Sep. 20—Ten years ago, the arrival of a Colorado-based natural gas company brought the promise of transforming Maine's oil-dependent heating fuels market and bolstering the energy-dependent manufacturing base.
Summit Natural Gas of Maine laid out plans for the most aggressive natural gas distribution project in the state's history. The company pledged to spend $350 million within five years to connect 15,000 homes and businesses in the Kennebec Valley and Portland's northern suburbs with natural gas, which at the time was half the price of heating oil. Gas expansion also was seen as a way to diversify the state's energy supply with a cleaner-burning, domestic fuel.
But Summit stumbled out of the starting gate and has never been able to catch up with those ambitious goals.
Summit has spent more than $329 million on capital investments in Maine. But the company has hooked up fewer than 5,000 customers and has the highest natural gas rates in the state, charges regulated by the Public Utilities Commission.
Now Summit is asking for even higher rates. It has told the PUC it needs a seven-year plan that would increase rates by 30 percent in the first year, and possibly up to 15 percent each year after that.
To gather customer input, the PUC is holding two public hearings this month. The first is Thursday at Cumberland Town Hall, and the second is Sept. 29, at the PUC's headquarters in Hallowell. Both are at 6 p.m.
It's a good bet regulators will hear from customers such as Diane Nichols, who lives in a new subdivision in Yarmouth served by Summit.
"They sold us on information that prices would be lower, but they didn't deliver," Nichols said. "They overbuilt. But ratepayers shouldn't be responsible for that. They shouldn't pass it on to the consumer."
Her discontent is echoed by William Harwood, the state's public advocate. His office wants the PUC to take the unusual step of imposing an emergency, temporary rate for Summit while the commission investigates whether the company's capital and operational investments were prudent. He blames poor management for the initial, faulty expansion assumptions.
"Much too little revenue and too large of an expense," Harwood said.
Summit did make some key mistakes, acknowledged Kurt Adams, the company's president and chief executive officer. A former Maine PUC chairman, Adams has led Summit since 2015.
"I think there were a couple of broadly held assumptions that wound up not panning out," he told the Portland Press Herald on Monday.
Most familiar with markets in the western U.S., Summit's executives assumed the deep price discount that gas enjoyed over heating oil in Maine wouldn't change, Adams said.
They didn't foresee state climate policies and public opposition to expanding natural gas pipelines in New York and Massachusetts. Those factors have tightened supply in Maine and driven up wholesale prices across New England. The pushback reflects a growing, national trend against natural gas, which as a carbon-based fuel contributes to climate change.
Lastly, Adams said, top management failed to realize how costly it is to convert an oil heat customer to gas when compared to propane, which is the common conversion in the West. During testimony at the PUC, Summit executives said it costs between $8,000 and $10,000 to switch out an oil boiler, compared to $1,500 to $2,500 for adjustments to a propane-burning unit.
Despite all this, Adams said, Summit's rates today are largely competitive with heating oil. And for the time being, that's true.
The latest data from the Governor's Energy Office shows that on a heat-unit basis, natural gas at roughly $2.41 per therm is cheaper than oil at $4.56 a gallon. Even with oil prices falling, as they have been recently, gas remains a better deal today, according to Efficiency Maine calculations. At $2.41 a therm, an average home boiler fueled by gas would cost $2,668 a year. That compares to $3,544 for a boiler burning oil costing $4.30 a gallon, the average price this week in Greater Portland, according to MaineOil.com.
Adams said Summit is committed to slow, steady growth in Maine. In a state where six in 10 homes still burn oil as their primary heat source, Adams believes natural gas has a role to play in the state's energy future, even with the policy push to power homes with electric heat pumps and the wider economy's emphasis on renewable electricity sources.
"Consumers have a choice, and some continue to choose natural gas over other providers," he said. "We think we have a compelling case to cover the cost of operating the system."
Summit Utilities had 48,000 customers in three states when it first came to Maine in 2012. Today the company also owns gas distribution and transmission subsidiaries in Colorado, Missouri, Texas, Arkansas and Oklahoma. The last two states represent a notable acquisition from CenterPoint Energy in 2021, for $2.15 billion in cash. Together these subsidiaries serve more than 625,000 customers over 23,400 miles of pipeline.
Summit is owned by Infrastructure Investments Fund, a private investing vehicle that's advised by JPMorgan Chase & Co. In the Denver area, where Summit is based, the company has been recognized by the Denver Business Journal as one of the region's fastest-growing private companies.
Not so in Maine. Here, Summit's tenure has been marked by challenges.
As early as 2014, a variety of construction and labor problems was delaying hookups, angering potential customers and drawing the scrutiny of regulators. An unexpected plunge in heating oil prices at the time also didn't help make the case for converting to gas.
Summit began work in 2014 on a $73 million network in three affluent Portland suburbs, with a goal of serving 80 percent of the homes in Falmouth, Cumberland and Yarmouth. But today, the company has only 2,785 customers in the three towns, according to testimony at the PUC.
Summit has buried a total of 68 miles of transmission piping and 182 miles of distribution lines in Maine. Beyond the Portland suburbs, they reach homes and businesses in the Augusta area and up the Kennebec Valley to Skowhegan.
Notable large customers include the Sappi Fine Paper mill, which has used gas to displace hundreds of thousands of barrels of heavy oil. Other big Summit customers include fiber products maker Hahtamaki Maine in Waterville and tomato grower Backyard Farms in Madison. These large players negotiate their own rate contracts with Summit.
And Summit is expanding, slowly. This year the company has pushed pipe into North Yarmouth, which is experiencing a surge of subdivision development. Adams sees it as an example of the company's steady, strategic growth.
"The real question is, how long is going to take for Summit to grow into its business plan?" Adams said. "In Maine, it has taken much longer than Summit initially presumed."
But making existing customers pay higher rates in pursuit of slow, steady growth isn't acceptable, in the public advocate's view.
In testimony at the PUC, Harwood referred to a metric that compares how much the state's four gas distribution companies have invested, per the number of meters they serve. Summit clocked in at $78,403 per meter. The company's next closest competitor, Maine Natural Gas, was $16,511 — less than a quarter the cost.
Harwood's office also used company data to extend that metric to capital investment, customer counts and monthly bills for the state's three other gas distribution utilities. The comparison is striking.
Unitil, the state's legacy gas company known as Northern Utilities, has a net "plant" investment in its system of $310 million to serve 34,058 customer meters. The company's average monthly home bill is $89.16.
More-recent startup Bangor Natural Gas has put $42 million into its system and has 7,499 meters. The average home bill is $129.65.
Another startup, Maine Natural Gas, has invested $89 million and serves 5,381 meters. The company's bill is $156.
Summit has spent the most money on its plant, $329 million, to serve the fewest customers, 4,191 meters. Summit's average monthly home bill is the highest, $167.81.
Regarding planned growth, Harwood said Summit's projections seemed unrealistic. He noted the company historically has been signing up only 355 to 455 customers a year, so tallies of thousands of homes, small businesses and large commercial customers near the existing pipelines don't appear pertinent.
"To meet its goals," Harwood said in testimony, "the company would need to substantially exceed the past several years of customer growth. In addition, Summit fails to acknowledge that raising rates would have a negative impact on customer growth."
Harwood said these conditions raise concerns about the company's long-term viability and its "questionable financial condition," a worry first noted by the PUC staff attorneys working on the case. Asked if that was an accurate assessment of Summit Natural Gas of Maine, Adams said it was not, citing the parent company's resources.
"We are financially very strong," he said.
Summit's existing rate plan at the PUC expires at year's end. The PUC commissioners have yet to set a date to deliberate the case.
The outcome is of special interest to town leaders in Cumberland, Falmouth and Yarmouth, who welcomed the expansion of natural gas in 2012 and want the company to remain viable. Today, the towns collectively represent half of Summit's residential customer base. In testimony, the towns objected to customers "being held captive to rate increases" due to Summit's miscalculations.
"Many of these ratepayers have already spent thousands of dollars to convert their homes from oil to natural gas," the towns noted, "and now will have no other option than to shoulder the brunt of this proposed rate increase to offset this miscalculation."
That's what worries Diane Nichols.
There are roughly 30 homes in her subdivision, all heated by natural gas boilers installed during construction. Her bills for last January and February were $221 and $249. Her house is only three years old, so it's better insulated than most. She doesn't use gas for heating water, and she prefers a cool room.
"What else can I do?" she said. "I live in an energy-efficient house and keep the heat at 63."
Facing even higher bills, Nichols said she's considering adding a heat pump to supplement her gas boiler. She's looking into whether the cost would be worthwhile.
"I'm going to have to spend money to save money," she said. "That's what I'm exploring. The fact that I'm even considering that because of Summit is not what I expected."