Natural Gas Supplies
The rate of "production" of natural gas (NG) in the US and Canada held more or less steady in the last few years.  This hides the fact that an enormous, and increasing, effort was required to achieve that.  Production from existing wells declines over time.  These days each new well, on the average, yields less gas and depletes faster than wells drilled in the past.  To maintain the total production, the number of new wells drilled each year has quadrupled since the turn of the 21st century - tens of thousands of wells.  Despite a tripling of the price of NG in North America, such frenetic drilling is not longer economical, and is slowing down.  A recent government report from Canada predicts that their NG production will decline significantly in the next few years.  US NG production already peaked in 2001.

Importation of NG from overseas is difficult and expensive: it requires cooling the gas to some 200 degrees below zero to turn it into Liquified Natural Gas (LNG, not to be confused with LPG, aka propane), and transporting it in ships that keep it that cold (using a significant portion of the NG as refrigeration fuel on the way).  There are only a handful of facilities on this continent for re-gassification of LNG, and local opposition to the building of such facilities is fierce, in part due to worries that an unloading LNG ship is a target for terrorists.  There is also a very tight world market for LNG.  Thus, we cannot expect to import enough NG to cover the coming decline in domestic (and Canadian) production.  Lower supply means higher prices.  How much higher?  That depends on the flexibility of demand.

In North America natural gas is, or was, widely used for five main purposes:

(1) Heating of buildings
(2) Generation of electricity
(3) Production of ammonia fertilizer
(4) Production of many types of plastics
(5) Conversion of Alberta's "tar sands" into oil

In the wake of the major increases in the price of NG in recent years, the two uses that are portable: production of fertilizer and plastics, have largely picked up and moved overseas to where NG is still abundant, e.g., parts of the Middle East.  (Yes, that means that now our agriculture, too, depends on imports from the Middle East.)  This has temporarily plugged the supply-demand gap here in North America.  But meanwhile the demand for heating keeps growing (those 6000 square foot homes need a lot of heating), many new gas-fueled electrical power stations have been built, and the "tar sands" operation has grown to consume a significant portion of Canada's NG.  (Given the usefulness of clean-burning NG, this has been described as "turning gold into lead".)  With increasing demand and declining supply, the crunch is re-appearing.  Thus we can expect much higher NG prices yet within a few years.

Electricity is generated from a variety of energy sources.  The biggest source of baseload power in the US is coal.  The electricity we buy in Vermont is mostly hydro and nuclear based.  But when the demand for electricity soars on hot summer days, the additional power is provided by generators that can be quickly and easily started as needed.  Those are mostly fueled by natural gas, and that last bit of electricity costs a lot more per KWH than the baseload.

As explained in the background documents for the Vermont electricity study, when long-term contracts for electricity are negotiated, the agreed-upon price is based on projected spot-market prices -- not the cost of generation of the contracted source -- and those projections are based on the expected price of NG.  When the current contracts were signed, NG was much cheaper than today.  Given the dire future of NG supply in North America, which will become clearer over the next 2 or 3 years, we can expect that any new electricity contracts Vermont can hope for will cost at least double the current rate.  Probably even more than that, especially if the decline of the value of the US dollar is taken into account.  The price of electricity in some parts of New England is already much higher than in Vermont, and we won't escape this trend.  A major price increase is a given that does not depend on which sources of electricity we choose, except for one aspect: a higher price will allow some currently "un-economical" sources to become competitive.

Consequences for Vermont’s Electrical Energy Future
The consequences for the future of electricity in Vermont (and elsewhere in the region) are major:

As prices will be much higher than today, we will have more motivation to conserve.  Most households can easily use far less electricity than they use today, without much loss of comfort and utility.  Fluorescent bulbs, front loading washing machines, and the latest energy-saving refrigerators make a big difference.  Turning lights (and TVs) off when leaving a room is not onerous.  Lighting the outdoors will go out of fashion.  Drying clothes on a line will come back into fashion.  Air conditioning will be recognized as a luxury we can do without most of the time (judicious tree plantings can provide adequate cooling for most Vermont homes).  Leaving the doors of air-conditioned businesses propped open on hot summer days will become as socially unacceptable as the emptying of chamber pots into the street.  Some industries, such as the making of microchips, are inherently energy-intensive, but they will have no incentive to leave Vermont for other states, since electricity will be expensive everywhere.

And, given a much higher price for electricity from conventional sources, some new sources will be able to join the market, despite their higher inherent costs.  This includes wind power from turbines in locations that are not optimal, i.e., not on the highest ridges.  (Turbines in the best locations are already competitive.)  Since the available prime ridges are limited, we will have to build turbines in lesser spots anyway in order to generate enough power.  Might as well start building there now, rather than arguing over the highest ridges while building nothing.  (And locating the turbines closer to the consumers saves on transmission costs.)  Also competitive will be small, local hydropower installations, and wood-fired co-generation plants.

Time to Power Smart!
An editorial in the BFP (What's the alternative to Vermont Yankee?) said: "Conservation and efficiency efforts are insufficient to reduce the state's energy demand by a third within five years. Nor can Vermont develop wind and solar capacity to provide the base load power to make up for Vermont Yankee's output. Powering down Vermont's economy is not an option, nor is a dramatic increase in electricity rates."  I think they are wrong on all counts.  Conservation and efficiency can easily shave a third off our electricity consumption.  (They have shaved two thirds off of mine.)  Alternative sources will become competitive.  A dramatic increase in electricity rates is guaranteed.  We have no choice but to power down, and it won't be that bad.