October 25, 2016

Amid uncertainty, state cans natural gas expansion

PHOTO | Contributed
PHOTO | Contributed
A construction crew works on a natural gas pipeline expansion.

Hamstrung by court and regulatory rulings in key New England states, the state's Department of Energy and Environmental Protection said it's canceling an RFP meant to increase natural gas capacity in the state.

The developers of seven projects, including a $3 billion expansion of the Algonquin pipeline called Access Northeast, had submitted bids in late June, vying to provide as much as an extra 300 million cubic feet per day of natural gas capacity for the region's gas-fired power plants.

But the mechanism by which developers and utilities wanted to finance the projects by building the cost of expanding gas capacity into electricity rates was controversial.

The Massachusetts Supreme Court dealt the first blow with a ruling in August forbidding the financing scheme, saying it would undermine the objectives of utility restructuring in the late 1990s and expose ratepayers to risks. With New England's largest population, the Bay State was seen as crucial to the Access Northeast project.

In New Hampshire, utility regulators issued a ruling earlier this month containing similar language.

DEEP said this week that those decisions "have materially reduced the ability for the costs of projects to be shared among a substantial portion of the region's ratepayers."

"DEEP has consistently asserted that the problem of inadequate gas infrastructure is greater than one state can solve alone," the agency said in a statement. "Regional investment is necessary to ensure that no one state disproportionately bears the costs of addressing what is a problem endemic to our regional electric system. As a result, DEEP moved to cancel this RFP."

DEEP said it could restart the RFP process in the future. Two separate RFPs for clean energy procurement remain ongoing, with major developments also announced Tuesday.

In a statement released Wednesday, Spectra Energy, the lead developer of Access Northeast, expressed disappointment about the canceled RFP.

"ISO-NE, the electrical grid operator for the region, recently stated that New England's power generation situation is precarious during the winter time, and that beyond 2019 it may become unsustainable during extreme cold conditions without immediate action to solidify the region's energy infrastructure," said Arthur Diestel, director of stakeholder outreach at Spectra. "Simply put, the regional pipelines are running full and demand is growing which exacerbates the possibility of electric black-outs and shortages of natural gas for home-heating."

Diestel said his company was encouraged that DEEP has indicated the possibility of another RFP in the future.

Editor's note: This story has been updated to include comment from Spectra Energy.

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