Maine’s 2013 omnibus energy bill, LD 1559, focused regional attention on the importance of relieving constraints in New England’s natural gas infrastructure, and in particular, on how our region’s natural gas basis differential — the extra price we pay for natural gas on top of what consumers elsewhere pay — silently but dramatically increases heating and electrical costs for homes and businesses.
The omnibus bill provided a mechanism for the Maine Public Utilities Commission to work with the other New England states to contract for pipeline capacity and lower future gas and electricity costs. That process is now underway, but unfortunately, some of the proposals under negotiation fall far short of the longer-term need and may have the primary effect of helping southern New England states while helping Maine consumers only marginally. The proposed new pipeline capacity would increase gas supply for heating, but it does not adequately help power generation or manufacturing needs. Worse, it commits the region to paying for upwards of 2,400 megawatts of power transmission lines, likely sited in Maine, allowing the future purchase of Canadian hydroelectrical power on a massive scale.
So how does this affect the home and small business owners? This group mostly buys electricity through the Standard Offer rate approved by the Maine Public Utilities Commission. Your power rate today was set back in 2012, before the full effects of the pipeline constraints were priced into the market. Expect to see your home electricity costs rise in the near term as future Standard Offer prices increase to match current elevated natural gas prices. While consumers elsewhere in the country enjoy record low prices for electricity and natural gas, Maine shivers and grows poor.
In December, this problem, high energy costs from elevated basis differential, caused a production outage at the 450-employee Huhtamaki mill in Fairfield. On Jan. 11, a two-week shutdown of the Verso Bucksport mill, with 850 employees, was announced for the same reason: high short-term natural gas costs.
This crisis is unprecedented in Maine. It means the situation is getting worse: Last winter, Maine experienced natural gas prices of $16 per MMBtu. This winter is poised to be even worse due to colder weather and continued natural gas pipeline bottlenecks into New England. In December 2013, the average spot price for natural gas at Algonquin Citygate in Boston was $13.367 per MMBtu, up over 130 percent from December 2012. On Jan. 6, 2014, the Algonquin Citygate spot price for natural gas averaged $34.14 per MMBtu, and other prices around New England were in the mid-$30 per MMBtu range. Then, on Jan. 7, 2014, natural gas prices in New England reached record highs, with midpoint prices up to $40 per MMBtu and bids as high as $100 per MMBtu.
What New England needs is 2 billion cubic feet per day of additional natural gas pipeline capacity, along with the electricity transmission capability to set the stage for uniform energy costs for New Englanders, as compared to the rest for the nation. Without a 2 billion cubic feet per day pipeline, we will continue to be energy-cost disadvantaged and will fall further behind in job opportunities and standard of living compared to the rest of the nation. We certainly cannot permit the other New England states to be on parity with the nation while Maine is not.
Maine citizens should contact Gov. Paul LePage to thank him for his leadership on this problem so far and to request that he dig in, hold fast and get the complete solution Maine needs.
Bob Dorko serves as the president of the Industrial Energy Consumer Group, which represents some of Maine’s largest industrial energy consumers, and can be reached at 474-6805.