Malloy energy plan pits natural gas against oil

HARTFORD, Conn. (AP) ? A broad effort by Gov. Dannel P. Malloy to reshape energy policy in Connecticut with incentives to boost efficiency and keep down costs has drawn strong opposition from the home heating oil industry, which accuses the state of encouraging residential and business customers to dump local oil suppliers in favor of increasingly popular natural gas.

It's shaping up as a David-and-Goliath struggle between family-run home heating oil companies stung by skyrocketing oil prices, and the state and its regulated gas utility monopolies.

"They're using state resources to eliminate jobs, delivery drivers, customer service representatives," said Stephen G. Rosentel, president of Leahy's Fuels Inc., a family-owned home heating business that has operated in Danbury since 1917. "These are real jobs and real people, and they matter."

Malloy administration officials disagree with Rosentel's comments, saying the governor's plan would create 10,000 jobs through the extension of gas lines and other projects and lead to significant savings for consumers.

"This is by no means forcing anyone to covert (to natural gas) by any stretch of the imagination," Malloy spokesman Andrew Doba said Monday.

Malloy's proposal recommends policy changes in energy efficiency, electricity supply, industrial energy needs, transportation and natural gas. He's promoting his plan as a way to spur economic development, business growth and lower costs in a state where homeowners and businesses have long complained that high energy costs are choking off other economic activities.

But the natural gas component instantly stirred opposition to the proposal giving incentives to homeowners and businesses to convert from oil to natural gas.

Thirty-one percent of Connecticut homes heat with gas, compared with 47 percent in Massachusetts and 48 percent in Rhode Island, the state says. And the percentage of commercial and industrial businesses with access to gas is only slightly higher, state officials say.

Malloy proposes to make gas available to as many as 300,000 Connecticut homes and businesses by asking state regulators to allow utilities to collect customer payments ? extended over longer periods of time ? to finance conversions to natural gas. The plan also would promote construction of 900 miles of gas mains with a focus on connecting factories, hospitals, schools and other big energy users.

The governor's plan calls for privately obtained capital, utility financing and bonds to pay for conversion. It also proposes an economic development fund to support fuel-switching for commercial and industrial customers to support a "growth agenda."

Jessie Stratton, director of policy for the state Department of Energy and Environmental Policy, did not entirely rule out public financing, saying that "taxpayer involvement is probably unlikely."

"Barring some public subsidy, which I think is fairly unlikely, there is no state subsidy on this," she said.

Stratton, a former state legislator, said Connecticut has promoted a "significant amount of public subsidies" for oil with incentives to promote efficiency in buildings heated by oil and tapping into a fund financed by electric and natural gas ratepayers.

Chris Herb, vice president of the Independent Connecticut Petroleum Association, said the group is "absolutely opposed" to any state incentives to convert to natural gas.

"We're not afraid of competition. We're not afraid of consumers making choices," he said. "We believe natural gas utilities have the financial means to extend their lines."

But Doba said the governor's proposal is being supported by labor unions and the Connecticut Business & Industry Association, the largest business representation group in the state.

Michael West, a spokesman for United Illuminating, the New Haven-based utility that shares its parent holding company with Connecticut Natural Gas and the Southern Connecticut Gas Co., said increased demand for natural gas is due to rising interest from customers who "call us constantly."

The gas companies have made a commitment to increase the number of customers by about 10 percent over three years, beginning in 2011, from its current number of about 345,000, he said.

Mitch Gross, a spokesman for Yankee Gas, a subsidiary of Northeast Utilities, said the Connecticut company has been adding between 3,000 and 4,000 customers a year since 2007.

"The phones remain very busy," he said.

Rosentel questioned why the state needs to provide incentives if oil companies are losing customers to natural gas and propane.

"That's happening without a state subsidy," he said. "It begs the question, 'Why is the state subsidizing?'"

And Herb questioned the state's economic development assumptions that converting to natural gas would pump $250 million into the state's economy each year by cutting homeowners' heating bills and another $215 million a year in business production cost savings.

"Economic development has nothing to do with energy prices and everything to do with our tax policies and cost of labor," Herb said.

Stratton, however, said state officials are motivated simply by the lower cost of natural gas.

"It's all driven by cost factors," she said. "It's not that we like one better than the other."

Source: http://news.yahoo.com/malloy-energy-plan-pits-natural-gas-against-oil-165606536--finance.html

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