New Study Outlines New England’s Need for Additional Natural Gas Capacity; $3.7 Billion Could Have Been Saved During ‘Polar Vortex’

HOUSTON

New Englanders could have saved approximately $3.7 billion in wholesale electricity costs during the 2013-2014 ‘Polar Vortex’ winter had the proposed Northeast Energy Direct Project (NED) been in service, according to an independent study by ICF International, commissioned by Tennessee Gas Pipeline Company, L.L.C. (TGP), a Kinder Morgan, Inc. (NYSE: KMI) company. The study also concluded that the additional gas capacity that NED would provide could generate $2.1 billion to $2.8 billion in annual savings going forward for New England electric consumers under normal weather conditions.

The in-depth study examined the impact of TGP’s NED project on New England’s natural gas and power markets and its need for new natural gas supplies. Additionally, the study assessed the cost savings from the increased natural gas capacity NED would make available to the region, which pays some of the highest electricity costs in the United States, in part due to inadequate gas supplies and infrastructure.

Further analysis by Kinder Morgan finds that the estimated energy cost savings for 2013-2014 would equate to $578 if spread across each of New England’s 6.4 million households, and average $437 per household over the next 10 years assuming normal weather conditions.

“The ICF study supports NED’s potential contribution to reducing and stabilizing prices, and improving reliability through increased gas availability,” said Kimberly S. Watson, president of Kinder Morgan’s East Region Gas Pipelines. “New England needs more natural gas capacity, and NED would provide the region with direct access to abundant, reasonably priced supplies of gas. Additional gas supplies will bring down energy costs in New England and benefit consumers who now bear the burden of paying some of the highest energy costs – if not the highest – in the country.”

The main findings of the ICF study include:

New England’s demand for natural gas is projected to grow; current supply is inadequate to meet regional needs during peak winter conditions.

As coal and nuclear capacity are retired and replaced by natural gas-fired power generation, New England power sector gas demand will grow. Local distribution companies (LDCs) in New England project that residential and commercial gas demand will also grow, increasing by 8 percent over the next three years, and continue rising at a steady rate thereafter. The growing natural gas consumption for heating and electric generation will contribute to increases in the frequency and magnitude of daily natural gas pipeline capacity deficits over the course of a winter season.

ICF projects that the deficit between supply and demand in both New England’s gas-fired electric generation and residential/commercial heating loads during normal winter weather conditions on a peak day in 2020 could approach 1.5 billion cubic feet (Bcf/d) and be as high as 1.7 Bcf/d on a “design day,” even with the several gas pipeline expansion projects expected to be in-service by the end of 2017. ICF estimates that the duration of such deficits for electric generation during the winter could extend to 63 days (over 41 percent of winter days.)

During 2012-2014, TGP transported 52 percent of the total gas consumed by New England’s natural gas-fired power generators. With the addition of NED’s capacity, TGP will be able to transport gas supplies for the vast majority of New England’s gas-fired generators.

NED could bring benefits for consumers – more stable gas and electric prices, and cost savings.

Through analysis of historical gas pipeline utilization and prices, and estimates of potential reductions in prices that might have been realized had the NED project been in service, ICF determined that NED capacity could have reduced New England’s wholesale electric costs by approximately $3.7 billion had it been in service during the 2013-2014 “Polar Vortex” winter. Going forward, NEDcould generate $2.1 billion to $2.8 billion annual savings for New England electric consumers under normal weather conditions.

Additionally, the study finds that spot gas prices and wholesale power prices can be more volatile when pipeline utilization (load factor) rises above 75 percent of installed capacity. During the 2013/2014 winter, daily load factors averaged 90 percent and frequently exceeded 95 percent, contributing to price volatility. TGP notes that this challenge would be mitigated through NED’s additional capacity.

NED supports renewables, and improves environmental benefits.

NED provides essential support for the future of renewables. As renewable energy programs in New England are embraced and activated, natural gas is a favorable base to the intermittent power production from renewables. The gas supplies NED can provide would produce environmental benefits by reducing power sector air emissions. Introducing new natural gas capacity would further reduce NOₓ, SO₂ and CO₂ emissions in the region by lowering its reliance on oil and coal-fired generation. By 2020, absent new pipeline capacity, New England generator reliance on fuel oil to meet power demand could result in increased NOₓ, SO₂ and CO₂ emissions, and sharply reverse previous years of reductions.

About TGP, NED and the ICF study

TGP has been serving the New England region for more than 60 years. Planned to be in service in late 2018, NED would connect with TGP’s existing 200 Line and 300 Line natural gas systems that provide diverse gas supplies to the Northeast and New England from South Texas, the Gulf Coast and key shale play areas.

ICF International, based in Fairfax, Virginia, was engaged by Kinder Morgan, Inc. to independently analyze the New England natural gas and power markets and the need for new natural gas supplies and capacity to serve the region. ICF’s study of NED’s benefits to the New England electric market are estimated for the 10-year period after the project is placed into service. ICF findings and conclusions integrate base case analysis produced using its suite of proprietary natural gas and power industry software models and data that have supported a wide array of market studies for federal agencies, utilities, investors and financial analysts.

As part of the study, ICF was also asked to analyze potential energy market, reliability and other benefits that may arise from the construction of the proposed NED Project. Its study projects natural gas supply and demand in New England through 2035 and assesses the supply/demand balance on a daily basis for discrete years. Emphasis is placed on understanding the demand for capacity during the winter season, when natural gas is in high demand as a fuel for heating and power generation. Sensitivity analyses considered the implications for capacity under both normal and “design” weather conditions.

Kinder Morgan, Inc. (NYSE: KMI) is the largest energy infrastructure company in North America. It owns an interest in or operates approximately 84,000 miles of pipelines and 165 terminals. The company’s pipelines transport natural gas, gasoline, crude oil, CO₂ and other products, and its terminals store petroleum products and chemicals, and handle bulk materials like coal and petroleum coke. Kinder Morgan is the largest midstream and third largest energy company in North America with an enterprise value of approximately $115 billion. For more information please visit www.kindermorgan.com.

This news release includes forward-looking statements. These forward-looking statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management, based on information currently available to them. Although Kinder Morgan believes that these forward-looking statements are based on reasonable assumptions, it can give no assurance that such assumptions will materialize. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include those enumerated in Kinder Morgan’s reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they were made, and except to the extent required by law, Kinder Morgan undertakes no obligation to update or review any forward-looking statement because of new information, future events or other factors. Because of these uncertainties, readers should not place undue reliance on these forward-looking statements.

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