Proposals aimed at lowering power rates in Maine by building a big natural gas storage facility suffered a blow when a consultant for the Maine Public Utilities Commission determined the project wouldn’t benefit electric and gas customers.

The consultant came to similar conclusions for a variety of competing plans that sought to have customers help pay for gas storage ventures, based on the promise of lower rates in the future. And while these conclusions were based on whether a controversial natural gas pipeline is built in southern New England, the overall findings raise doubt that the storage idea will gain traction.

The report was filed with the PUC last week. Parties in the case are set to file questions Friday. After a public hearing and other procedures, the PUC is expected to decide the matter in April.

James Cote, a spokesman for Maine Energy Storage, the lead proponent, declined to respond to the report. He said the company would file its response with the PUC.

But Tim Schneider, Maine’s public advocate, said the report provided a robust analysis that made a strong argument against any storage option.

“The takeaway from the report is there’s no benefit for electric ratepayers,” he said.

Schneider noted that his office hasn’t take a formal position yet in the case and was doing its own research. But based on the consultant’s finding, he said the only benefit he could see was a potentially favorable return on investment for ratepayers, if certain market conditions occurred.

“If this is such a good investment, why isn’t the market doing it?” he said.

PIPELINES AND PRICES

At the request of the Legislature, the PUC has been looking at a plan to tap stored natural gas to lower the cost of energy when demand spikes. Natural gas is used to generate half the region’s power, and with most new pipeline projects stalled, policymakers are searching for alternatives.

The solution offered by Maine Energy Storage involves building a big tank along existing pipelines in either Rumford or Brewer. Natural gas would be delivered and stored in its liquid form during the summer, when prices are low, and drawn off on cold winter days, when prices are high.

Maine Energy Storage is a partnership between a Boston-based company that helped develop a gas-fired power plant in Rumford and a Japanese firm that builds gas storage facilities around the world. Their proposal supplements an ongoing case at the PUC in which lawmakers asked the agency to see if Maine electric customers could benefit by underwriting capacity on new gas pipelines.

The storage facility could cost $250 million and be online in 2021. To offset the cost, developers want electric and gas customers to help pay for it over 20 years.

Maine Energy Storage estimates the project would save Maine customers between $9.9 million and $40.6 million a year, compared with new pipeline proposals, and up to $2.1 million if no new lines are built.

In this graphic, Navigant Consulting Inc. forecasts where Maine will get its natural gas through 2053. Sources include Appalachia (the Marcellus and Utica Shale regions); the Western Canadian Sedimentary Basin (WCSB); Eastern Canada; and LNG import terminals along the Eastern Seaboard in Canada and Massachusetts. MMcfd = million cubic feet per day.

In this graphic, Navigant Consulting Inc. forecasts where Maine will get its natural gas through 2053. Sources include Appalachia (the Marcellus and Utica Shale regions); the Western Canadian Sedimentary Basin (WCSB); Eastern Canada; and LNG import terminals along the Eastern Seaboard in Canada and Massachusetts. MMcfd = million cubic feet per day.

Because natural gas is such a dominant fuel, its wholesale price at different times of the day and year sets the pace for electric rates. New England lacks enough pipeline capacity on the coldest days, when gas prices surge because demand for heat and power is high. Maine Energy Storage says that having gas stored at those peak times can act as a hedge against price spikes.

But the costs and benefits for consumers were challenged in an analysis done by Navigant Consulting, a California-based firm hired by the PUC. Navigant also looked at 10 additional proposals from five other bidders that sent competing projects for the PUC to consider. These ranged from storing liquefied natural gas at an existing terminal in New Brunswick, Canada, and pumping it to Maine via pipeline, to storing it during the winter in small, mobile tanks next to factories.

Navigant developed values for each proposal in four “snapshot” years, from 2022 to 2052, and compared them to a variety of costs. It then calculated a formula to measure profitability over time and return on investment for each project.

THE ‘ACCESS NORTHEAST’ FACTOR

Significantly, it made these comparisons based on whether the Access Northeast pipeline is built. Access Northeast is a $3 billion project proposed by Spectra Energy to expand an existing pipeline in southern New England and connect more power plants. By increasing supply in the region, it would have the effect of lowering wholesale gas prices. That would make LNG storage in Maine less attractive.

If Access Northeast is built, only one option would have a small, but positive, benefit for customers, Navigant said.

“Any benefit of having LNG storage capacity is negated by contract costs,” the report stated.

Without the pipeline, seven options had favorable benefits, but they ranged widely and were based on price assumptions that the consultants said were unlikely to occur. Maine Energy Storage wasn’t part of that group; it was considered uneconomic with or without the pipeline.

The future of Access Northeast is unclear following a court ruling in Massachusetts that prohibited electric customers there from financing private pipeline projects. Just before Navigant issued its report last month, Spectra announced it would delay a key Access Northeast filing with federal energy regulators until late this year.

That news wasn’t made public in time for Navigant’s report. But in a discussion section, the consultant noted that the “new political environment in Washington and announced appointments in the new administration” suggest that Access Northeast, or a similar pipeline project to meet capacity needs, eventually will be built. That assumption further dims the prospects for LNG storage in Maine.

 

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