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The Real-World Costs and Consequences of Restricting Natural Gas

The Real-World Costs and Consequences of Restricting Natural Gas

Apropos of next week’s hearing at the Colorado Public Utilities Commission—in which the PUC plans to take public comment on a proposed rule that would dramatically affect natural gas line extensions—news out of New England offers a grim look at the consequences of underrating sufficient natural gas capacity.

Per the Washington Examiner:

Authorities in New England are staring down a similar predicament this coming winter to Europe’s: keeping people warm during extreme cold without breaking the bank.

 

Infrastructure and other constraints mean neither region can suddenly access additional volumes of natural gas adequate to bring down prices, pushing leaders to promote demand reduction measures for electricity and gas.

 

But some have pointed out that such measures can only go so far when consumers are in the thick of winter and temperatures are in the teens.

This is of course, true. Natural gas is an invaluable resource for keeping populations warm even in the harshest of winter conditions. Supply disruptions of the fuel stemming from sanctions levied in reaction to the Russian invasion of Ukraine, not to mention the misbegotten policy of dependence on Russian imports in the first place, have left Europe in a precarious situation heading into the winter with dangerously low reserves of LNG.

But what about New England? After all, the U.S. is still the world’s largest producer of natural gas. And though prices for the fuel have increased domestically, they are still nowhere near European levels. Our producers have kept up their output, and our supplies appear to be adequate in the aggregate. Why then, is New England facing such a shortage?

It turns out, the region has spurned opportunities to ensure adequate supply of the fuel in the past, and the consequences of the those actions are coming home to roost.

Proposed pipeline projects to increase gas supplies to the region have faced special challenges in recent years from environmental groups and some Democrats, such as former New York Gov. Andrew Cuomo, who blocked permitting for pipelines.

Protectionist policies from the federal government have also made it difficult for LNG producers in other regions of the U.S. to help fill the gap in supply.

The prospect of allowing more shipments of LNG into New England by easing enforcement of the Jones Act, too, has proved controversial — and caused a significant rift among advisers to President Donald Trump.

Such misguided policy has left New England residents with the unfortunate situation of being forced to choose between adequate warmth this winter, and an affordable heating bill. And its utilities are responding with calls for demand-side management measures.

Charles Crews, president and CEO of the Northeast Gas Association, is preparing consumers for $40 per MMBtu this winter.

 

“If you do the math, that could equate to a $1,000 utility bill for an everyday consumer here in our region,” Crews warned during a panel discussion at last week’s FERC-hosted New England Winter Gas-Electric Forum. “I don’t know about you, but I don’t want to spend a thousand dollars on my utility bill.”

 

As some other participants explored, in the absence of a few billion cubic feet more of pipeline capacity or some other structural solution, the way to avoid a 1k bill is to burn less gas.

Of course, there are limits to how much you can tell residents to avoid burning gas in the dead of a harsh winter.

Charles Dickerson, president and CEO of Northeast Power Coordinating Council, offered a candid assessment of the limits of demand reduction as a strategy for bringing down prices this winter.

 

“When it’s 16 degrees outside, there’s only so much reduction you can do on demand,” Dickerson said, recalling a television appearance he made years ago where he learned this lesson.

 

“I made the unfortunate mistake of telling people to put sweaters on. My family killed me,” he said to laughter from the audience. “There’s not enough sweaters you can put on when it’s 16 degrees outside.”

Coloradans understand this too. They don’t need the PUC to make the same mistakes as other states that woefully underrated the value of having adequate infrastructure to ensure reliable gas service.

Restricting new gas line extensions may be well and good for California—though its push to electrify the state far too quickly has left its grid in a shambolic state—the weather in Colorado will be far less forgiving. Unlike California, Coloradans experience real winters, where the consequences of having inadequate heating supplies will be felt much in the same way as is currently the case in New England.

Colorado residents and policymakers must give due consideration to the vital role natural gas continues to play in the state.

Despite the rush to decarbonize everything all at once, the state’s gas utilities must be allowed to continue serving the state reliably, without cost raising impediments from state regulators, until a better alternative is up to the task. There’s a reason roughly 70 percent of Coloradans still rely on the fuel.

Electric heating alternatives still struggle with effectiveness and efficiency in cold climates and are often quite costly to install. Until that changes, gas is a necessity.