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Cromwell — Gov. Dannel P. Malloy on Friday unveiled a proposed "Comprehensive Energy Strategy" for Connecticut that aims to reduce the state's high energy costs by connecting more homes and businesses to natural gas.
The governor told an audience at an energy convention that the plan — still subject to regulatory and legislative approvals in 2013 — would expand access to out-of-state shale gas for an additional 300,000 residences and businesses by 2020 and lower heating bills. Roughly 900 miles of new gas lines would need to be built, providing an estimated 7,000 new construction jobs.
Malloy said the savings gained by switching from pricey fuel oil to cheaper natural gas would help Connecticut businesses stay competitive and give residents extra money in their pockets.
Reducing oil consumption should also cut down on greenhouse gas emissions that contribute to global climate change, he said.
"We want cheaper energy, we want more reliable energy ... and we want to have a good environmental impact, and this plan touches all of that," Malloy said at the Connecticut Business and Industry Association's Business and Energy Conference in Cromwell.
Only 31 percent of Connecticut homes heat with natural gas, compared to 47 percent of homes in Massachusetts, 48 percent in Rhode Island and 72 percent in New Jersey, according to the state Department of Energy and Environmental Protection.
Malloy said the greatest hurdle to utilizing more natural gas here has been the large upfront costs of building gas lines and converting furnaces and boilers.
Much of the proposal's nearly $5.5 billion in upfront costs for converting buildings to gas would be financed by gas companies, banks, capital markets and state bonding. Details of the finance strategy and the state's share of the costs are still being determined, state officials said.
If and when the program begins, new gas customers could get gas equipment and service right away but would pay back the installation costs through a decade of installment payments and interest charges that get added to their gas bills. As long as natural gas prices stay low, these customers would save money.
The average total cost of converting a residence to natural gas that is located within 150 feet of an existing gas line is $7,500, according to the DEEP. For a homeowner who currently uses heating oil, he or she could save $1,050 to $579 a year, depending on the interest rate assigned to the loan that they would repay via their gas bill.
State officials, giving a typical southeastern Connecticut installation estimate, said the cost of an oil-to-natural gas conversion in Stonington ranges from $5,000 to $8,000.
By DEEP's calculation, the average industrial customer could save $19,940 to $17,390 a year by converting. Natural gas prices in the United States have plummeted in recent years as a result of new hydraulic "fracking" technologies that allow better extraction. Recent surveys indicate that Connecticut has little if any fracking potential, so all gas would be imported from other states.
"We will not be fracking in Connecticut," Malloy said. "We simply don't have the natural deposits in our state. They seem to stop at the Hudson (River)."
The governor said state officials will aim for "zero leak" standards for methane in pipelines that bring gas to Connecticut. Methane is a more powerful greenhouse gas than carbon dioxide but stays in the atmosphere for a shorter time.
According to the plan's draft report, natural gas is currently 60 to 75 percent cheaper than fuel oil, 70 to 80 percent cheaper than propane and 75 to 85 percent cheaper than all-electric heating.
Malloy's gas proposal is already generating controversy. Gene Guilford, president of the Independent Connecticut Petroleum Association, said it is risky for state government to simply pick an energy source and hope it stays cheap. He said that heating oil in Connecticut has been less expensive than natural gas for 17 of the past 20 years.
"No one four years ago believed that the economics of natural gas would be where they are today," Guilford said. "Hence, no one today can tell you where the economics of natural gas will be four years from now."
The proposal cites a U.S. Energy Information Administration forecast projecting natural gas prices to remain low for at least the next 20 years. Leaders of the General Assembly's Energy and Technology Committee praised the energy plan.
"We like the overall framework of the plan and the fact that there is a plan," said state Rep. Vickie Nardello, D-Prospect, who attended the conference. "We did not have a plan for many, many years, and the fact that we actually have a plan to consider is a huge step forward."
DEEP developed the plan as required by a 2011 state law. The proposal also calls for expanded initiatives to help small businesses and lower-income families save money by conserving energy. Additionally, it suggests allowing imported Canadian hydropower to count toward the existing goal of generating 20 percent of Connecticut's electricity from renewable energy resources by 2020. Last year, 3 percent of the state's net electricity generation came from renewable energy, according to the U.S. Energy Information Administration.
A series of at least five public hearings on the proposals are scheduled for next month. DEEP is to submit a final version of the energy strategy early next year.