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New England Governors Vow Cooperation on Energy Infrastructure

The governors of six New England states have committed to work together with the Independent System Operator of New England (ISO New England) to advance an energy infrastructure initiative that diversifies the region's energy supply portfolio while ensuring that the benefits and costs of transmission and pipeline investments "are shared appropriately" among the states.

Securing the future of the New England economy and environment requires strategic investments in the region's energy resources and infrastructure, said astatement signed by the governors of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.

"As the region's electric and natural gas systems have become increasingly interdependent, ensuring that we are efficiently using existing resources and securing additional clean energy supplies will be critical to New England's economic future. To ensure a reliable, affordable and diverse energy system, we need investments in additional energy efficiency, renewable generation, natural gas pipelines, and electric transmission. These investments will also serve to balance intermittent generation, reduce peak demand, and displace some of the least efficient and most polluting fossil fuel generation, enabling the states to meet clean energy and greenhouse gas reduction goals while improving the economic competitiveness of our region."

Reliability and peak demand in New England could be compromised without a more robust natural gas market and infrastructure build out in the region, according to officials from the gas and power sectors, including Kevin Kirby, vice president for market operations at ISO New England (see Daily GPI,Oct. 24). And Peter Brandien, vice president of system operations for ISO New England, has said that while the region is taking a fuel-neutral approach, it needs to have additional gas infrastructure (see Daily GPI,Oct. 17).

"We have seized on every available opportunity to bring down the cost of electricity, heat, and power for our families and businesses," said Connecticut Gov. Dannel Malloy of Connecticut. "We have enjoyed some success but energy prices here are still higher here than in other parts of the country because of severe constraints on the flow of electricity and natural gas into our state. By working closely with New England neighbors who face similar challenges we can thoughtfully plan and develop the network of electric transmission lines and natural gas pipelines needed to meet our goal of providing cheaper, cleaner, and more reliable power for Connecticut."

Last winter, natural gas and electricity prices in New Englandspiked due to a combination of constrained gas supplies from the West and South, declining liquefied natural gas shipments into the Boston and New Brunswick areas and declining gas wellhead production from the Sable Offshore Energy Project offshore Nova Scotia (see Daily GPI,July 23). Day-ahead spot natural gas prices were $34.25/MMBtu in New England and $36.00/MMBtu in New York City on Jan. 25.

A recent FERC quarterly update of various regional efforts to coordinate natural gas and electric markets concluded that the New England and Northeast generation markets will continue to be the most gas-dependent during the upcoming heating season (see Daily GPI,Sept. 20). In September, the Federal Energy Regulatory Commission passed an interim order that would make it easier for Northeast generators to substitute oil if natural gas was in short supply or was too high-priced. The Commission ratified the petition of ISO-NE, which cited some natural gas shortfalls last winter.

The Northeast has become heavily gas-reliant and preliminary estimates call for the Northeast to replace as much as 6.2-9.8 GW of coal-fired capacity with gas by 2015.

The region's proximity to the prolific Marcellus Shale isn't expected to do much to alleviate winter price spikes in New England, with multiple pipeline expansions expected to come online by 2015 largely focused on transporting gas to the New York/New Jersey and Mid-Atlantic regions (see Daily GPI,Oct. 30).

As far as natural gas is concerned, New England’s problem is a geology that does not lend itself to market-area underground storage for peak-shaving, like that maintained by both pipelines and distribution companies around most major population centers. The region is also burdened by the heavy cost of construction of new peak supply pipelines into the area, which could run at very low levels during much of the year. This is discouraging would-be pipeline builders and backers.

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