What's going to happen to electricity prices in Maine this winter?

Energy prices around the world are rising faster than ever. Prices of the natural gas for this Winter are at 20-year highs. What is causing these huge price increases?

Here in New England, we find ourselves in a perfect storm. Demand for natural gas continues to grow as customers around our region covert to natural gas solutions.

Over the last several years, poor public policy decisions by our neighboring states have limited the capacity of gas distribution in New England. New York and Massachusetts have denied permits to three large distribution pipelines that could provide significant volume. Demand for natural gas in New England continues to grow while supply has been artificially capped. This situation has established a baseline for upward price pressure.

Public policy has also shifted electric generation from other fuel sources to natural gas, exacerbating demand pressure in our region. According to ISO-NE, the independent, not-for-profit corporation responsible for keeping electricity flowing across the six New England States, “During the last few years, inadequate infrastructure to transport natural gas has affected the ability of natural-gas fired plants to get the fuel they need to perform.” In fact, electricity generators augment their gas supply to help satisfy their winter fuel requirements by importing liquid natural gas (LNG) from foreign countries. Last Winter, electricity producers in our region used gas originating from Venezuela and Trinidad and & Tobago. As you can imagine imported LNG is significantly more expensive than piped natural gas from Pennsylvania, but that is the solution our public policy driven capacity restrictions have caused.

This year, with Russia’s aggression in Ukraine, and the subsequent curtailing of Russian natural gas and oil products from the European and North American markets, energy supplies are in even shorter supply. The law of supply and demand is in play here: Supply is down (capacity constraints and Russian containment), while Demand is up (more customers are using natural gas, electricity now is nearly 70% produced by natural gas in New England). Price has increased with this situation.

US produced LNG is also part of our story. The price for LNG worldwide has reached all-time highs. Europe is desperately trying to replace the natural gas supplied by Russia. Because of this “new” demand for US produced natural gas, many natural gas producers are diverting all they can to LNG distribution channels for use in Europe and Asia where that gas commands a premium price. This situation further reduces supply available to New England customers.

In New England we have a perfect storm: growing demand, shrinking supply.