New England’s Drive to Boost Gas Supplies Hits Roadblock

For several years, states in the northeastern U.S. have been in the midst of a major shift away from coal and nuclear power toward natural gas. As aging coal plants shut down on environmental concerns, and several of the region's nuclear plants have been prematurely retired or faced with challenging economics, developers of natural gas-fired plants have rushed into the void.

That's made New England, which once enjoyed a diverse mix of nuclear and coal-, gas-, and oil-fired power, increasingly dependent on the handful of pipelines that bring gas into the area. Those pipelines have become heavily constrained during periods of peak demand, in a few cases forcing gas-fired plants to shut down for lack of fuel.

New England Pipelines Problematic

One obvious solution is building more gas pipelines, but making that happen has proven challenging. Spectra Energy's Algonquin Incremental Market project, which comes online in December, will provide some relief, but long-term projections indicate that more capacity will be needed.

The problem for New England is who pays for the expanded capacity. Traditionally, pipelines are paid for by local gas distribution companies that purchase firm service, while power plant owners, whose needs are more difficult to forecast, purchase less-expensive flexible service. Under Federal Energy Regulatory Commission rules, gas pipelines cannot be built until their capacity is fully contracted.

But it's the gas plant owners who need the extra gas. That dilemma led to an innovative but controversial initiative under which several of New England's electric utilities would support pipeline construction by passing those costs on to their ratepayers. Under the plan National Grid and Eversource Energy would work together to fund Spectra's Access Northeast pipeline project. Not surprisingly, the idea drew intense opposition, and this past August, the Massachusetts Supreme Judicial Court shot down the idea, ruling that there was no legal basis for the approach under state law. A similar administrative decision in New Hampshire also cast doubt on the plan.

Connecticut Won't Do It Alone

Things looked to be different in Connecticut, where state law allows such financing schemes provided the benefit to ratepayers outweighs the costs. But on October 27, state officials canceled a request for proposals for new gas pipelines, concluding that Connecticut's ratepayers should not shoulder the entire expense after Massachusetts and New Hampshire backed out.

State officials expressed frustration with the situation, recognizing that additional capacity was needed but saying it would be unfair for Connecticut to go it alone.

Dennis Schain, a spokesman for the Department of Energy and Environmental Protection (DEEP), said, "While the evaluation of bids was underway at DEEP, administrative decisions and a court ruling in other New England states limited the likelihood that the costs of projects would be shared among a substantial portion of the region's ratepayers."

ISO New England, which oversees the region's grid, says it has sufficient gas capacity in the near term after a number of changes were made in its auction system following problems in 2013 and 2014. The independent system operator now closely monitors the local gas market, estimating how much will be needed so it can anticipate possible constraints. New demand response programs have provided some relief.

Still, with the Pilgrim nuclear plant retiring in 2019 and several major combined cycle plants (CCPPs) under construction or development, regional gas demand is poised to continue growing. Late last month, Dallas-based Panda Power Funds, which has built a fleet of modern CCPPs across the U.S. over the past several years, announced plans for a 550-MW project in New Milford, Conn.

Analysts say that New England's gas demand will exceed the region's import capacity at current rates of growth. Spectra and Eversource say they remain committed to the Access Northeast project, though how it will be funded now is unclear.

-Thomas W. Overton, JD is a POWER associate editor (@thomas_overton, @POWERmagazine).

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