEC,with whom it shares some legal advisers, that Connecticut should not allow Eversourceto have too much influence on its procurement process.

Anotherpipeline in the region, Portland NaturalGas Transmission System LP, did take issue with the requirement fordirect firm delivery. PNGTS recommended that Connecticut change the RFP languageto allow indirect connections to generators.

"Numerousreferences to primary firm delivery capacity are made throughout the draft RFP document,"PNGTS wrote. "However, no single interstate gas transportation pipeline servesevery generator in the [ISO New England] control area. [Connecticut's] electricitysupply may be derived from any facility in the ISO NE control area, which encompassesall of the New England states."

"If[Connecticut] truly desires primary firm pipeline capacity, it, along with the otherNew England states, must acquire a proportional share of firm delivery capacityto every generating facility in New England," PNGTS said. "Buying capacityon multiple pipelines is necessary and desirable to achieve this result. In orderto most efficiently and reliably achieve these benefits, consideration must be madefor possible backhaul routes that minimize forward haul builds on existing pipelines."

ENGIEGas & LNG LLC, formerly known as GDFSUEZ Gas NA LLC, also expressed concerns over connections to generators.ENGIE, which imports LNG from international sources into the U.S. Northeast throughthe Distrigas of Massachusetts LLCEverett terminal in Greater Boston, has pushed LNG imports over more pipeline asthe answer to New England's energy problems.

"Everynatural gas supply bidder will have to negotiate access to delivery and receiptpoints with at least one of the pipeline companies and those pipeline companiesare expected to be responding bidders to the department's RFP," ENGIE wrote."Bidders like ENGIE should know how their access to delivery and receipt pointsis being evaluated and verified, and have an opportunity to represent themselvesin that process."