Winter Gas Crunch Again Threatens New England

After an array of New England’s largest utilities announced rate increases this fall, blaming seasonal natural gas shortages, the region is once again facing short-term gas price spikes as growing demand coupled with supply constraints roil the power market.

National Grid, which supplies customers in New York, Massachusetts, and Rhode Island, announced on Nov. 1 that it would raise rates through April by about $33 per customer. Then, on Nov. 14, Northeast Utilities subsidiary Western Massachusetts Electric Co. announced January-through-June increases of about $26 for the average customer. On Nov. 17, the Connecticut Public Utilities Regulatory Authority approved rate increases for Northeast Utilities subsidiary Connecticut Power & Light and United Illuminating. Meanwhile, another Northeast Utilities subsidiary, NSTAR, has a rate increase request pending before the Massachusetts Department of Public Utilities. All of the companies blame the increased cost of natural gas for driving up the costs of the electricity they buy.

The prospect of yet another round of chaos in the region’s natural gas market—after last winter’s polar vortex storms caused record gas demand across the eastern and northeastern U.S., which in turn sent spot prices to record highs—has spurred debate and controversy about how to address the problems. The situation has been exacerbated after one coal plant after another, along with the region’s only nuclear plant, have shut down or announced plans to do so. Nearly half of New England’s power now comes from natural gas–fired plants.

Pipeline companies are racing to expand the region’s import capacity, but no new interstate pipelines are expected to come into service before 2018. The governors of the six states in the region recently considered a plan to subsidize additional pipeline capacity, but the proposal was tabled when Massachusetts decided it wanted to study the issue further.

Meanwhile, environmental groups are rallying against any additional pipelines, fearing the added supply will support construction of additional gas-fired power plants and reduce support for renewable generation. Several have argued that the pipelines aren’t necessary, and that building them could actually make the problem worse by spurring additional demand as supply constraints ease and prices fall. Instead, they have urged demand reduction and energy efficiency measures to address constraints in the short term.

ISO New England has warned that failing to replace the retired capacity, which will require increased pipeline capacity, could create a risk of rolling blackouts in the future.

—Thomas W. Overton, JD is a POWER associate editor.