AUGUSTA — A city consultant hired to recommend a natural gas provider has selected Summit Natural Gas of Maine, but said that recommendation could flip to Maine Natural Gas, depending on city officials’ goals.
Summit’s proposal would save the city the most money for heating city and school buildings, Energy Market Decisions told an ad hoc committee this afternoon. The Summit proposal could save about $641,000 a year starting in 2014, versus $622,000 via Maine Natural Gas, a savings of just less than $19,000.
The Maine Natural Gas proposal, meanwhile, could save residents who connect to their gas pipeline more money, but would reach fewer of them than Summit’s, according to the consultants.
“In penetration, Summit has a slight advantage because its plan also serves Gardiner and Hallowell,” said consultant Rebecca Bachelder. “I think Summit is better prepared to serve the entire community, rather than just the denser neighborhoods. But it does that with a cost. Because every foot of main has a cost.”
Maine Natural Gas’ annual residential heating costs, according to the consultant’s report, would be $1,524, just over $200 less than Summit’s estimated $1,725.
But fewer residents and businesses would likely be able to take advantage of those lower costs, because Maine Natural Gas’ proposal is expected to serve fewer customers than Summit’s.
Maine Natural Gas proposes 57 miles of distribution pipeline in Augusta, which is about 35 percent of the 161 miles Summit plans to build in the city. Maine Natural Gas officials have said they hope to convert 70 percent of residences in Augusta to gas, versus Summit’s goal of converting 90 percent of residences and bringing gas mains to every neighborhood in Augusta.
Summit, according to the consultants, plans to invest $95 million in Augusta, while Maine Natural Gas plans to invest $54 million.
Summit also plans to run pipe to Gardiner and Hallowell, while Maine Natural’s proposal only states the firm could bring a pipeline to those cities sometime in the future, if it is economically viable.
And that cost means higher rates. The consultants estimate a resident using Maine Natural Gas would spend $17,370 for gas over 10 years, not counting fees, versus $18,543 for a Summit customer, a difference of $1,173.
Those estimates were based on Summit’s rate plan, which increases 1.35 percent a year, and an assumption by the consultants that Maine Natural Gas’ rates will go up 1.5 percent a year, although company officials said they have no current plans to seek a rate increase.
Summit’s proposal has more potential financing help built into its rates than Maine Natural Gas, consultant C. John Meeske said, which is an important factor because it can cost thousands of dollars to convert from oil to a natural gas heating system.
He said Maine Natural Gas offers rebates of up to $400 to help residents convert to a high-efficiency gas heating system and offers financing plans of up to 10 years, at 5 to 10 percent interest.
Summit offers rebates up to $1,500, a free, in-home energy audit and up to six hours of air sealing work, which Meeske said could help customers qualify for low-interest financing through Efficiency Maine.
“If you can pay for your conversion (to natural gas) with cash you have in hand, then you want to go with the guy who has got the lowest rates,” Meeske said. “But if you’re like most consumers, and don’t have a lot of cash on hand, then the option for them is the one that provides more in rebates and helping them get over those front-end costs so they’ll have the opportunity to save something, rather than continue to use oil or propane.”
Dan Hucko, spokesman for Maine Natural Gas parent company Iberdrola USA, which also owns Central Maine Power, said company officials are still analyzing the consultants’ presentation and will determine how best to respond to it.
“However, two things did stand out,” Hucko said. “We were very surprised to see the presentation indicate Summit’s prices are lower than ours, when our prices clearly were the lowest when the city published both (request for proposal) responses on their website on April 12, 2013. We also believe the consultant was inappropriate in making assumptions about our future pricing and then drawing conclusions from those assumptions that aren’t necessarily true.”
Both companies, after a round of interviews with the consultants, offered to make some changes to their proposals, according to Matt Nazar, city development director, changes he said were not requested by officials and without the other company’s knowledge. He couldn’t immediately be reached this evening to clarify whether the changes were to Summit’s rates.
Tim Johnston, executive vice president of Summit, which is a subsidiary of Colorado-based Summit Utilities, said the consultants did a very thorough job and he thought they made a pretty good recommendation.
Summit Natural Gas of Maine President Mike Minkos said the differences in the two firms’ proposals come down to how widely each plans to distribute natural gas, and his firm “wants to expand our system to provide the most value to everyone in the Kennebec Valley.”
The city’s request for proposals sought bids to bring natural gas to city, school, county and court property in Augusta. Residents of the city will still be free to choose from either of the two competing companies.
The request for proposals also had an alternative which asked the firms to submit proposals to provide service to Gardiner and Hallowell.
Ralph St. Pierre, assistant city manager and finance director, said it could be beneficial to Augusta’s residents and businesses if natural gas is spread to as much of the area as possible, because it could save people money and increase their disposable income, which they could spend in Augusta, where 20 percent of the city’s total property value is made up of retail businesses.
City councilors agreed to spend up to $40,000 to hire the consultants to analyze the proposals from the two firms and make a recommendation on which would be best for Augusta and its residents. City councilors are expected to discuss the consultant report more at their meeting Thursday.
Keith Edwards — 621-5647