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The Connecticut Energy Marketers
Association (CEMA) has met Malloy
head-on, challenging his plan at every
turn and winning some important early
victories. The state Legislature adopted the
framework of his plan last year, and CEMA
has moved to “street fight” mode to protect
Oilheat dealers community by community.
Chris Herb, President of CEMA, said the
state Public Utilities Regulatory Authority
(PURA) has approved a docket that allows
for 900 miles of new gas pipeline with a
modified goal of converting 280,000 homes
to gas heat. The plan is tremendous threat
in a state with 600 oil dealers serving a
combined 680,000 homes.
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While the overall expansion plan
has the blessing of the state Legislature,
Connecticut’s gas utilities must propose
each expansion project to PURA separately.
This affords CEMA the opportunity to mar-
shal its forces and mount a local campaign
in opposition.
Gas line expansion is an expensive
proposition, and Herb says the utilities have
demonstrated an aversion to risking their
own money on system expansions. Their
preference is to shift project costs either to
ratepayers or to the state, so that company
shareholders are not exposed to the risk of
building pipelines on speculation.
Spotting a local threat will require vigi-
lance on the part of Connecticut oil dealers,
because the utilities are not required to
make an announcement when they solicit
customers for an expansion project. Instead,
CEMA expects them to reach out quietly to
customers and try to meet their threshold
requirements, as set by state regulators.
PURA allows the Connecticut utilities to
pass the costs of expanding gas service into
a neighborhood only when the utility pre-
enrolls 60 percent of the potential customers
on the line in service agreements. If fewer
than 60 percent of the potential customers
sign on, PURA will not let the utility charge
the costs to its ratepayer base. Instead, the
utility must underwrite the project on share-
holders’ backs or abandon it. “They do not
want to expend any of their own money,”
Herb said of the utility shareholders.
“Originally, the utilities wanted to be
able to lay the pipeline and have the cus-
tomers come to it, and they would simply
raise rates on current customers and impose
premiums on new customers,” Herb said.
“We said that was unfair.”
Herb said that CEMA’s members are
very engaged and active in the process,
and they are keeping their ears close
to the ground, listening for any talk of
utilities soliciting customers on their turf.
CEMA has equipped its website homepage
(
) with a “Report Natural
Gas Activity” button, so members can
notify the association as soon as they learn
of a potential expansion project.
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By spotting expansion projects in the
early stages, CEMA can enter the fray and
conduct a public relations blitz. Herb said
there are plenty of helpful messages to share
with customers considering conversion.
They can make a great positive case for
heating oil, focused on the attentive, per-
sonal service that oil heat dealers provide;
the importance of maintaining choice and
diversity in the marketplace; and the excel-
lence of the liquid fuels that blend ultra-low
sulfur heating oil with renewable biodiesel.
They can also make a strong negative
case against natural gas. The utilities’ fuel
damages the environment and aggravates
climate change, and customers must trade
in their reliable oil heat service to do busi-
ness with a utility. On the utilities’ favorite
issue, today’s relatively low natural gas
prices, CEMA and its members and allies
can make an excellent case that the prices
of natural gas and heating oil will soon
converge again.
Herb said the utilities historically have
had an uphill battle signing up enough
customers to make expansion projects
worthwhile. “They have never been able
to achieve the conversion estimates they
have made in the past,” he said. “Granted
the economics have changed in the utili-
ties’ favor with the low gas prices, but we
are happy that the conversion rate the
regulators picked is much higher than what
the historical rates of conversion have
been. We believe this will limit the expan-
sion plan.”
Signing up customers on the basis of low
price will be a challenge too, because new gas
customers have to pay a 30 percent surcharge
on their gas for 10 years to help cover the
costs the utility has paid to serve them.
If CEMA and its member companies can
dissuade customers in a proposed expansion
area fromsigning on for gas service, “we’ll put
a real kink in the utilities’ plans,” Herb said.
“We need the commodity costs to sort them-
selves out, and we’ll be buying some time by
meeting these plans with resistance.”
The association will prepare a number
of communications pieces that members
can pass on to consumers who might be
considering fuel conversion. There will be
a lot of different options for the dealers,”
he added. “They will have to make a risk
assessment and ask themselves how valu-
able it is to fend off a threat in a particular
neighborhood.” CEMA will also continue
to reach out to government officials and the
media and to call out any false information
that is presented to state residents.
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EvenwithPURA setting suchdemanding
thresholds on pre-enrollment, the gas
expansion plan remains “a very serious
threat,” according to the CEMA President.
“Approximately 40 percent of our market is
at stake. The consequences are potentially
dire for this industry. That’s why we don’t
have any choice but to succeed.
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+15%
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+20% +25% +30% +35% +40% >+40%
PG&E Citygate
$3.97/MMBtu
+27%
Sumas
$3.71/MMBtu
+37% Opal
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+36%
Chicago Citygate
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+35%
SoCal Border
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+31%
El Paso Permian
$3.63/MMBtu
+36%
Legend
Trading point
2013 average spot natural gas price
% change 2012 - 2013
Henry Hub
$3.73/MMBtu
+35%
Transco Leidy Hub
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+11%
Algonquin Citygate
$6.90/MMBtu
+75%
Transco Zone 6 NY
$5.10/MMBtu
+61%
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