Two reasons New England will suffer brutal winter energy prices and even blackouts
Breanne Deppisch
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A fuel supply crisis in New England has sent consumer utility bills soaring and threatens blackouts this winter — even as the United States exports record volumes of fuel to customers overseas.
New England’s woes are attributable to two factors: its lack of pipeline infrastructure, which prevents it from receiving supplies from other parts of the U.S., and a century-old law known as the Jones Act that limits the delivery of fuel from the rest of the country by ship.
As a result, U.S. fuel continues to be exported at record volumes to the European Union — where gas storage facilities are full and oil is, for now, oversupplied — even as its own residents are starved of that same supply.
The Jones Act has come under heavy criticism in recent months, both from utility company directors and state leaders.
Otherwise known as the Merchant Marine Act of 1920, the Jones Act requires that any cargo shipped between domestic ports be transported on a U.S.-built, U.S.-registered ship flying the U.S. flag and manned by a majority-U.S. crew.
Though it is aimed at ensuring a minimum strength for the domestic shipping industry, the law inflates shipping costs and limits the availability of cargo ships, making it vastly more expensive for domestic shipping firms to transport fuel across the country. The Maritime Administration estimates that it currently costs 2.7 times as much to ship goods on U.S.-flagged vessels.
This summer, New England’s six state governors asked Energy Secretary Jennifer Granholm to explore the conditions that the Jones Act might be suspended to grant the Northeast expanded access to U.S. natural gas — noting that, without a Jones Act reprieve, the Northeast must compete with the rest of the world for supplies of liquefied natural gas. There are no Jones Act-compliant LNG tankers.
“You would think that charity would begin at home … that American fuel would go to American ports,” Joe Nolan, CEO of New England utility Eversource Energy, told the Financial Times in an interview. “We’re going to have to compete just like everybody else — in the global market.”
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In addition, New England has been dubbed an “energy island” due to its dearth of pipelines, which has left it largely disconnected from the rest of North America and therefore leaves it deeply reliant on shipped LNG for supplies.
This is due in large part to political resistance to pipeline infrastructure in the region, including by former New York Gov. Andrew Cuomo, who repeatedly blocked natural gas production and pipeline construction during his time in office.
In 2016, Cuomo used a string of administrative actions to block the Constitution Pipeline, a gas pipeline project that would have brought supplies from Pennsylvania to New England, citing concerns about water quality and carbon dioxide emissions.
The Jones Act and lack of natural gas pipeline infrastructure don’t bode well for the Northeast heading into winter. Already, utility bills have already soared in the region, where residents rely disproportionately on home heating oil and natural gas to warm their homes during winter compared to the rest of the U.S.
According to data from the Energy Information Administration, residents who rely on home heating oil will spend an average of $2,694 to heat their homes this winter — a 45% jump from the previous year and the highest average in at least 25 years.
Heating oil prices were 65% higher in October compared to the previous year due to tight inventories and constraints on refining, EIA said.
Natural gas prices have also soared. In Boston, prices for natural gas this winter have soared to nearly $30 per million British thermal units, or mmBtu, even as gas in other parts of the U.S. is trading at roughly one-fourth of that price.
Grid regulators have warned this month that an extremely cold winter or cold snap could strain reliability and result in the need for rolling blackouts. Distillate inventories in the Northeast have fallen 44% compared to the same point last year.
Earlier this year, Sens. Elizabeth Warren (D-MA), Jack Reed (D-RI), and Angus King (I-ME) urged the administration in a letter to curb LNG exports in an effort to “keep prices low for American consumers.”
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“We can’t let energy companies squeeze American consumers with unaffordable energy bills at home while reaping record profits through LNG exports abroad,” Warren said.
“The Department of Energy needs to reevaluate its LNG export policies and figure out how to keep prices low for American consumers,” she added.