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Energy: In New England, we pay 40% above U.S. average

New Hampshire Union Leader

January 07. 2014 10:03PM

GOFFSTOWN — Economic growth in New England will be constrained by the lack of natural gas pipelines in the region for at least another two years, and perhaps longer, according to a group of energy experts speaking at St. Anselm College on Monday.

"Growth in jobs and income will lag the national average despite many other advantages we do have in the region," said Lisa Shapiro, chief economist at the law firm of Gallagher, Callahan and Gartrell in Concord.

Shapiro was one of several speakers at the workshop "New England's Energy Future and its Effect on the Regional Economy," which was hosted by the New Hampshire Institute for Politics.Natural gas delivered to New England can at times cost seven to 10 times higher than the national average on the continental U.S., she said, given the high demand for transmission and the lack of space on pipelines, particularly in the coldest months.

"We really are at such a comparative disadvantage compared to the rest of the country," she said, when businesses size up the cost of energy in planning an expansion or relocation.

From 2010 to 2012, energy prices in New England declined 6 percent, she said, but the region remains the highest-priced market for energy in the U.S.

"We are now only 40 percent above the national average, but we had been at 50 percent," she said.

In addition to discouraging business expansion or relocation to the region, high energy prices sap resources for consumer spending, which accounts for two-thirds of the economy, she said.

New Hampshire consumers have already seen increases in electricity costs for 2013 versus 2012, with no relief in sight.

When energy spending goes up, that's less money for everything else, she said, especially with incomes stagnating as they have since 2008. The cost of electricity has been declining across the country as shale gas from Pennsylvania and Ohio flows into the vast transmission network that bypasses New England, with only five pipelines into the region.

"We need more pipeline capacity," said Dan Ford, an investment analyst for Barclas Capital who specializes in energy stocks. "The question is, who is going to pay for it?"

More than 50 percent of the power plants that provide energy in New England are now fueled by natural gas, but the owners of those power plants do not want to commit to long-term contracts for the purchase of natural gas.

Pipeline builders won't build without those contracts, and there's no indication that the stand-off will break anytime soon.

Anne George, vice president for external affairs at the independent system operator, ISO-New England, described steps the ISO is taking to encourage long-term contracts.

Ford said the costs of building new pipeline into New England may need to be "socialized" over the entire energy system.

The six New England governors acknowledged as much on Dec. 6, when they signed the New England Governors Commitment to Regional Cooperation on Energy Infrastructure Issues.

The pact commits policymakers in the six states to pursue solutions to the pipeline problem that could include a massive investment by New England ratepayers in pipeline construction through their electricity bills.

"States are interested in making ISO a collection agent to fund pipeline construction," George said.

Even if the governors are able to reach an agreement on "socializing" the costs of new pipeline, as Ford said, any new pipe in the ground is years away.

A Jan. 3 report in Environment and Energy Publishing summed up the challenge succinctly.

"The plan unveiled in early December commits the governors' combined political will to the task," wrote reporter Rod Kuckro, "but it remains to be seen whether the best of intentions can overcome market barriers, inadequate incentives and old-fashioned not-in-my-backyard sentiments that have bedeviled past efforts to build energy infrastructure in the six-state region."

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