It was an especially tough winter for small business owner John York of Salem, New Hampshire.
“I looked at it about a week ago and I think I spent about $6,000 in power through today, for the year,” York said.
One massive snowstorm after another pummeled New England, making a bad situation worse for ratepayers who paid a much higher rate for electricity and heating costs than virtually any other area in the country.
A lumber company not far from York’s business told a local newspaper earlier this year it spends close to $1 million a year on its energy bills.
“It’s a supply issue,” said York, who runs Allegra Marketing and Print Mail in a 1,900-square-foot space consisting of two employees right off Main Street in the town first settled in 1652. “Nobody wants any gas lines to run through their backyards, but those of us who are paying the power bills are telling them we need to do those things.”
York’s got a point, said energy analyst Ed Hirs, professor of energy economics at the University of Houston and the managing director of Hillhouse Resources, an independent oil and gas company.
“Why should this poor guy pay four or five times what a competitor (in another state) is paying?” Hirs asked. “It’s really challenging.”
Why are energy costs so high in New England? To use a phrase from a best-selling book, it’s due to a perfect storm of energy moves that have caused economic ripple effects.
“The capacity for the lines that have been in New England haven’t changed, really since the mid-1960s,” Hirs told Watchdog.org. “The pipelines are generally packed full year round. Demand, of course, has increased since then, the population has increased since then.”
What’s more, the region has retired or shut down many of its coal-fired power plants and phased out nuclear facilities such as the Vermont Yankee plant that generated 620 megawatts of electricity when operating at full power.
Natural gas figured to fill the gap — there is plenty of inexpensive natural gas some 400 miles away in the Marcellus Shale Formation in Pennsylvania — but there is a dearth of pipeline capacity to bring the natural gas to New England markets.
Pipeline companies such as Kinder Morgan are eager to build pipelines connecting the region, but a combination of environmental groups opposed to natural gas development and property owners who don’t want pipelines running underneath their land have kept construction projects from moving forward.
Pipeline construction “is a bad idea for a number of reasons,” said Greg Cunningham, vice president and director of clean energy and climate change for the Conservation Law Foundation, based in Boston.
“The (New England) states are looking to overbuild and oversize the pipes. That, to our minds, means an investment that won’t allow us to meet our climate change goals which, as a region, are to reduce our greenhouse gas emissions by 80 percent from 1990 levels by the year 2050.”
To help meet its energy demands, Boston has come to rely on LNG, or liquified natural gas.
“By not having these pipelines, New England condemns itself to rely more on petroleum for heating and that fuel oil stuff is dirty, nasty, filthy material,” Hirs said in a telephone interview. “For the sake of argument, fellas, you’ve got natural gas here. It’s the lesser of two evils.”
But Cunningham says an LNG pipeline system for the Northeast is under-utilized and calls for the region to adopt a series of policies including improving energy efficiency and relying more on renewables.
He also points to some areas, such as Maine, where energy prices actually went down by nearly 20 percent over the previous winter.
“Policies that we’ve been talking about for some time are starting to render benefits and some of these improvements in the markets are starting to aid us as well,” Cunningham said in a telephone interview. “Now I recognize that doesn’t mean that there aren’t some high energy costs to be paid, but we are on the right track and those costs are declining.”
While some environmental groups don’t want natural gas in the region’s energy portfolio under any circumstances, Cunningham said the CLF is open to using natural gas in limited scenarios and after a needs assessment is conducted.
“What we’re urging here is a cautious, moderated approach,” Cunningham said. “It’s not anti-natural gas, it’s using natural gas in a cautious way that we need to in light of the climate imperative that we’re facing.”
Hirs is skeptical.
“The renewables arguments are costly. They require storage capacity for the grid which we don’t have. They require re-engineering the grid for two directional power,” Hirs said. “These are really big issues.”
In the meantime, York said he’s getting some relief from his company’s high energy bills after his local utility announced a price reduction for the coming months.
But he worries about what will happen when fall and winter come.
“Power is so inexpensive in the South and other parts of the country because they put in that infrastructure and they allow people to move gas and electrical power throughout the grid,” York said. “But for whatever reason the people in New England seem to think that, you know, you hit a switch and you got power and there’s nothing to it, but that’s not really the reality of it.”