The cost of proposals to expand natural gas pipeline capacity to Maine outweigh the benefits, according to a report drafted by a consulting firm hired by the Maine Public Utilities Commission.
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The findings come as New England governors are working to increase gas pipeline capacity to help lower electricity prices, especially in the winter when gas use soars to fuel power plants and heating systems.
In an effort to lower power prices, the Maine Legislature in 2013 authorized the PUC to spend up to $75 million a year to buy up to 200 MMcf/day of gas through an "energy cost reduction contract" (ECRC) that would be paid for by electric ratepayers if it was cost effective.
Through a solicitation process, the PUC received project offers from Spectra Energy, Tennessee Gas Pipeline and Portland Natural Gas Transmission System.
In a redacted report released late last week, Boston-based London Economics International found that the offers do not provide enough cost savings to Maine consumers to make them worthwhile.
"The results of LEI's analysis -- that the benefits the ECRCs [bring] to Maine consumers are too small to exceed costs to Maine -- are driven by the relatively low level of gas and power consumed in Maine as compared to the New England region," the report said.
New England uses about 2,400 MMBtu/day on average, while Maine uses only about 160 MMBtu/d, or about 7% of the region's total, according to the report. Massachusetts uses about half of New England's gas, followed by Connecticut at about 25%.
Similarly, Maine accounted for about 9% of New England's electric use in 2014.
Reflecting the usage rates, if gas prices fell by 25 cents/MMBtu, Maine would see $14.6 million in savings while Massachusetts' costs would fall by $106.7 million, the report said.
Each of the pipeline proposals has "a noticeable but not game-changing effect" on Algonquin city-gate gas prices and the difference in pricing effects between the projects was small, the report said.
CONSULTANT SEES DROP IN POWER PRICES
In its analysis, LEI assumed that Maine's average wholesale prices would fall from about $43/MWh this year to about $36/MWh in 2018, partly because of current projects to expand import pipeline capacity in New England.
After that, prices rise gradually to about $52/MWh in 2029, according to LEI's forecast.
The consulting firm assumed the gas would cost $5.85/MMBtu in 2028. Of the proposals, Spectra Energy's Atlantic Bridge project would have the biggest effect on Algonquin city-gate gas prices by lowering them to $5.54/MMBtu in 2028, which would have the effect of lowering power prices in Maine by $2.44/MWh, it said.
Atlantic Bridge would lower total electric wholesale costs by $86.5 million through 2028, while the other proposals would provide less savings, according to the report. Total savings for electric and gas customers would range from $80 million to $135 million through 2028, it added.
The Conservation Law Foundation said Friday that the report supports the environmental group's opposition to the plan to expand pipeline capacity for Maine via an ECRC contract. "The conclusions drawn by the PUC's expert consultant in their report should prevent Maine from entering into such a contract any time soon," the group said.
In May, Central Maine Power, Maine's largest utility said it planned to participate in one of the proposed projects, known as Access Northeast. The $3 billion Spectra Energy project would expand the Algonquin and Maritimes & Northeast pipeline systems to deliver an additional 1 Bcf/d to New England by November 2018. The project could serve power plants totaling at least 5,000 MW, according to Spectra.