State official offers update on N.H. energy picture

New Hampshire’s energy supplies are at normal levels and the resupply infrastructure is operating normally, despite the effects Hurricane Katrina has had on the Gulf Coast.

That’s according to Joseph C. Broyles, energy program manager for the New Hampshire Office of Energy and Planning, who spoke recently at a meeting of the Energy Planning Advisory Board.

Energy prices initially spiked after Katrina first struck the Gulf, but they have receded somewhat since. Moreover, the impacts of Katrina to New Hampshire and the New England region are blunted because much of the region’s energy comes from overseas. Despite this relatively good news, however, it was clear that energy prices this winter are likely to be as much as 65 percent higher than last year.

The Energy Planning Advisory Board was created by the Legislature in 2004 to “monitor and assist in the implementation of the New Hampshire Energy Plan,” a plan covering a 10-year period, prepared by the Governor’s Office of Energy and Community Services in 2002.

Chaired by Mary Ann Manoogian, director of the Governor’s Office of Energy and Planning, the board includes representatives from the Public Utilities Commission and the Departments of Environmental Services, Transportation, Resources and Economic Development, the University of New Hampshire, the Office of Consumer Advocate, the Business and Industry Association of New Hampshire and state senators and representatives, including Larry Ross, chair of the House Technology and Energy Committee.

Although energy supply is not likely to be an issue for New Hampshire customers in the near future, prices are likely to be significantly higher than they have been.

While Broyles made it clear that his office is not in the business of predicting prices, he said that computer models have shown a 65 percent increase in heating oil prices for the coming winter – and average heating oil prices for 2004-05 exceeded the 2003-04 average by 42 percent.

The 65 percent increase prediction is based on the price of heating oil on Sept. 1, 2005, as compared to Sept. 1, 2004.

Recent price increases that New Hampshire and New England have experienced are not, however, a result of Katrina, but instead a result of forces in motion before the hurricane.

Over the last couple of years prices have trended up during the winter and have not fallen after the winter heating season is over. In prior years, energy prices tended to moderate after the winter season ended. Over the last few seasons, customers have had no chance to recover from increasing prices during the summer months.

Broyles also said that the pinch in prices may force some retailers out of business because retailers are caught in a cash flow bind between receivables and the higher wholesale costs of heating oil. In addition, increased energy prices raise a concern that some customers will engage in unsafe practices, such as failing to maintain their heating systems and running or using unsafe heating appliances or using safe ones in unsafe ways.

One of the reasons that the stocks of heating oil in the region are high is that the increased prices have created an incentive to the industry to stockpile heating oil. The Northeast actually uses 85 percent of all heating oil used in the country.

In his presentation, Broyles also said that New Hampshire’s energy consumption is growing faster than its population, a trend that is occurring nationwide.

He also discussed how energy from many different sources enters New Hampshire, much of it through what he called “choke points.”

The fossil fuels headed to New Hampshire come from Canada, Europe, Africa, the Caribbean, Venezuela and the Gulf of Mexico. Shipments from those regions can sometimes be delayed, such as when an ice storm causes a delay in propane shipment from a tanker. The fact that New Hampshire is located at the end of the supply infrastructure for most types of energy also has an impact on supply and prices.

Although Katrina may not have had a major impact on regional energy prices, Broyles said that Katrina has had and will have a significant impact on the industry going forward. He described it as a “watershed” and said that people will probably describe the energy sector in terms of “BK” and “AK” — Before Katrina and After Katrina.

One of the beneficial effects of Katrina is that it may have awakened in our country the need to undertake appropriate energy planning for the future.

Doug Patch, former chairman of the New Hampshire Public Utilities Commission, is with the Concord law firm of Orr and Reno.