A proposal by the Massachusetts Department of Energy Resources to allow the state's electric distribution companies to socialize the cost of committing to long-term natural gas pipeline capacity is ill-conceived and may well be contrary to state law, the president of the New England Power Generators Association said Monday.
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Dan Dolan said in an interview that DOER's proposal, which the Massachusetts Department of Public Utilities is just beginning to review, is based upon what he said is a false premise that new gas pipeline capacity and new generating capacity is not being built.
In fact, Dolan said, two planned pipeline expansion projects -- Spectra Energy's Algonquin Incremental Market project and Kinder Morgan's Connecticut Expansion -- are advancing toward construction, and 1,700 MW of proposed power plants have cleared ISO New England's recent forward capacity auctions.
"And, for next year's auction, more than 16,000 MW of proposed projects have expressed interest" --a clear sign that the existing system is working, he said.
"So, from a policy perspective, what we're strongly urging regulators in Massachusetts -- and in New Hampshire, which is considering a similar proposal-- is to be very cautious in committing public dollars" to costly projects that the private sector may well develop on its own, Dolan said.
The Massachusetts DPU has just begun reviewing DOER's proposal, which would allow EDCs like National Grid and Eversource to enter into long-term commitments for gas pipeline capacity, release that capacity to gas-fired generators on an as-needed basis, and recover any remaining costs from EDCs' ratepayers.
EDCs would need to prove that ratepayers would receive a new benefit from the EDCs' investments -- that is, that the savings associated with having sufficient gas pipeline capacity during winter peak demand periods are "materially higher" than the cost of making the pipeline-capacity investments.
Comments on DOER's proposal must be submitted to the DPU by June 15.
The DOER's proposal closely mirrors a plan proposed in February by National Grid and Eversource, who announced plans to lock in incremental capacity on Spectra Energy's planned Access Northeast gas pipeline project and to provide pipeline capacity to gas-fired generators in the region as they needed it to fuel their units.
Access Northeast would add up to 1 Bcf/d of incremental gas pipeline capacity in New England as soon as late 2018.
Spokesmen for the DOER did not respond to a request for comments about the department's proposal.
The DPU's review of the DOER proposals is expected to last at least several months.