NRCM Testimony In Opposition to LD 1187, €An Act to Create the Maine Energy Cost Reduction Authority€, and LD 1262, €œAn Act to Reduce Energy Costs€

by Dylan Voorhees, NRCM Clean Energy Project Director

Senator Cleveland and Representative Hobbins,

NRCM believes these bills as written give the government too much power to commit Maine to a greater dependence on natural gas. Even aside from the specific details of the bills, we believe Maine should proceed with extreme caution in making long-term commitments to imported fossil fuels, given our state’s goals of increasing energy independence, promoting renewables and energy efficiency, and addressing climate change that is already beginning to impact our state.

NRCM is not opposed to the use of natural gas. We recognize that in some regions of the country natural gas has begun to displace power generation from coal, avoiding significant amounts of carbon pollution. And we recognize the strong desire to bring natural gas as a heating fuel to parts of Maine, a move which would likely reduce energy costs for some, and may have carbon pollution benefits.

However the policy questions raised by these bills go far beyond the positives or negatives of natural gas as a fuel. This bill proposes a significant intervention by the government, using public dollars, to make long-term commitments for natural gas capacity into New England and Maine. In the form and magnitude contemplated in this bill, this would probably be unprecedented in Maine and perhaps nationally. Maine’s lawmakers have certainly led the nation on several occasions—and often for the good—but there has always been a natural hesitancy by Maine’s Legislature and that should guide you here as well.

These are some of our high level concerns with this bill:

1. This bill puts significant risk on ratepayers that would otherwise be born by the private sector. It does so without the planning context that Maine used when the ratepayers took these same kind of risks prior to deregulation.

NRCM recognizes that there are times when energy markets fail to provide the most desirable public outcome. This is clearly the case with demand reduction: energy providers and utilities do not have any natural incentive—quite the opposite—to help reduce demand through energy efficiency, even when it is extremely cost-effective to do so. So we use policies to address that. We place pollution limits on power plants to try and internalize the true cost the public pays for pollution, be they public health or others. In each of these examples, ratepayers pay a cost, but they receive a larger benefit. We support that and we assume that the supporters of this bill must support those concepts as well. But the burden should be on the policy’s proponent to show clearly that there is a market failure when they propose a government action.

Before Maine deregulated, the state determined what all the reasonable costs of producing power were, including the cost of procuring fuels. The public assumed the risks, and limited the profits that the regulated entities could make. People may have mixed feelings about that, but one thing is true: the Public Utilities Commission made those decisions in a planning context that tried to consider the best, cheapest way to provide the outcome of keeping the lights on, whether a power plant, a new transmission line, or cost-effective energy efficiency. This bill lacks most of that context.

When we deregulated, it was because policymakers felt the generation of power and the procurement of fuels was something the market could provide more efficiently. That means private entities would calculate and take the risks, and the rewards to go with it. We believe more analysis is needed to show that the private sector could not meet the needs this bill seeks to address. We believe ISO-NE should continue to pursue reforms to the market that put incentives in the right place, i.e. for power generators, so that they can make these long-term commitments.

2. It would have Maine make long-term commitments for natural gas when we know natural gas prices will rise over the long-term.

Natural gas prices have likely bottomed out, either last year or this year. We all know they have been much higher in the past, and most experts would agree that they will be higher in the future. Nobody knows how quickly gas prices will rise, of course. And gas might still be a relatively cheap fuel five years from now. But in ten? Or twenty? I don’t know, do you? Subsidizing the cost of building a natural gas pipeline—and taking on some of the risk through a long-term commitment is absolutely a form of subsidy—means we need to think long-term.

3. The bill could increase our dependence on natural gas for power, at the detriment of continued development of renewable energy sources.

Maine has been steadily increasing local renewable energy resources. It is our state policy to do so because renewable energy resources are sustainable and more stable over the long-term, and they keep more of our energy dollars in the Maine economy. Over the last ten years or so, the single biggest concern of ISO-NE and in Maine’s power market has been our heavy dependence on natural gas. Our renewable energy policies were put in place largely to address that overdependence.

If the bill has its desired result, it will lower the price of gas that our generators buy, thus lowering the price of electricity, some would say artificially. It would be historic irony, and could be harmful over the long-term, if the unintended consequence of this bill made renewable development more difficult and locked us further into gas. Are our memories so short? The price of most forms of renewables is coming down. The price of gas will go up. As desirable as gas seems in this moment—and I repeat that we do not oppose some role for gas in Maine—we know intuitively that our long-term prosperity means greater made-in-Maine renewable energy.

4. Natural gas contributes to climate change and gas from hydraulic fracturing may have very large climate change consequences.

Did you know that New England’s natural gas power plants put out more total carbon pollution than our coal power plants? Of course emissions from a gas power plant are less than a coal plant on a per unit of energy basis. Nonetheless we must reduce total greenhouse gas emissions much more if Maine is to contribute to broader efforts to reduce the impacts of climate change. Again, we must be mindful of the long-term consequences of big policy decisions such as this bill.

The gas that this bill seeks to enable is gas from “fracking”, and although the jury may still be out, there is compelling evidence that the total greenhouse gas emissions of gas from fracking operations may be much higher than other sources of gas. Enough so that the relative greenhouse gas benefits of  fraked gas compared to oil or coal, have been questioned by some. We don’t know enough to make a precise judgment on that comparison, but we know enough to express the concern about the climate impacts of this bill. Some have said natural gas is a “bridge fuel” between dirtier fossil fuels and a renewable, climate-friendly future. While there may be some truth to that, we ask you to consider how long a bridge you are building and committing us to stay on. The need to significantly mitigate greenhouse gas emissions is not a problem for a future generation, it is one we must confront now.

5. At least when considered on its own, the bill puts cart before the horse by prioritizing more energy supply instead of more energy efficiency and demand resources that are unequivocally cheaper for ratepayers.

I will not belabor this point because we know this bill does not proclude significant action by this Legislature to increase investments in energy efficiency. However over the last five years Maine has not established a strong track record of making full investments in cost-effective efficiency. If Maine continues to fail to increase investments in cost-effective energy efficiency resources that have been carefully identified and analyzed, Maine risks falling further behind in efforts to lower energy costs. We risk making further investments in natural gas that are built on a system that wastes energy (for electricity and direct gas use), meaning our energy bills will still be higher than they need to be.

In conclusion, we obviously have significant concerns about this bill taking Maine in a harmful direction, despite its seemingly good intentions. We recognize the goal is to lower energy costs. We think there are other strategies that the committee should strongly consider to increase energy efficiency, which would lower energy costs even more with little to no risk. If the committee decides to move forward with some of the concepts in this bill, we believe they need to be scaled back dramatically, with more emphasis on analysis and planning and constraints on this far-reaching policy.

Thank you.