Limited Gas Pipeline Driving Energy Price Hikes

Shivering through one of the coldest winters on record, energy consumers in Connecticut and New England are now also suffering spikes in their energy prices largely due to an inadequate natural gas pipeline infrastructure.

The record cold has put unprecedented demands on natural gas suppliers and electric generators to meet their customers’ needs. Gas suppliers must give priority to customers who have so-called “firm” contracts that guarantee the delivery of adequate supplies of gas to meet demand. Firm contracts are mostly held by residential customers. 

Many electric generation units that use gas, however, operate on “interruptible” contracts, meaning that if there is not enough gas for them, after the suppliers supply their “firm” customers, the generators must buy expensive electricity on the spot market to make up for the reduced electricity they can generate from gas. 

As a result of these pipeline constraints, not only gas customers, but electricity customers are seeing higher energy costs.

Limited Transport

While New England is a primary target for the vast amount of Marcellus Shale gas being produced in nearby states, the problem is getting it here.

The solution is expanding the region’s gas pipeline capacity, but pipeline projects can take years to complete from the planning stage to actual operation. For New England, no projects are expected to be completed until at least 2016.

Ultimately, those pipeline projects should significantly open up Connecticut’s gas supply and potentially reduce energy costs.

In what should be a boon to the pipeline effort, late last year the six New England governors signed a pact to accelerate regional cooperation on expanding gas and electricity transmission lines in New England, along with renewable energy resources.

The pact, said the governors, aims to “ensure a reliable, affordable and diverse energy system,” that will “improv[e] the economic competitiveness of our region.”

Renewable Growth

Experts say the focus on natural gas shouldn’t deter the continued development of renewable power in New England. According to U.S. Energy Information Agency (EIA), renewables will continue to experience strong growth in the region. 

From 2012 to 2040, says the EIA, non-hydro renewable power sources will represent 28% of overall growth in electricity production. What’s more, the shift toward gas and renewable energy will cause the nation’s CO2 emissions to sharply decline.

Overall, Connecticut’s short-term energy cost pain should give way to a much better energy future, albeit not until 2016.

For more information, contact CBIA’s Eric Brown (860.244.1926; eric.brown@cbia.com; @CBIAericb).