Will Northeast See Gas Supply Relief?

Kinder Morgan has announced that it plans to begin construction on its 124-mile Northeast Direct natural gas pipeline early this summer, according to a Washington Post article. The $700 million pipeline will bring supplies from gas fields in Pennsylvania to customers in New York and New England. The region relies heavily on natural gas for both electricity and heating and has seen prices spike due to constrained gas supplies in recent winters.

The Shift to Natural Gas

An editorial in the Providence Journal noted that this results from a rapid shift from coal and oil-based power generation to gas-based generation. Between 2000 and 2014, New England saw generation from oil-fired plants drop from 22 percent to just 1 percent of generation, while coal-based generation dropped from 18 percent to just 5 percent. At the same time, natural gas-based electricity rose from 15 percent to 44 percent.

Who Pays?

Typically, gas customers, not electricity customers, pay for gas pipelines. Argus media reported March 26 that because gas is becoming a far more important source for power generation, there was a possibility of including the pipeline costs in the electricity tariff. However, according to the chief executive of the New England ISO, Gordon van Welie, this idea has “died, and it is not coming back anytime soon.” Without increased gas supplies, it is unclear whether gas customers in the Northeast will see winter gas prices fall anytime soon.

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