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New England faces uncertain future as states turn away from Access Northeast

New England's energy problems could grow worse as two statesturn their backs on a pipeline project aimed at relieving natural gastransportation constraints on top of other trends in the region's electricity market,according to a new study from an energy industry-backed group.

New England faces greater risk of higher energy costs andgas and power price volatility than a year ago, Daymark Energy Advisors foundin a study released on Oct. 11 by the New England Coalition for AffordableEnergy. In August 2015, Daymark found that failure to expand regional energyinfrastructure, including pipelines, electricity transmission lines andelectricity generation, could lead to $5.4 billion in higher energy costs for theregion by 2020.

"The report — and a recent warning by [ISO New England Inc.] that the electric system maybecome unsustainable during extreme cold weather due to energy supplyconstraints — are stark reminders that events of the past year put the region'seconomy and competitiveness in an increasingly perilous position as we approach2020," coalition spokesman Carl Gustin said in an Oct. 11 statement. "Timelyactions to add new energy infrastructure and address energy marketuncertainties are needed."

Among the troubling trends in the last year, the studyhighlighted state clean energy policies with side effects for wholesaleelectricity markets; electricity market drivers such as the of 's Pilgrim Nuclear PowerStation and the increase in installed costs and fuel prices that push upgeneration costs and limit resources; and gas infrastructure delays andcancellations. In the last category, the study highlighted the Access Northeastgas transportation project as "delayed" after unfavorable decisionshurt its ability to attract electric utilities as customers, and NortheastEnergy Direct as "on hold." The study also noted that New York hastried to stop pipeline projects, and it expected such efforts to continue.

The New England Coalition for Affordable Energy is sponsoredby the oil and gas industry's top lobby group, the American Petroleum Institute.The updated report was sponsored by coalition members Associated Industries ofMassachusetts, Connecticut Business and Industry Association, and Business andIndustry Association of New Hampshire.

On Oct. 6, the New Hampshire Public Utilities Commissionrejected anEversource Energyrequest for a 20-year gas transportation contract with 's on theproposed Access Northeast project. The project, a joint venture of SpectraEnergy, Eversource and NationalGrid plc, would expand the existing Algonquin pipeline and storagesystem by up to 925,000 Dth/d. The New Hampshire order followed an Aug. 17decision by the Massachusetts Supreme Judicial Court that a Massachusetts Department ofPublic Utilities order that had allowed electric distribution companies to buygas transportation capacity and pass on the costs to electric ratepayers.

Robert Rains, an energy analyst with Washington AnalysisLLC, said the decision was another blow against the project.

"The NH PUC rejection underscores what we continue toview as an exceedingly difficult environment for this pipeline proposal absentlegislative intervention, which we view as unlikely," he said in an email.

"A work-aroundthrough [the New England States Committee on Electricity] is unlikely as well,given that organization's limited authority and the by FERC for theAlgonquin system just after the MA [Supreme Judicial Court] decision all seemto suggest this project will not go forward, Rains said.

"Supply constraints and capacity shortages shouldsupport the buildout of hydro projects, however, including , which is still gestatingin New Hampshire," Rains said.

The Daymark report observed that Spectra Energy has said itwill work with New England states on infrastructure, and while it has notannounced new projects, the merger between Spectra Energy and Enbridge "maylead to additional synergies and infrastructure solutions … with Enbridge'ssignificant storage capacity in Canada."