A lack of pipelines into New England is making natural gas costlier, pushing up wholesale electricity prices in the region by 55 percent last year, the region's electric grid operator said Tuesday.
The average price of wholesale electric energy rose to $56.06 per megawatt hour, up from a historic low of $36.09 in 2012, ISO-New England said.
Natural gas is the predominant fuel used to generate the region's electricity, amounting to about 46 percent of generation in 2013. Wholesale power prices tend to track the price of natural gas.
The rising price undermines the attractiveness of natural gas, which is in high demand as an alternative to costlier heating oil. The price of natural gas has declined as production increases in the Marcellus shale field in New York and Pennsylvania.
But limited pipeline capacity into New England has made it difficult for some natural-gas-fired generators to get fuel, pushing up prices and risking reliable operation of the power system, ISO said.
"New England sits on the doorstep of the Marcellus shale, which has increased supply and lowered natural gas prices significantly, at least in areas of the country that can access that gas," said Gordon van Welie, president and chief executive of ISO, based in Holyoke, Mass.
Pipeline constraints, particularly in winter when demand for home heating rises, have pushed up the average spot price for natural gas in New England to the highest in the country. Until new pipelines and equipment are built, prices for natural gas and wholesale electricity are likely to remain volatile, ISO said.
Seth Kaplan, vice president for policy and climate advocacy at the Conservation Law Foundation, a Boston environmental group, said the higher electricity prices due to the cost of gas should prod officials to switch from fossil fuels, particularly using wind power that can capitalize on gusty New England winters.
"We're strapped to fossil fuels like a roller coaster," he said.
In addition, costly pipeline construction can be avoided with improved storage and greater efficiency, he said.
In January, the governors of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont asked ISO for technical help to seek proposals to build transmission equipment and public works to deliver enough electricity to serve 1.2 million to 3.6 million homes. The states also asked ISO to devise a way to finance the project.
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