New England weighs next steps for pipeline effort

An effort to enable greater natural gas delivery capacity into New England may shift to a state-by-state approach this year to avoid a legal fight over state and federal jurisdiction.

New England's six governors began work on the energy initiative in 2013 to address persistently high power prices that stem from the high cost of gas on the region's constrained pipelines. The Independent System Operator under that initiative would have paid for new pipeline capacity and passed through the cost to consumers through its federally regulated tariff.

Progress stalled last summer amid the failure of energy legislation in Massachusetts and uncertainty over the 2014 gubernatorial elections in the region. But with two new governors in the region taking office last week and Massachusetts recently completing a study that found it needs more gas, a path has opened for the initiative to resume.

States will work on the infrastructure effort through the New England States Committee on Electricity, a state group that works on regional electric issues.

The group's executive director Heather Hunt expects talks on the energy initiative to begin soon, once the new administrations settle into their roles. Among the options are last year's tariff approach, which would require approval by the Federal Energy Regulatory Commission, or alternately having states pass legislation to pay for infrastructure at the state level.

Hunt said some market participants last year expressed a "direct interest in litigation" to the tariff approach. As a result Hunt expects one factor states will consider this year are "ways forward that lead to success in the nearest possible term."

Helping the initiative this year is a recent spike in power prices that has shifted attitudes toward infrastructure projects. Massachusetts' new governor Charlie Baker (R) in his inaugural address on 8 January blamed a recent jump in power prices on "inadequate delivery systems" as he highlighted a link between economic growth and an affordable energy supply.

"It signals a bit of a shift when you have got the leadership out there making statements about this," America's Natural Gas Alliance vice president of market development Amy Farrell said.

States in New England may face a fight before they can put steel in the ground. Merchant generators have fought the initiative out of concern that it would subsidize gas supplies to some plants. They point to expansion projects that are already increasing gas supply, along with the grid operator's pay-for-performance initiative that starts in 2018 and will give an incentive to generators to secure firm fuel supplies.

New England Power Generators Association president Dan Dolan expects talks on the initiative to continue but questions if anything has fundamentally changed in Massachusetts. The state, as New England's largest energy user, has significant influence over the process, but its legislature last year failed to pass a bill needed to advance the initiative.

"What stopped this last time was not deep disagreement [about the approach]. It was really that Massachusetts was not able to get the legislative authority," Dolan said.

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