December 2, 2013

CT's limited natural gas capacity raises concerns

Photo | HBJ File
Photo | HBJ File
An Algonquin Gas crew works on a pipeline expansion.
Photo | HBJ File
Natural gas expansion workers test a pipeline.

As the state readies a plan to aggressively expand natural gas use among businesses and homeowners, concerns are being raised that the pipeline capacity feeding gas into Connecticut could be stretched thin, or even run short, as demand increases in the years ahead.

The three major national natural gas suppliers are planning a $2.2 billion pipeline expansion over the next three years to meet the state's increasing demand for the fuel, but if any projects get delayed it could create capacity issues for the utilities who deliver gas to Connecticut consumers, an industry expert says.

"A concern that I always have is if there's a delay," said John Meeske, president of Energy Market Decisions Inc. in Hopkinton, Mass. "If you're adding load and you do not have additional capacity, you're going to come right up against it."

The pipeline build-out will support Gov. Dannel P. Malloy's plan to switch 280,000 customers to natural gas home heating via distribution utilities Yankee Gas, Connecticut Natural Gas, and Southern Connecticut Gas. The plan was appoved by regulators Nov. 22.

Thanks to large shale fields in New York, Pennsylvania, and Ohio, the price of natural gas heating in Connecticut is roughly half of fuel oil while burning significantly cleaner.

"Connecticut has a historic opportunity to lower fuel costs for heating, electric generation, industrial processes, and transportation," Peggy Diaz, a special assistant in the Bureau of Energy and Technology Policy at the state Department of Energy and Environmental Protection, recently told the Public Utilities Regulatory Authority. "Securing additional natural gas capacity expansion is necessary to realize this opportunity."

In order to import enough gas to meet future demand, Connecticut will need the three suppliers piping natural gas into the state — Tennessee Gas, Algonquin Gas, and Iroquois Gas Transmission — to follow through on planned pipeline expansions by November 2016.

"If for whatever reason new pipeline capacity is delayed beyond the start of 2016-17 winter, capacity deficits will be a serious issue for one or more [companies] depending upon which pipeline is late," Meeske said.

The pipeline expansion is a massive undertaking — U.S. natural gas pipeline construction totaled $1.8 billion in 2012, according to the U.S. Department of Energy. In Connecticut, gas mains owned by Algonquin, Tennessee, and Iroquois had a combined value of about $1.1 billion (on a depreciated basis) as of 2011, according to reports on file with the Federal Energy Regulatory Commission.

In Oct. 2012, when Malloy unveiled his plan to expand access to natural gas, just 31 percent of Connecticut households used the fuel, compared to 47 percent in both Massachusetts and Rhode Island, and 72 percent in New Jersey.

Despite the limited infrastructure, in 2011 Connecticut registered a record 15.6 percent jump in natural gas use, according to the U.S. Energy Information Administration.

As demand has risen, the transmission infrastructure feeding Connecticut has remained the same. The last time the state significantly increased its natural gas import capabilities was 2007, for an additional 19.7 percent of capacity.

To create more pipeline capacity, Algonquin plans to expand a portion of its Connecticut pipeline from 26 inches in diameter to 42 inches, the maximum size used by utilities, filings with the Federal Energy Regulatory Commission show.

Tennessee Gas indicates plans to accommodate the expected influx of new customers through a mix of eight miles of new pipeline in the Hartford area, the acquisition of a lateral pipeline and other means, according to plans filed by Tennessee parent Kinder Morgan with FERC.

These Tennessee and Algonquin projects are not expected to finish before November 2016. In the meantime, Yankee, CNG, and Southern Connecticut Gas have launched their own aggressive market plans to sign up customers over the next 10 years. The pace of the expansion inside Connecticut can't exceed the pace of the pipeline expansion bringing natural gas into Connecticut.

CNG and Southern Connecticut Gas — both subsidiaries of New Haven's UIL Holdings Corp. — plan to hook customers up to 23 miles of new distribution pipeline annually between 2013 and 2023. UIL CEO James Torgerson, during an August conference call with investors, downplayed any potential hiccups with capacity as new customers come online.

"We can meet all the needs," Torgerson said. "Obviously the utilities, whether electric or gas, are going to work together to make sure nothing bad does happen."

According to data posted by PURA, natural gas supplies will be tightest in the winter of 2015-2016, when the state's surplus capacity of natural gas would be sufficient to meet the needs of nearly 27,000 homes for four days during a peak stretch of need (about 10 percent of the households Connecticut utilities expect to add as a result of the expansion). Assuming the pipeline construction stays on pace, the figurative spigot is pried open the next few years afterward as demand inches to catch up to the newly increased capacity.

In approving Malloy's expansion plans, PURA echoed Meeske's concern that until the expanded pipelines are in service, the companies are tight on deliverability capacity. Still, PURA expressed confidence the distributors can cope with any contingencies that might arise.

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