A natural gas utility's plans to convert 3,000 homes and businesses in Maine to natural gas ran into a snag because many heating, ventilation and air conditioning (HVAC) contractors are unfamiliar with the options available to new natural gas customers.
Meanwhile, a decision by state regulators to allow the formation of a separate company to facilitate the transition to natural gas has drawn the ire of a trade association that represents heating oil, propane, biofuels, motor fuels and convenience store owners.
In January 2013, the Maine Public Utility Commission (PUC) approved plans by Summit Natural Gas of Maine to provide gas service to 17 municipalities in the Kennebec Valley (see Daily GPI, Jan. 14, 2013). Summit later announced plans to extend service to Cumberland, Falmouth and Yarmouth, towns in the southern part of the state (see Daily GPI, Nov. 26, 2013).
But Mike Duguay, Summit director of business development, conceded that the heating industry's lack of familiarity with natural gas conversions put a wrench in the company’s plans to convert the 3,000 homes and businesses within the next three months.
"Most [contractors] are geared toward oil and propane, and as a result a lot of those firms just simply have not had enough experience in the natural gas conversion business," Duguay told NGI on Friday. "That's understandable. We're putting thousands of customers in front of them, and it's a market that effectively didn't exist prior to us coming into central Maine. It's a question as to whether the capacity even exists in the industry to begin with."
The PUC recently approved the formation of the Natural Gas Conversion Co. (NGC), an entity whose purpose is, according to Summit, to provide "an affordable and timely process" for residents and businesses to convert to gas (see Daily GPI, Sept. 17).
"[NGC] is a wholly distinct and separate organization; it's not under Summit," Duguay said. "The real intent there is to just make sure customers have as many available options to them as possible. What we're seeing in the market is that because there hasn't been a lot of experience converting people over to natural gas, a lot of people in the HVAC community are not aware of what the options potentially are.
"Everybody makes the assumption that the easiest solution is to simply take out what's existing and go to the highest level of technology to solve it -- which might in fact be a wall-hung, direct-vent boiler solution."
Duguay said many customers were being left out of the market because they could be eligible for a replacement burner on an existing oil-fired boiler, or they may have the option to install a plug-and-play atmospheric boiler to their existing chimney.
"We've identified a void where not as many options are being provided to customers that potentially are available to them," Duguay said. "It will take some time. I think it will come around. The people who are out there doing HVAC and plumbing work, they'll start to become more familiar with the options [and] with natural gas conversions."
Duguay added that he thinks Summit will make the 3,000 goal. "There are a lot of contractors in that space that do get it," he said. "They've stepped up and committed resources, and they understand the opportunities for them."
Jamie Py, CEO of the Maine Energy Marketers Association (MEMA), told NGI that his group wants to ensure that Summit's plans don't create cross subsidization, "where ratepayers are subsidizing what obviously is the intent of the conversion companies.
"We just want to make sure that cross subsidization doesn't happen," Py said Friday. "The state of Maine allows entities to form like [NGC]. Summit originally had filed to be part of its core business, which would have been a big problem, but PUC didn't allow that. But it's going to happen.
"We're just concerned that Summit may have a different plan for customers than what we would do with them. Whether or not they wanted to convert to gas, go to propane, stay with oil, whatever they would want to do. Customers [need to] get the full spectrum of options, and our guys offer all them."
Py said one of the major problems with Summit's plans was that it chose to expand into what had previously been considered uneconomic territory.
"There are three natural gas entities in the state already: Maine Natural Gas, Unitil and Bangor Gas Co.," Py said. "They've been around for 60, 70 years. They all had the opportunity and were licensed to go into these territories but chose not to for whatever reason. But generally that reason is that it's not economical. So Summit came in and made whatever their economic assessment was, that they could do this and get all these people involved and hook up a lot of homes."
Summit Natural Gas of Maine is a subsidiary of Summit Utilities Inc., which operates 20 natural gas districts throughout Colorado and Missouri. The company also specializes in providing natural gas to areas that are either difficult to serve, or those that are not being served at all.