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Business-Backed Study Warns of Higher New England Energy Costs

A pro-energy/business group has released a study that warns New England is at risk for higher energy costs and price volatility than was thought a year ago. Energy project delays and cancellations, as well as new energy policies, could cause more economic harm through 2020 than previously estimated, it said.

The New England Coalition for Affordable Energy released the study, which was conducted by Daymark Energy Advisors. It was sponsored by business/industry associations in Connecticut, Massachusetts and New Hampshire.

Failure to expand New England's energy infrastructure -- natural gas pipelines, power transmission lines and generation resources -- could cause $5.4 billion worth of higher energy costs in the region by 2020, Daymark found. Such a financial hit could reduce disposable income in the region by $12.5 billion and cause 167,000 jobs to be lost or not created.

Pushing new natural gas pipelines into New England, or expanding existing capacity, has been extremely difficult for the industry. This is due to environmentalist/landowner resistance, as well as capacity contracting challenges exacerbated by regulatory opposition to electric utilities holding pipeline capacity (see Daily GPI, Oct. 10; Sept. 14; Sept. 1; Aug. 18).

"It is fair to say that the current energy landscape in New England is in flux and there is a higher degree of uncertainty than a year ago regarding outcomes over the next three to five years and beyond," said Daymark President Marc Montalvo.

Clean energy policies in New England states have created economic challenges in wholesale power markets, Daymark said. Given the level of uncertainty highlighted in the report, Daymark said a regional planning strategy that looks at state-by-state actions through an integrated approach is what is needed. Such an approach would cover electricity supply reliability, environmental goal achievement and the cost effects of electricity and natural gas on the region's economic outlook.

The report also recommends a two-step process for regional planning that would consider economic, environmental and reliability consequences over the near term, defined as the next five to 10 years, as well as over the longer term, defined by the outer limits of policies and legislation to address climate change.

"The report -- and a recent warning by ISO New England that the electric system may become unsustainable during extreme cold weather due to energy supply constraints [see Daily GPI, Jan. 27] -- are stark reminders that events of the past year put the region's economy and competitiveness in an increasingly perilous position as we approach 2020," said Carl Gustin, coalition spokesperson. "Timely actions to add new energy infrastructure and address energy market uncertainties are needed."

Most regional energy studies to date have looked at either specific project economics or impacts on reliability and the environment without affordability considerations and consequent impacts on New England's competitiveness, employment and income, the group said. "The systemic view we recommend would allow for assessment of the gains available to New England's energy economy via the maximization of the resource and technical advantages of each state as part of a broader regional economy," Montalvo said.

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