Regulators Give Thumbs Up To Natural Gas Expansion, Angering Heating Oil Dealers
A trade association of more than 600 home heating oil and propane dealers is considering all of its options, including legal action against the state for approving a plan that allows three natural gas companies to convert 280,000 customers to natural gas.
Chris Herb, president of the Connecticut Energy Marketers Association, said legal action is just one of the many options his organization is examining as a result of Friday’s decision by state regulators.
“Something is fundamentally wrong in America when the government has the power to convert 280,000 customers from one fuel to another,” Herb said Saturday.
The Public Utility Regulatory Authority gave final approval to a plan by three natural gas companies to expand their footprint in the state.
The final decision concluded that all new natural gas customers will be able to spread the cost of conversion over a period of 10 years.
Homeowners closest to the existing natural gas pipelines will pay an additional 10 percent on their distribution charges, and those further away from gas mains or businesses will pay a 30 percent premium on the distribution component of the standard rate. The distribution component of an average bill accounts for about 40 to 60 percent of the monthly cost.
“Gas pipeline capacity into the New England region is limited, and this has caused prices to spike in the winter when gas is needed both to heat homes and run power plants,” Gov. Dannel P. Malloy said Friday in a press release. “The gas expansion plan called for in my Comprehensive Energy Strategy will benefit both gas and electric customers in the near-term, by helping to expand gas capacity into Connecticut.”
Herb questions the reliability of natural gas. He also points out that once a homeowner converts to natural gas they have to rely on only one utility company to deliver it to their home. They don’t get to go out into the marketplace and decide which company should come and deliver it based on price.
He said the plan is tragically flawed because it assumes natural gas will continue to be cheaper than home heating oil, when already the market is changing.
According to the U.S. Energy Information Administration (EIA) households heating with natural gas will expect to spend an average of $80 (13 percent) more this winter than last winter. The growth in natural gas expenditures represents a 14-percent increase in the average U.S. residential price from last winter, with consumption that is slightly lower than last winter nationally.
EIA expects households heating primarily with heating oil to spend an average of about $46 (2 percent) less this winter than last winter, reflecting a 5-percent decrease in prices and a 3-percent increase in consumption.
New England Independent System Operator, the regional electrical grid operator, is studying the reliability of natural gas. According to this Associated Press article, ISO-New England is worried about reliability of the electrical grid in the winter months when demand for the fuel is high.
Herb says there are no storage facilities for natural gas located in the region, so natural gas has to be delivered by interstate pipelines. If demand peaks in the winter, he said it’s possible gas won’t get delivered.
But Malloy argues that it’s the lack of natural gas in Connecticut that has put the state at a disadvantage.
“A greater percentage of homes and businesses in neighboring states benefit from the use of natural gas than do people in Connecticut,” Malloy said. “This has put us at a competitive disadvantage — but with this plan in place we will now move forward to change that.”
When he laid out his vision last year to convert more homes and businesses to natural gas, about 50 percent of Connecticut homes were on home heating oil and 31 percent were on natural gas. An estimated 35 percent of commercial businesses and 53 percent of industrial customers were using natural gas about a year ago.
According to plans filed with PURA, Connecticut Natural Gas and Southern Connecticut Natural Gas plan to convert 29,500 low-use (non-heating) customers to heating, and they hope to add 113,700 new on-main customers and 54,000 new off-main customers by 2023.
Yankee Gas proposes to convert 10,000 low-use customers to heating, add 41,296 new on-main customers and 31,125 off-main customers by 2023.
In addition, regulators decided that instead of crediting existing customers for the excess natural gas sold when demand is low, utilities will be able to use what is called a “non-firm margin credit” to help expand the gas lines. If the new customer surcharge and non-firm margin revenue prove insufficient to cover ongoing expansion costs, a system expansion reconciliation charge on existing customer bills will be used to make up the difference.
In their ruling, regulators vowed to revisit the revenues the utilities would gain as a result of the expansion to make sure the changes don’t adversely impact future rates.
PURA Vice-Chairman John W. Betkoski, who was the lead commissioner on the case, commented that the final ruling “strikes the right balance between ensuring price stability for current customers while maximizing opportunity to expand gas availability consistent with Governor Malloy’s overall energy strategy.”