A Maine Public Utilities Commission (PUC) staff recommendation in an Examiner's Report released Wednesday says there is no need for state regulators to enter into pipeline capacity contracts in order to support natural gas and power price stability -- at least not for now.

Much has happened in the New England natural gas and power markets since the price spikes of winters 2012-2013 and 2013-2014. Market rules have been revised; new pipeline capacity serving the New England region is expected over the next couple of years, and the two past winters of price spikes are starting to look like outliers compared with the winters before and since.

"The commission does not find that the market and rule changes to date are likely to alter the fact that the region's generators do not make long-term commitments for pipeline capacity," the report said [2014-00071]. "However, based on the record, it is not possible to conclude that such commitments are necessary to address high winter price levels and volatility."

The docket remains open and is the result of the Energy Cost Reduction Act (ECRA), enacted by the state in 2013 (see Daily GPIOct. 31, 2014). ECRA authorizes the PUC to execute -- after consultation with the state's public advocate and the governor's energy office -- energy cost reduction contracts (ECRC) to acquire up to 200 MMcf/d of natural gas pipeline capacity a year, for an annual cost not to exceed $75 million. ECRA would allow the PUC to administer and resell the pipeline capacity acquired.

The latest review considered specific projects proposed to alleviate natural gas constraints in the region. One is the Access Northeast project, led by Spectra Energy (see Daily GPIMay 4). Another is the Portland Natural Gas Transmission System (PNGTS) Continent to Coast (C2C) expansion project (see Daily GPIJan. 13, 2015). Also considered was the Northeast Energy Direct (NED) project of Kinder Morgan Inc. (KMI), but that project has been withdrawn by KMI (see Daily GPIApril 21). Repsol Energy North America Corp. has participated in the docket, arguing for reliance on liquefied natural gas rather than additional pipeline capacity.

"During the pendency of this proceeding, there have been several pipeline expansion projects to increase capacity into and within the region that have been announced, including the three projects that were submitted as ECRC bid proposals in this case," the report said. Other projects being tracked by the PUC include Tennessee Gas Pipeline Co.'s Connecticut Expansion Project (see Daily GPIApril 13), the Algonquin Incremental Market (AIM) Project of Algonquin Gas Transmission (see Daily GPIMarch 29) and Spectra's Atlantic Bridge project (see Daily GPIMay 2).

Additionally, changes have occurred in gas and power markets during the PUC docket. For instance ISO New England (ISO-NE) changed its forward capacity market rules to provide "pay for performance" incentives that create carrots and sticks intended to drive generators to perform during "scarcity" events (see Daily GPIDec. 24, 2014). Another change in ISO-NE is intended to encourage market participation by gas-fired generators, allowing them to update bids after their gas costs are known. Other ISOs have taken similar measures (see Daily GPIFeb. 20, 2015).

And further, the Federal Energy Regulatory Commission has acted to harmonize natural gas and power scheduling (see Daily GPIDec. 17, 2015). "Changes include moving the nomination deadlines for scheduling gas transportation to later in the day and incorporating an additional intraday scheduling opportunity," the report said. "These changes are intended to allow for more efficient use of existing facilities, thereby mitigating the need for capacity expansions."

Although in early stages, efforts in Massachusetts, Connecticut and Rhode Island to advance adoption of clean energy projects have "...the potential to result in a large quantity of renewable energy being added to the ISO-NE market, the effect of which could be to displace gas generation thereby reducing gas demand in the region and easing pressure on prices," the report said.

Finally, a repeat of the two winters of spiking gas and power prices is not expected, according to the report.

"...[T]he high prices in the winters of 2012-2013 and 2013-2014 did not occur during the several-year period prior to and after these winters, and based on market expectations, are not expected to re-occur in winters for the near-term future," the report said. "Throughout these periods, generators have not made long-term pipeline capacity commitments, and it is unlikely that the market expects that conditions in the near-term future will result in such commitments.

"Thus, but for the winters of 2012-2013 and 2013-2014, winter prices have been and are expected to continue to be relatively stable despite the lack of FT [firm transportation] associated with generator long-term commitments for pipeline capacity."

Comments on the report are due by Wednesday (June 15). The PUC could issue a decision some time this summer a spokesman said.