In August 2014, Gov. Dannel P. Malloy, officials from the Fairfield County town of Wilton and representatives of Yankee Gas celebrated the start of a large-scale natural gas expansion project estimated to save taxpayers hundreds of thousands of dollars a year.
Malloy’s Comprehensive Energy Strategy recommended changes in energy efficiency, electricity supply, industrial energy requirements, transportation and natural gas. He promoted his plan to spur economic development, business growth and reduced costs in response to persistent complaints from homeowners and businesses about high energy prices.
A key part of the governor’s plan was to convert heating in homes and businesses to natural gas from oil, a strategy that Wilton embraced. Malloy announced in 2012 an ambitious goal of connecting 300,000 households to natural gas by 2020.
State officials reported in 2018 that 39,104 residential customers converted to natural gas for heating and 12,021 commercial and industrial customers shifted to natural gas for generation or other processes between 2014 and 2016.
But now, soaring natural gas prices are eliminating the rationale to abandon oil.
High natural gas prices promise a costly winter
In Wilton, all four of the town’s schools were hooked up to natural gas by 2016.
Local officials are now bracing for a costly winter as natural gas prices soar. Wilton has budgeted more than $500,000 for heating, up from $440,000 last year and about $300,000 before that, said Chris Burney, director of public works and facilities.
“In the next month or so we’ll decide if we have to pull money out of other areas to supplement the heating bill,” he said.
Part of the higher cost is due to fresh-air systems that run 24/7 in response to COVID-19 safety mandates. But rising natural gas prices also are responsible for the financial pain.
“I’m watching the market like everyone else,” Burney said.
Critics of the Malloy administration’s energy policies say consumers who spent thousands of dollars to convert to natural gas have little to show for their investment now that gas prices are spiking. As prices fluctuate, with gas and oil taking turns as the more expensive heating fuel, family-owned oil dealerships say that was always their point: Markets, not government, dictate commodity prices.
Gas pipeline construction has ‘not materialized’
In a February 2018 report, state energy officials said gas main installation has “not materialized at the rate the local distribution companies projected.” Utilities are not overbuilding, but are installing mains to meet current and near future customer demand, DEEP said.
In addition, with expanded use of fuel cells and other on-site power such as solar panels, “much of the anticipated residential natural gas demand” is shifting to the commercial and industrial sectors, that show greater demand, the state said.
Connecticut Natural Gas, Southern Connecticut Gas and Yankee Gas have installed about 381 miles of gas lines from 2014 to 2019, with 2020 information not yet reviewed, according to the state Public Utilities Regulatory Authority. The Malloy administration said in 2013 its goal over 10 years was to build about 900 miles of gas mains, focusing on factories, hospitals, schools and other buildings with significant energy consumption.
The Public Utilities Regulatory Authority said in December that ratepayers are on the hook for about $64 million in higher gas costs for the expansion program. Risks of the program are “demonstrably greater” for ratepayers than the utilities’ shareholders, regulators said.
Meanwhile, with natural gas prices continuing to rise, “it doesn’t make sense for customers to make the switch,” said Shannon Laun, a staff attorney at the Conservation Law Foundation, an environmental advocacy organization.
The U.S. Department of Energy reports that a natural gas bench mark in June and July was at its highest level for the same months since 2014. In the first week of October, the spot price jumped 5.7%.
The reasons include sharply higher prices in Europe due to rising demand as COVID-19 restrictions ease and less natural gas storage in the U.S. than last year due to a drop in production during the pandemic.
‘I told you so’
“This is definitely an I-told-you-so moment,” said Chris Herb, president of the Connecticut Energy Marketers Association, which represents oil dealers. “All this government picking winners and losers played out really poorly for consumers.”
Previous energy price swings have prompted consumers to take a second look at converting to natural gas. In 2015, cost savings between natural gas and oil shrank, leading to a more than 25% drop in conversions among residences and businesses.
Global oil prices also are rising as OPEC leaves supply restrictions unchanged, demand rises and a gas-to-oil switch is underway in response to high natural gas prices in Europe and Asia. Locally, Tuxis Ohrs Fuel in Meriden is charging $3 a gallon for oil, or $2.50 for customers who lock in their price, said Kate Childs, vice president of the 42-year-old family business.
She said she lost business due to a “ton of conversions” that included nurseries, greenhouses and schools.
Childs called the state program a “farce.”
“It was a 10-to-15 year horizon. They completely misled the consumer,” she said.
In their battle with Malloy, family-owned oil dealerships said the governor favored utility-owned gas companies over small businesses. Now they’re opposing the Lamont administration’s push for electric heat pump subsidies.
A spokesman for the Department of Energy and Environmental Protection did not respond to a request for comment.
A push for electrification and weatherization
Amy McLean, Connecticut director of the Acadia Center, a clean energy advocacy group, said heat pump technology has expanded and improved over the past few years. Electrification and weatherization are common sense energy solutions and state policy should not give incentives to switch to gas, she said.
“At this point gas companies say natural gas is cleaner than oil,” McLean said. “It’s about the same or worse than oil because of leaks in pipelines.”
New England energy markets are expected to see significantly greater price volatility this winter compared to the “relative calm of the last couple of years,” said Dan Dolan, president of the New England Power Generators Association.
And that’s before the arrival of winter weather. Significant price volatility could result if extremely cold weather or storms plague New England, he said.
“This is not a new or unique situation,” he said. “There are some unique aspects to this one.”
Stephen Singer can be reached at email@example.com.
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