Malloy Promotes Conversion To Natural Gas, Denies Choosing ‘Winner’
by Christine Stuart | Oct 5, 2012 12:06pm
(11) Comments | Commenting has expired
Posted to: Energy, Environment, Town News
CROMWELL — Gov. Dannel P. Malloy unveiled a new Comprehensive Energy Strategy Friday that, among other things, promotes a major conversion to natural gas.
Malloy told a group of business and utilities executives in Cromwell that he wants to make it affordable for their businesses and, further, to convert 250,000 homeowners and 75 percent of businesses to natural gas in the next seven years.
“Think about it.,“ Malloy said. “If I tell you that you can save money by converting to natural gas but it will cost $7,000 or $8,000 to connect and get your new furnace and appliances, you might decide to pass.”
However, “if I tell you there are minimal out-of-pocket expenses and that you can finance all this over time for a monthly cost that is less than your current bill, you are likely to make the move. That’s what our strategy recommends.”
The average heating bill for a natural gas customer is about $1,600, while families with home heating oil are paying about $3,400 a year, he said.
Those in attendance offered cautious approval of the 200-page document which many were seeing for the first time, while others like Eugene Guilford, who represents 600 heating oil and propane retailers, were more critical.
“Connecticut should avoid a ‘One-Fuel Fits All’ energy strategy,“ Guilford, president of the Independent Connecticut Petroleum Association, warned.
“Both ISO-New England and the Federal Energy Regulatory Commission have warned this year about New England’s over-reliance on natural gas and Connecticut should heed these warnings,” he added.
As for the economics of converting to natural gas, there’s no way to predict that natural gas will be cheaper than heating oil into the future, Guilford said.
“No one four years ago believed that the economics of natural gas would be where they are today. Hence, no one today can tell you where the economics of natural gas will be four years from now,“ he said.
Department of Energy and Environmental Protection Commissioner Daniel C. Esty said natural gas is currently one-third the price of home heating oil.
“It’s cleaner, cheaper, and more reliable,” he said.
Asked if the state was picking a “winner” by promoting the conversion to natural gas, Esty said they weren’t forcing anyone to convert.
Currently, 50 percent of Connecticut homes are on home heating oil, while about 35 percent of commercial businesses and 53 percent of industrial customers use natural gas.
Malloy admitted in his remarks that they debated requiring the conversion to natural gas, which is currently being used by about 31 percent of households, but decided against it.
He said many consumers in the state of Connecticut haven’t had the option to convert to natural gas, like residents of other states.
“I think there’s a great option here for the oil suppliers. There’s a lot of work to be done in conversion. There’s a lot of work to be done on the maintenance side,” Malloy said. “But in the absence of competition our consumers were left with only one option—the most expensive option. And we know that’s not been good for us as a state.”
He said he doesn’t know how many low value manufacturing companies the state would have held onto if it had offered this conversion option to companies years ago, but he knows he wants to hang onto the more than 170 precision manufacturing companies that are largely operating at the moment on heating oil.
But Guilford argues that like electric utilities, there’s no choice for consumers when it comes to natural gas companies.
“With natural gas and electric utilities, consumers are stuck with one company and have no choice between energy providers. With heating oil, the consumer may choose between dozens of companies who all compete for the right to serve the consumer,“ he said.
Malloy argues the conversion to natural gas is more than just economic. It’s about the environment.
He said there will be “significant air quality and public health benefits.”
At the same time he acknowledged the controversy over obtaining natural gas through a process called hydraulic fracking.
“There have been cases where this has impacted water supplies or when drilling and transmission have led to the release of methane, a very potent green house gas,” Malloy said. “First, let me be clear – we will not be ‘fracking’ in Connecticut – we simply don’t have natural gas deposits in our state.”
He said the natural gas deposits seem to stop in the Hudson River Valley in New York. He also said they will aim for a “zero leak standard” for methane on pipelines that bring the gas to Connecticut.
Mark LeBel, an energy fellow at the Connecticut Fund for the Environment, said that while natural gas is better in some respects than other fossil fuels, it is not sufficient by itself to reach Connecticut’s environmental goals.
“Investment in energy efficiency and renewables shield consumers from unexpected changes in fuel markets and we shouldn’t underinvest just because natural gas prices are appealing at the moment,“ he said.
Without commenting directly on the 200-page document, Sen. John Fonfara, co-chairman of the legislature’s Energy and Technology Committee, applauded Malloy’s ability to show leadership when it comes to energy issues.
“The plan will go through it’s normal process and everyone will have a chance to weigh in on it, but it’s framework is exactly what Connecticut needs in taking an affirmative stance on how to get out of being one of the highest cost energy states in the continental U.S.,” Fonfara said.
The strategy has been posted on the state’s website here and will be open for public comment through the end of the year.
Editor’s note: This corrects Esty’s statements regarding the price of natural gas and the number of commercial businesses using natural gas.
Tags: Gov. Dannel P. Malloy, Gene Guildford, ICPA, John Fonfara, energy, natural gas
(11) Comments
posted by: RE-Windsor, CT | October 5, 2012 2:24pm
So the Governor wants to give money to who? I understand all just got another pile of papers (200 pgs)to read. I would hope you let us now how badly we are going to be dinged again. As my daughter reminded me money does not grow on trees, it grows in cotton fields, as our money has a very high cloth content. I hope the Governor is going to spend some money on growing some green cotton plants.
posted by: wmwallace | October 5, 2012 6:05pm
The governor continues to miss the real reason why people and jobs are leaving. That would be the high taxes in the state and the possibility of them going up more in the future.
posted by: Lawrence | October 5, 2012 6:59pm
Asked if the state was picking a “winner..”
“Picking winners” is a GOP talking point for CT government doing what the GOP has been BEGGING CT government to do for years, then complaining when a Democrat is successful at doing it.
Best to get this GOP virus phrase out of the news bloodstream as quickly and completely as possible.
posted by: Tim White 1 | October 6, 2012 3:38pm
In Cheshire, the DOT happens to be planning to repave Rte 42 next year. If Yankee Gas excavates and lays pipe simultaneously (avoiding the high cost of cutting pavement, then repaving), it will be much less expensive for Yankee to install the pipelines. As well, we have an elementary school with dual-fuel boilers on Rte 42… even though it has no NG access.
If our town’s schools, state DOT and Yankee Gas all communicate, the pipeline extension should have a payback under 30 years (assuming continued trends in fuel costs… NG is typically less expensive than oil). So for the town, it may make financial sense… plus there’s greater reliability with two fuel options.
Beyond that, as the town Public Works repaves roads over the years to come, it could make sense to lay NG pipe through many adjacent R-20 / 1/2-acre lot neighborhoods on Rte 42… as Malloy wants.
I agree with the general direction of Malloy and Esty. But no matter how you look at it, it does seem to be a gov’t subsidy that benefits a particular industry / utility.
posted by: Tim White 1 | October 6, 2012 3:41pm
Now if the FHA rewrites their rules and allows house energy projects (i.e. geo) to be paid via a property tax bill… then we might see some fast movement toward cleaner, cheaper, more reliable energy.
posted by: Commuter | October 6, 2012 8:31pm
Exactly, Lawrence. And the notion that if we just cut taxes everything will be alright and we’ll all grow up to be wealthy is childish nonsense.
The only group strongly opposed is the oil dealers, which is understandable.
posted by: wmwallace | October 6, 2012 10:37pm
Successful at what taxing us more and still not having enough money because spending went up a billion dollars.
By the way many have been on the natural gas bandwagon. Of course many have tried to push things like wind and solar which has been ineffective for the most part.
posted by: Lawrence | October 7, 2012 8:07am
wmwallace,
Most CT companies want to “go green,” to save money and be environmentally responsible.
Here’s a link to the 2010 CBIA survey on the subject.
And Gene Guilford is only half-right: CT consumers have a wide variety of choices for electricity generators (mine is on Long Island) it’s the delivery company that is mostly the same (UI or CL&P).
Funny how Mr. Guilford sent his lobbyist to complain to the legislature at its recent LIHEAP meeting that CT’s heating oil dealers are ONLY getting a guaranteed profit of 31 cents per gallon, plus a few pennies more depending on what county they distribute in, as part of this year’s $82 million federally funded home heating assistance program.
posted by: RE-Windsor, CT | October 7, 2012 12:51pm
@Lawrence, please provide an example where the Republicans did such a thing,
@Tim White, Here in Windsor we try to coordinate any major roadwork with the utilities so that when the road is paved it does not need to be cut up reducing its usable life. Not sure how that is a subsidy to a utility, but I am sure someone can spin it that way. I see it as a better product at a lower cost that benefits all stakeholders, and more so the local residents.
@Tim White, Geo is not totally what it is cracked up to be. A cost benefit analysis which I have done at length made the payback on a static utility model almost 25 years. The HVAC equipment has a useful life of ~15 years. So for me in my build which was hyper energy efficient ICF, it was not economically feasible, unless someone wanted to pay 50% of the installation cost. Also be aware the costs do not usually include the costs of the pumps used to move the water. In a standard home it is economical many times.
Remember natural gas today is cost efficient because of fracking and heavy oil drilling/pumping. With oil you get some gas, and much of that is burned off, you have seen the flames near oil pumps. However at times oil has been more efficient. A static model 10 years ago using then gas prices would have been tremendously wrong. If fracking is shut down you may see the price of gas shoot up, or if new pipelines are not installed you may see supply bottle necks.
posted by: Tim White 1 | October 7, 2012 3:54pm
Re-windsor, I certainly didn’t intend to imply that any particular energy tool (i.e. geo) is a panacea. Far from it. It depends on a host of issues, particularly a home’s current heating system and the ground underneath you. Regardless, I’d like to minimize our exposure to the middle east. As such, I’ll try anything not beginning there… including fracking. I’m concerned about the uncertainties, particularly on drinking water. But I’d rather deal with that than rely on our “allies” around the world.
As for a “subsidy,” call it what you want. I don’t care for it when gov’t gets involved in picking winners and losers (which is effectively happening here). But there are bigger issues (minimizing our oil consumption) that override that IMO. And it’s not an indirect, roundabout relationship. The reality is that the cost and reliability of oil is directly impacted by the middle east. I think we should mitigate those risks.
