While everyone has been obsessing over the affordability of electricity in New Hampshire this winter, natural gas rates have also gone haywire. And more trouble is on the horizon.
Effective on March 1, the state’s biggest natural gas utility — Liberty — imposed an emergency increase in its cost-of-gas rate, for residential customers heating with that technology, of nearly 53%. This rate — which pays only for the fuel, and does not include additional charges that pay for the pipeline network that delivers the gas — is now $1.75 per therm.
How much gas is a therm? About what it takes to run a typical furnace for an hour.
Whom does Liberty serve, as a gas utility? About 98,000 customers in New Hampshire, from Nashua to the Lakes Region, as well as Berlin. (A separate Liberty system, delivering propane under even higher rates, serves Keene.)
This latest increase for Liberty customers caps a dismal winter season. On Nov. 1 of last year, a cost-of-gas rate of 91.62 cents per therm went into effect. On Feb. 1, the rate went up to $1.14. And now this latest increase, which actually could have been much worse.
Originally, Liberty asked the Public Utilities Commission for an emergency increase to an obscene $2.57 per therm. The state’s Department of Energy persuaded the utility to live with the smaller increase actually approved.
Liberty is not New Hampshire’s only natural gas utility. The other is Unitil, which serves about 35,000 customers, mostly in the seacoast region. The Unitil cost-of-gas rate in New Hampshire — which, like Liberty’s, pays only for fuel and does not include distribution charges — is 62.52 cents.
How is that possible? Natural gas is natural gas, and New Hampshire is cold in wintertime, regardless of whether you live in the service territory of Liberty or Unitil. So why is Liberty’s cost-of-gas rate now almost three times what Unitil is charging?
From my front-row seat as the state’s Consumer Advocate, tasked with representing the interests of residential customers before the PUC, I discern two reasons.
First, the two utilities are literally looking in different directions. Unitil draws much of its gas supply from the north, through interstate pipelines that ultimately suck gas out of Canada. Liberty depends on interstate pipelines that draw their supply from places like Texas and Pennsylvania — and these pipelines, in particular, have no capacity to spare.
This is what politicians are talking about when they issue calls for more natural gas pipeline capacity for New England. Often these entreaties refer to electricity since natural gas is the dominant generation technology for our region. But the same interstate pipelines that sell fuel to generators are also serving the heating customers of Liberty and Unitil.
The second reason Liberty’s gas supply rates are higher than Unitil’s has to do with corporate culture.
Unitil is the smallest utility whose shares trade on the New York Stock Exchange. Though it also serves customers in Maine and Massachusetts, Unitil is based in Hampton and is thus the only true New Hampshire company among investor-owned gas and electric utilities. Last year, Unitil acquired two smaller gas utilities in Maine and announced plans to buy the Aquarion Water Company of New Hampshire presently owned by Eversource.
In other words, Unitil is a scrappy, ambitious, New Hampshire-centric enterprise that contrasts sharply with Liberty, a subsidiary of an Ontario-based firm — Algonquin Power & Utilities — that has had a troubled few years. A management shake-up and strategic retreat resulted in a big selloff of assets in favor of becoming a so-called “pure play” utility conglomerate focused entirely on retail companies with regulated rates.
This shift has trickled down palpably to the way Liberty approaches its work here. Just a few years ago, Liberty wanted to spend nearly half a billion dollars on what was known as the Granite Bridge project — a new pipeline along the Route 101 corridor along with a huge liquified natural gas tank in Epping that could have operated as a so-called “physical hedge” against the sort of wholesale price volatility that drives the March 1 rate increase.
Now Liberty’s representatives just shrug in the face of such fuel cost jolts, triggered by an unusually cold winter. They are cooly indifferent to whether customers pay now — that was the $2.57 option — or whether they pay later, as they will under the $1.57 rate actually approved — as long as Liberty can claim they are just doing what the PUC ordered them to do.
In fairness to Liberty, that’s essentially the stance Unitil takes as well. Both gas utilities pretty much treat the cost of buying gas and getting it here as implacable, like the tides. And because they earn no profit on these costs, they tend to disclaim responsibility for them.
That’s problematic for two reasons.
First, unlike with electricity, residential natural gas customers have no choice but to buy their gas from the distribution utility. There is no community power aggregation and no competitive suppliers.
Second, the business model of these utilities depends on people maintaining their reliance on this expensive fossil fuel. In a different and better world, such utilities would be defined as “heat” rather than “gas” utilities and tasked with investigating whether other technologies could be cheaper and better.
For both Liberty and Unitil, gas supply rates are scheduled to decrease on May 1 as summer rates click in. But, as I write, the newly raging Mideast war has sent natural gas prices, globally, well beyond the levels seen in January. Sooner or later, we’ll see that reflected in retail rates for New Hampshire customers.
Attorney Donald M. Kreis is the state’s Consumer Advocate, representing the interests of residential utility customers.