Yes, We Believe So,But New Capacity Will Be

Needed (And Several Projects Are

in the Pipeline)

Massachusetts Electric Restructuring RoundtableFebruary 16, 2001

Thomas M. Kiley, President

The New England Gas Association

“Will There Be Enough Gas to Fully Support Electricity Generation

in New England?”

The Report

With so much generation in the region choosing gas, addresses impact on gas and electricity systems Energy systems are increasingly linked

– Study raises questions about infrastructure for multiple systems – electric, gas, oil – and how they inter-relate Agree that additional pipeline capacity will be needed to meet future power generation demand Need for ongoing communication – as in this forum today and others

NEGA’s Discussion Points Today

Study’s assumptions on pipeline capacity do not include several proposed system enhancements – undervaluing likely pipeline capacity growth

Uncertain of study’s assumptions about total electric system capacity

Dismayed by misimpressions conveyed about “gas shortages”

1985 1990 1998 2000

0

0.5

1

1.5

2

2.5

3

3.5

Bcf/day

Daily pipeline capacity today is about 3.6 billion cubic feet per day (Bcf/d).

In last 3 years, pipeline capacity has grown by 800,000 MMCf/d, or 29%

Region’s Pipeline Capacity Growth

New Pipeline Supply - PNGTS

Completed February 1999• 292 miles of 24” and 30” pipe, U.S. side• Interconnects with TransCanada system• $500 million investment• Initially 178 MMcf/d; now 230 MMcf/d

New Pipeline Supply – Maritimes & Northeast

Completed December 1999• 205 miles of 24” and 30” pipe, U.S. side• Supplies from Sable Offshore• $1.2 billion investment, total pipeline• 400 MMcf/d

New Supply Project – Atlantic LNG

New $1 billion liquefaction plant, Trinidad & Tobago• First deliveries to New England, May 1999• For calendar year 2000, as of 9/00, Distrigas had imported 60 Bcf from Trinidad, 11 Bcf from Algeria• 240 MMcf/d• Growing interest in LNG by many companies

Distribution System Growth

Continued investments by LDCs in system expansion & maintenance• New pipelines mean new service areas• 2 new LDCs in Maine

Distrigas of Mass. Everett marine terminal

1999 imports: 96 Bcf, more than double ’98 levels

3.5 Bcf of storage Interconnections to Algonquin

& Tennessee systems Recently increased system’s

daily vapor sendout to 450,000 MMBtu/d

LNG provides about 25% of region’s peak day supply

New contracts with power plants

Distrigas LNG Terminal

ME

NH

VT

MA

CTRI

Vermont Gas System

Portland Natural GasTransmission System Maritimes & Northeast

Pipeline

Iroquois GasTransmission System

Tennessee GasPipeline / El Paso

Algonquin GasTransmission / Duke

The Regional Transmission System

Cabot LNG /Distrigas

Miles of pipe:

Transmission –1,879

Distribution –32,120

ME

NH

VT

MA

CTRI

Androscoggin Energy, Jay,

157 MWs

Maine Independence,

Veazie, 520 MWs

Bucksport Energy, 174 MWs

Rumford Power,

265 MWs

Berkshire Power,

Agawam, 276 MWs

Tiverton, 265 MWs

Recent Gas Power Plants on N.E. Grid

Bridgeport, 540 MWs

Dighton, 178 MWs

Over 2,300MWs of newgeneration has been added

New Capacity Will Be Needed

Over 20,000 MWs of new units are proposed in the region, according to ISO listing

Report considers bandwidth of 7-11,000 MWs of new gas units in 2001-2005 timeframe

To meet new load demand, report states that new gas pipeline capacity will be needed. NEGA concurs.

Report includes in its modeling analysis several proposed projects but not others. This assumption is key. NEGA believes these others projects are likely and will contribute both to meet supply needs and help alleviate system bottlenecks as identified in the report.

Proposed Enhancements, New England / New York Systems, 2002-2003

Duke / Algonquin:• HubLine• Islander East (with KeySpan)

Duke / Maritimes & Northeast:• M&NE Phase III Expansion

El Paso / Tennessee:• Eastern Express New England• Connecticut/Long Island Lateral

Iroquois:• Eastchester

Included / Not Included

Included

Tennessee’s “Eastern Express 2000” (in 2001 model)

Iroquois’ “Eastchester” (in 2003 model)

Not Included

Tennessee’s “Eastern Express New England”

Duke’s “HubLine”

Maritimes & Northeast’s “Phase III Expansion”

See report pages vi-vii; 45-48. Also does not include Distrigas’ sendout capability in pipeline capacity (see p. ix).

Projects are Moving through the Process Now

The inclusion of several of these projects, as they proceed, will mean new supplies and increased capacity.

These projects are proceeding on schedule, as planned, under regulatory review.

Planned to meet market demand and conditions. Timely approval is key. Agree with report: “Any facility improvement that

results in increased liquidity at Dracut would likewise improve electric system reliability across New England” (p. xi).

Uncertainty About Electric System Capability/Assumptions

Would be interested in further information on electric assumptions - missing sense of total electric system capability in 2003-2005: gas units are presented somewhat in a vacuum.

The issue of constraint on peak, Winter 2003: – What is the total system capability? – What is the status of non-gas units? – What is the assumption for units on scheduled maintenance/ unplanned

outages, etc.? – What is the dispatch model/ process? – How much attrition of existing capacity occurs and when? – What about transmission ties: HQ, NB, etc.?

Reference gas: 2005 summer peak, 25,213 MWs, 2005 winter peak, 22,252 MWs (p. 34); High case: 2005 summer peak, 26,986 MWs, 2005 winter peak, 23,961 MWs (p. 34)

NEPOOL’s projected net generating capacity for this summer, 2001, is 27,100 MWs, with forecasted peak of 23,650

Misimpressions Conveyed on “Shortages” & “Crisis” Report’s cover letter states: “Against the backdrop of skyrocketing

commodity gas costs and the power crisis in California, New England’s growing dependence on natural gas for power generation is genuine cause for concern” (Levitan, 1-29-01)

News reports in wake of ISO press conference of Feb. 5 conveyed sense of looming crisis in the region – and pending “choice” between gas heat and power.

The Boston Globe, 2-6-01: “Study sees gas heat, electric shortages…Some New England consumers could go temporarily without heat or electricity during the winter of 2003 because the pipeline system may not be able to keep homes and power plants supplied with natural gas on peak winter days, according to a study released yesterday by the operator of the region’s power grid.”

This is incorrect.

LDC Reliability is Confirmed

Report itself makes clear several times that LDC supplies to firm customers are not at risk:

“When constraints arise, LDCs will be served as well as the minority of merchant generators who have lined up firm long-haul entitlements in their own name. Under the pipelines’ rigid scheduling priority systems, LAI does not envision the increased demand for natural gas for merchant generation having an injurious effect on the reliability of service for New England’s LDCs.” (p. ix)

“New England’s LDCs have nothing to worry about during times of constraint…[Gas] utilities remain obligated to serve. Therefore, gas utilities in New England cannot afford to “roll-the-dice” on the release of firm capacity rights when residential and commercial customers would otherwise be at risk.” (p. 14)

Natural Gas & Power Generation

Natural gas is the fuel of choice for new generation in New England and the U.S.

» Lower heat rate» Higher efficiency» Operating and maintenance performance» Lower emissions

Primary Energy Consumption,

New England vs. U.S. (%)

127

51

96

18

7

22

39

24

0

10

20

30

40

50

60

Natural Gas Petroleum Coal Nuclear Hydro &Biomass

Percentage

N.E. U.S.

Source: U.S. Energy Information Administration

Changing Electric Generation Fuel Mix: 1980 - 1999

Source: ISO New England

Pe

rce

nta

ge

Natural Gas

Purchases

Hydro

Oil

Nuclear

Coal

1999: Gas is 16% of mix

Projected Gas Market Growth

Residential

Commercial

Industrial

Electric Generation

0

200

400

600

800

1000

1200

1994 1995 1996 1997 2000 2005 2010 2015

Tri

llio

n B

tu

GTI projects 3.4% annual growth in New England over the next 15 years, led by electric generation

Annual Growth Rate:Residential: 1.1%Commercial: 1.7%Industrial: 3.5%Electric: 7.4%

Source: Gas Technology Institute (GTI)

Greater Communication

NEGA supports report’s call for greater communication among energy systems

Last June NEGA held a workshop on gas power plants, looking at the issue of “will there be enough gas?” Participants included ISO NE, pipelines, Distrigas, LDCs, power generators, consultants, state government agencies

Consensus that supply will be there to meet need, assuming new pipeline capacity

Recommendation for greater communication on scheduling protocols, etc.

Summary

Natural gas industry has made substantial infrastructure investments in recent years in New England

Study’s assumptions on pipeline capacity do not include several proposed system enhancements – undervaluing likely pipeline capacity growth

Agree that additional pipeline capacity will be needed to meet future power generation demand

Misimpression on “shortages” regrettable Need for ongoing communication