Gas pipeline operators push for higher rates could spark increase in electricity costs

Besides delivering gas to homes, the pipelines also supply power plants that generate electricity, meaning the requests before the Federal Energy Regulatory Commission will have a ripple effect on the cost of electricity.

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Workers from Cianbro and Shaw Brothers install a natural gas pipe along Route 88 in Cumberland Foreside on Sept. 10, 2014. Gordon Chibroski/Staff Photographer

Three natural gas pipeline operators are looking to increase rates paid by Maine consumers who already face rising electricity prices.

Algonquin Gas Transmission and Maritimes & Northeast Pipeline have asked the Federal Energy Regulatory Commission to authorize higher charges. And Granite State Gas Transmission has reached a settlement with regulators that will lead to higher bills for ratepayers.

The interstate pipelines are used by companies that deliver gas to thousands of Maine homes and businesses for heat, hot water and cooking. The pipelines also send natural gas to power plants that generate electricity, meaning the changes will have a ripple effect on the cost of electricity.

The Granite State line serves customers of its owner, Unitil Corp. Summit Natural Gas, Bangor Natural Gas and Maine Natural Gas tap the Algonquin and Maritimes lines.

Unitil’s settlement with state regulators and consumer advocates in Maine and New Hampshire would increase costs about 2.6% from what they were in the 2023-24 heating season, or about $4 a month – $24 for the season – for a residential heating customer, a spokesman said.

The other pipeline operators have proposed rate increases of about 30%. The impact on Maine ratepayers, particularly those served by Algonquin, might be less because of negotiated contracts with gas utilities that distribute the fuel, said Carol MacLennan, senior staff attorney at the Maine Public Utilities Commission. Settlement negotiations are underway and if successful would likely not end before late November or December, she said.

“They go big, usually,” MacLennan said of the proposed rate increases. “In the process of either litigating or settling, usually there’s tug and pull, and things get worked out.”

Four natural gas distribution companies operate in Maine and serve a relatively small number of users: Unitil, the largest supplier, has about 33,000 customers; Bangor Natural Gas has 8,500; and Maine Natural Gas and Summit Natural Gas have about 6,000 customers apiece. In contrast, Central Maine Power and Versant Power, Maine’s two dominant electric utility companies, together serve about 800,000 customers.

Andrew Landry, deputy public advocate, said the 30% proposed increase applies to rates for firm service, which is the rate that guarantees space on a transmission line for gas delivery. Firm service represents a portion of total revenue, he said.

A price increase would affect power plants that use natural gas – rather than hydropower, oil, coal, wind or solar – to generate electricity. Natural gas accounts for about half of electricity generation in the region, according to ISO-New England, the grid operator. Higher natural gas prices could push up regionwide electricity costs that already are climbing. To reduce greenhouse gas emissions, electricity is increasingly used for heating and cooling buildings, and powering vehicles.

“It’s very, very fundamentally needed in the New England region to keep heat on and lights on,” MacLennan said. “Whenever gas prices go up electric prices go up.”

Algonquin, which has 1,100 miles of pipeline extending from New Jersey to north of Boston, said the rate request is in response to more than $500 million in capital improvements to modernize its system, and accounts for “substantial increases” in operation and maintenance expenses and rising costs for property insurance, labor and materials. It also cited increased property taxes and the rising cost of debt due to higher interest rates.

Maritimes & Northeast, which has 343 miles of pipeline linking Nova Scotia and New Brunswick to the Canadian–U.S. border near Baileyville, Maine, and continuing to Massachusetts, said its rate filing “comes at a time of uncertainty” for the company.

“Maritimes has historically been a supply-driven pipeline system, but (the) quantity of capacity available on the Maritimes system now greatly exceeds the quantity of supply available to the system,” it said.

Some pipeline users oppose the rate increase proposal.

“Maritimes has not shown that the rates and other changes to its tariff proposed as part of … a general rate case are just and reasonable,” Repsol Energy North America Corp. told FERC. “Accordingly, the proposed rates and tariff changes should be suspended for the full statutory period and be made subject to refund.”

Regulators also should set the rate case for a full hearing before an administrative law judge “so that each aspect of Maritimes’ proposals can be fully examined and evaluated,” it said.

National Grid Gas Deliveries Cos. told FERC that Maritimes is seeking an overall increase of about 31.4% and that a “significant amount of unsubscribed capacity” would lead to reduced “economic life for the Maritimes system.” It asked FERC to require Maritimes to schedule a hearing “concerning all aspects of Maritimes’ rate filing.”

A spokesperson for National Grid did not respond to an email seeking details on the rate increase it cited.

Max Bergeron, a spokesman for Enbridge Inc., the Alberta, Canada-based parent company of Algonquin and Maritimes, said final rates won’t be known until FERC proceedings have ended. That could be a while: The pipeline businesses are responding to requests for information, and meetings are scheduled for this fall with regulators and customers, he said.

The regulatory ratemaking process gives FERC and its customers an opportunity to review filings and obtain documents “regarding the pipeline costs underlying the filed rates,” Bergeron said.

The volume of residential use of natural gas in Maine changed little from 2018 to 2022, even as overall consumption jumped 27%, to 59 billion cubic feet, according to the Energy Information Administration. Residential consumption in 2022 was 3.1 billion cubic feet, down a fraction of 1% from four years earlier.

LESS DEMAND, FIXED COSTS

Andrew Price, president and chief executive officer of Competitive Energy Services, a consulting group in Portland, credited Maine’s broad use of electric heat pumps for reducing natural gas consumption.

To help reach reduced greenhouse gas emissions targets, New England states are looking to phase out natural gas for uses other than industrial consumption and power generation. The Maine Legislature this year scaled back an ambitious proposal to limit natural gas expansion and instead required state studies about its use.

If natural gas prices rise, alternatives such as home heat pumps are more attractive, Price said.

“As people switch to these alternatives, natural gas usage falls and rates need to go up again per unit of energy to recover fixed asset costs across a declining unit volume, and the cycle accelerates,” he said.

Electric power generation accounted for Maine’s largest share of natural gas use, at 24.7 billion cubic feet in 2023, up 79.5% from 2018, reflecting a shift from coal and oil, which are greater pollutants.

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