Falling Oil Prices Undermine Malloy's Gas Expansion Plan

It may only be temporary, but falling oil prices are undermining Gov. Dannel P. Malloy's ambitious natural gas expansion plan.

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HARTFORD, Conn. (AP) — It may only be temporary, but falling oil prices are undermining Gov. Dannel P. Malloy's ambitious natural gas expansion plan.

With the savings shrinking between lower-cost natural gas and ever-cheaper oil, homeowners and businesses may be balking at spending the thousands of dollars required to convert their heating systems to gas from oil.

Malloy launched the initiative in 2012 as part of a broad state policy to confront the politically charged issue of high energy costs.

Three Connecticut utilities — Eversource, Connecticut Natural Gas and Southern Connecticut Gas — are expected to convert 16,500 residences and businesses this year, 27 percent less than an initial projection of 22,500, the state Department of Energy and Environmental Protection said. The agency cited the drop in oil prices, "which dampens the potential fuel savings" for customers considering shifting from natural gas.

Oil dealers say the response by consumers to the price changes supports their argument that the state should stay out of the marketplace.

"What we're experiencing right now is an absolute 'I told you so,'" said Christian Herb, president of the Connecticut Energy Marketers Association, which represents oil dealers. "Hundreds of millions are being invested in something that does not make economic sense or environmental sense."

Eversource insists that falling oil prices are not having an impact on gas hook-ups. Natural gas conversions in the commercial and new construction sectors are up, and municipalities have shown "very strong interest," spokesman Mitch Gross said in an email. Inquiries from residential customers and interest in converting are constant, he said.

The utility also points to the still-significant gap between oil and natural gas prices. Despite the drop in the price of heating oil, consumers can expect to pay about $1,400 this winter and natural gas users in the Northeast could spend about $860, according to the U.S. Energy Department.

The faltering natural gas conversions may just be a blip. State energy officials say the utilities exceeded their goal last year and expect to reach the target of 280,000 conversions over the seven-year program.

A Boston environmental group said the Malloy administration failed to consider market fluctuations when it drew up its energy plan, extending its criticism to natural gas pipelines being planned for New England.

"We don't know what the markets are going to bring this year," said Greg Cunningham of the Conservation Law Foundation. "They did not anticipate wholesale energy prices that are half of last year. Policy makers are making assumptions about what benefits are coming from big pipelines when the market proved to be incapable of accurate predictions."

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