July 16, 2018

CT's natural gas expansion plan well behind schedule

Photos | ContributeD
Photos | ContributeD
An Eversource crew installs a natural gas main in Cromwell. Utilities including Eversource are behind on aggressive goals to convert more people in Connecticut to natural gas as a heating fuel.
Gov. Dannel P. Malloy, Eversource officials and others celebrate natural gas pipeline expansion work in Wilton.

Connecticut's multibillion-dollar plan to convert 280,000 properties to natural gas heat by 2023 is far behind schedule, though it's still created tens of thousands of new customers for utilities.

The three public gas companies serving Connecticut businesses and residents recently submitted their annual Natural Gas Expansion Plan data to state regulators, reporting that from 2014 through the end of 2017, they converted 61,486 customers. That's about 62 percent of their original goal for that time period.

The conversion pace has been slowed by lower-than-expected oil prices, which has made it less financially appealing for consumers and businesses to invest in a switch to natural gas.

The slow conversion pace is also hampering Connecticut's environmental goals, at least to some extent. Connecticut has set ambitious greenhouse-gas emission reduction targets, with milestones approaching in 2030 and 2050. Natural gas generally burns cleaner than oil, so getting more customers to use that heating fuel would reduce carbon dioxide emissions by a greater amount.

Meantime, lackluster demand for natural gas could also play into an ever-raging debate about what Connecticut's energy future should look like. There are disagreements, for example, over whether or not Connecticut needs more gas pipelines to meet peak demand during periods of extreme temperature.

While utilities say natural gas remains an attractive and advantageous heating fuel, clean-energy advocates argue that state policy should shift away from incentivizing natural gas in favor of more renewables and efficient electric heat.

Aggressive goals

Lawmakers and regulators created the ratepayer-funded natural gas expansion plan in 2013, perceiving a "historic opportunity" for Connecticut energy users.

The plan, which was vehemently opposed and legally challenged by oil dealers, sought to seize upon a then-wide spread between gas and oil prices — one that was projected to continue — and help with the state's efforts to reduce air pollution.

It also aimed to provide an economic stimulus by spurring natural gas pipeline construction and helping ratepayers save on their energy bills.

But lower-than-expected oil prices have made conversions less attractive.

When the expansion plan was being devised, lawmakers relied on a 2012 forecast by the U.S. Energy Information Administration (EIA), which predicted oil prices would rise to $3.73 per gallon by 2015. That never happened and oil prices have remained below $3 a gallon for most of the past two years. Residential-delivered heating oil even dipped below $2.40 per gallon during a 17-week stretch in 2015 and 2016, a threshold state officials previously said would make natural gas conversions cost prohibitive.

The gas companies, particularly those owned by Orange-based energy provider Avangrid, have frequently revised their annual conversion goals downward since the program began, and both Eversource and Avangrid did so again for 2018, regulatory filings show.

Eversource's gas utility is now targeting 4,700 customer conversions this year, down from an original goal of 9,372, while Avangrid's two gas utilities have revised their combined goal of 20,100 conversions to 6,000, citing fuel prices and other factors.

Dave Allain, Eversource's director of gas expansion, said initial conversion targets — which called for Eversource to add 82,400 natural gas customers over a decade — were "extremely aggressive."

Pricing dynamics, however, could always change. Oil prices rose late last year, which has helped the utilities convert more customers. But regardless of how much, if any, money a conversion saves consumers, Allain says there are other reasons customers want natural gas — it's convenient, cleaner, doesn't run out and can be used for stoves, grills and other household appliances.

He said Eversource has grown much more skillful marketing gas conversions, describing the effort as a "fine-tuned machine." He said he's confident he can exceed the 4,700 conversions Eversource forecasted this year, perhaps by 1,000.

"We started this thing a little naive, we had a lot of growing pains, but I believe we're in a great position today," Allain said. "The results will show in 2018."

Eversource has managed to stay closer than Avangrid to its original conversion goals over the past four years, regulatory filings show.

Avangrid converted 40,194 customers between 2014 and 2017, compared to an original goal of 71,300. Avangrid spokesman Ed Crowder said the company's gas utilities remain committed to the expansion plan.

"Initial goals set forth in the strategy were based on then-current market conditions, and we have updated these forecasts each year to account for changing fuel prices and other variables," Crowder said. "We have substantially met our revised goals despite a significant decrease in the cost of heating oil."

Clean energy advocates push heat pumps

While utilities are still gung-ho on natural gas conversions, Emily Lewis, policy analyst at the nonprofit Acadia Center, says Connecticut should shift its incentives away from the heating fuel and toward heat pumps, which in colder months capture outdoor heat energy and transfer it inside a home or building.

Technological improvements in heat pumps have made them more efficient than natural gas heat in many instances, she said, as well as more effective in cold winters.

And according to Acadia's projections, Connecticut simply cannot meet its emissions-reduction targets over the next three decades without a big increase in the number of households using heat pumps (it's about 2 percent or less currently, according to the state Department of Energy and Environmental Protection).

Lewis says incentivizing natural gas conversions effectively guarantees greenhouse-gas emissions for the life of the new boilers and other equipment — often 15 years or more, whereas electricity generated in Connecticut is getting cleaner over time thanks to renewable energy like wind and solar.

"I think Connecticut needs to evaluate where it needs to go and why it's still incentivizing natural gas if it recognizes we need to move toward electrification," she said.

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