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Maine PUC declines to fund new LNG peakshaver

24 May 2017 20:49 (+01:00 GMT)
Maine PUC declines to fund new LNG peakshaver

Houston, 24 May (Argus) — The Maine Public Utilities Commission (PUC) has declined to help fund a new LNG peakshaving facility in the northeastern state, concluding it would not reduce consumer natural gas and electricity prices.

The state legislature in September authorized the PUC authority to spend up to $25mn/yr for capacity at a new LNG storage and peakshaving plant if specified conditions are met, including reducing energy costs. The PUC evaluated 11 proposals from six bidders but declined to contract for any capacity, effectively killing the initiative because local distribution companies will not sign capacity contracts they perceive to be uneconomical. Capacity costs ultimately would have been borne by ratepayers, on the premise that their overall energy costs would have decreased.

The proposals "expose the state's utility ratepayers to substantial risk and could result in significant rate increases, particularly in the near term," the PUC said in its decision this month. "The placing of the market risk of such highly risky investments on Maine utility customers, when private investors decline to take this risk, cannot be justified."

Under a 2013 state law meant to reduce energy costs, the PUC can contract for as much as 200mn cf/d (5.7mn m³/d) of gas pipeline transportation capacity, at a maximum cost of $75mn/yr. The law was amended last year to allow the PUC to also contract for LNG storage capacity to be built in the state at a cost not exceeding $25mn/yr. The state's combined cost for pipeline and LNG storage capacity cannot exceed $75mn/yr.

PUC staff, Navigant consultancy, Maine's local distribution companies and the state's consumer advocate each concluded that regional gas pipeline expansions likely would adequately address winter price spikes in Maine and other New England states.

Spain's Repsol, which owns the Canaport LNG import terminal in eastern Canada, also said the LNG peakshaver is not needed. Maine's gas demand peaks at about 300mn cf/d on the coldest winter days. Canaport in the last three winters has supplied more than 600mn cf/d to New England on peak demand days, it said.

Sparsely populated Maine accounts for about 9pc of gas consumption in New England and only has one small LNG peakshaving plant, with capacity of about 10mn cf/d.

The US northeast does not have significant salt-cavern gas storage capacity because of its geology, so the region relies on LNG peakshavers and import terminals to help meet peak winter demand.

The northeast has 44 LNG peakshaver tanks at 29 sites, with combined storage capacity equivalent to 16.1 Bcf of gas and combined vaporization capacity of 1.44 Bcf/d, the PUC said. Many of those facilities receive LNG by truck from the Everett LNG import terminal outside Boston, as only five of the peakshavers have liquefaction capability.

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