Natural Gas Prices Decrease Amid Call for More Pipelines and Infrastructure
September 23, 2015
For the second year in a row, prices are heading down for natural gas. National Grid recently announced a nearly 10 percent price reduction for residential customers in Rhode Island starting Nov. 1. The average savings will amount to about $120 annually. A smaller price reduction of $5-$7 annually is proposed for Massachusetts customers.
National Grid, the gas utility for all of Rhode Island and more than 1 million customers in Massachusetts, gave two reasons for the price cut: an expected drop in the cost of natural gas, and a refund for the difference it paid for gas in the prior year and what customers were billed. As is its policy, National Grid buys natural gas for its customers and passes through those costs. It sets prices annually, but can request to make price adjustments with state regulators if prices move more than 5 percent up or down.
In a Sept. 9 statement, National Grid also stressed the need for bringing more natural gas into the region to avoid seasonal spikes in demand, in January and February.
“Domestic natural gas is essential to providing the mix of energy sources that is essential to our region’s future growth and prosperity,” said Tim Horan, president of National Grid in Rhode Island.
Natural gas powers nearly all of Rhode Island’s electric power plants, and 59 percent of electricity in Massachusetts. Despite the price dip, National Grid only expects demand to increase.
“The region’s pipeline constraints limit the amount of natural gas available for electricity generation, which can lead to price spikes during the coldest days of the year. Those spikes, in turn, affect what customers pay for electricity,” according to the Sept. 9 statement.
To meet that demand, Rhode Island announced plans to build a new natural-gas power plant, in Burrillville. National Grid also is proposing a new facility for the Providence waterfront that converts natural gas to liquefied natural gas. Several pipeline expansion projects are underway across southern New England and more are proposed. National Grid and all six New England governors support the projects.
According to ISO New England, the entity that operates the regional power system, new solar installations and growth in energy-efficiency programs are expected to keep energy demand flat in the region and even decline in Rhode Island, Vermont and Maine in the years ahead.
Several energy experts are challenging the idea that more pipelines are necessary. In an Aug. 16 Boston Globe opinion piece, former Massachusetts Department of Public Utilities chairwoman Ann Berwick argued that increasing the volume of natural gas in the region is not the solution to high energy prices.
Berwick noted that natural gas prices climbed last winter in Pennsylvania despite sitting on the largest source of natural gas in the eastern United States, the Marcellus shale field.
“If Pennsylvania isn’t immune to gas price volatility, it’s worth asking whether New England can get better results by increasing supply,” Berwick wrote.
Berwick also noted that utilities argue for new infrastructure because it makes more money than energy conservation and efficiency.
Expanded pipeline capacity she wrote would “exacerbate our dependence on a single fossil fuel with a history of price volatility, bias our future energy use towards a fossil fuel that is far from clean, and increase our reliance on a fuel that depends on fracking.”
Berwick also praised Massachusetts Attorney General Maura Healey for commencing a study of the region’s electric supply by looking at what role renewables can play in meeting energy demand and how President Obama’s clean energy plan fits into a local energy plan.
After last year’s harsh winter, Christophe Courchesne, who at the time was with the Conservation Law Foundation (CLF) and is now chief of the Environmental Protection Division for the Massachusetts AG’s office, researched the demand/capacity paradigm. He found that despite record cold, snowfall and subsequent historic demand for natural gas and no new upgrades in infrastructure, power plants had no capacity issues and thus peak prices were lower than anticipated.
The main reasons were the increase in liquefied natural gas reserves in the region and lower oil prices, which allowed oil and coal plants to help meet power demands.
“Despite dire predictions and some of the worst winter weather on record, there wasn’t a crisis,” Courchesne wrote. “Modest market shifts made a huge difference, driving down prices, assuring the lights stayed on, and calling into question the wisdom of the region making big new bets on gas pipelines and transmission infrastructure.”
Proponents of pipeline expansion have argued that older coal, oil and nuclear plants are going offline and new, cleaner burning natural gas plants will fill the energy void. But Caitlin Peale Sloan, a staff attorney in CLF’s Boston office, said many of these power plants aren’t supplying much and don’t warrant replacing.
“We’re are already way over invested in natural gas in terms of energy, and we just can’t put more of our economy and our future into natural gas,” she said. “We should be investing our technology where the fuel is free like wind and solar energy.”
On Sept. 17, CLF declared it was appealing the approval of contracts between three gas distribution companies — Boston Gas Co., Berkshire Gas and the Bay State Gas Co. — and pipeline owner and developer Kinder Mogran. The contracts facilitate the building of new pipelines and other projects that increase the volume of natural gas. CLF also challenges the fossil fuel companies for failing to follow the greenhouse-gas reduction targets set by the Massachusetts Global Warming Solutions Act.
“We shouldn’t be sitting around and waiting for a significant amount of natural gas to get into the region,” Peale Sloan said. “Instead we should be using exiting infrastructure to help us reduce our reliance on natural gas.”
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