Utilities can’t force customers to pay for pipelines, says state’s high court
Thanks to a high court ruling Wednesday, electricity customers can no longer be asked to help cover the costs of building private gas pipelines.
The Massachusetts Supreme Judicial Court’s unanimous decision, in a case brought by the Conservation Law Foundation, would instead require electric utilities to shoulder the financial risks of those projects.
ENGIE and the Conservation Law Foundation had challenged the state Department of Public Utilities before the Supreme Judicial Court. In April 2016, the Attorney General’s Office filed an amicus brief arguing that the DPU did not have authority under existing state law to allow electric distribution companies to enter into ratepayer-backed natural gas transportation contracts.
The DPU has been reviewing proposed contracts by Eversource and National Grid with Algonquin Gas Transmission for its Access Northeast pipeline expansion project through central and eastern Massachusetts. Both contracts were based on the department’s October 2015 ruling.
The filings were suspended within minutes of the court decision, said the lead Conservation Law Foundation attorney on the case, David Ismay, who added that the ruling “affirmed Massachusetts’ commitment to an open energy future by rejecting the Baker Administration’s attempt to subsidize the dying fossil fuel industry.”
“Access Northeast lost their biggest customer,” Ismay said.
Not only did the court decide that the DPU had erred in its interpretation of the statue, it also said it went against the purpose of the 1997 utility restructuring act that was meant to ensure that investors rather than ratepayers shouldered the financial burden of enormous capital projects, Ismay said.
“It can’t be squared with the restructuring act, which deliberately pushed all the risks associated with generation to the private market,” Ismay told The Recorder. “Everything associated with generation is on the private market, and what we’re going to do is get those markets to deliver enough electricity at the right time to us, and we’ll buy it on the wholesale market.”
The Conservation Law Foundation, among others that included a study by the state attorney general’s office, argued that there is no need for additional gas pipeline capacity in the region, and the market had borne that out.
“A lot of us had a suspicion,” he said, that one or more pipeline projects were proposed simply “to get it through the region to sympathetic LNG export facilities in Canada,” Ismay said.
In his opinion, Justice Cordy wrote that the DPU’s order was “invalid in light of the statutory language and purpose” on the state’s utility industry restructuring act, because it “would undermine the main objectives of the act and re-expose ratepayers to the types of financial risks from which the Legislature sought to protect them.”
Attorney General Maura Healey issued a statement saying, “Today’s SJC decision confirms our longstanding position that existing law bars electric distribution companies from using ratepayer money to foot the bill for natural gas pipelines. Requiring electric ratepayers to pay for new natural gas pipeline capacity effectively shifts the risks associated with building these projects to ratepayers, contrary to the state’s policies of the past two decades. … The court’s decision makes clear that if pipeline developers want to build new projects in this state, they will need to find a source of financing other than electric ratepayers’ wallets.”
Whether pipeline companies could pass their development costs to electricity users through their power generating company customers was an issue in the recent controversial Kinder Morgan Northeast Energy Direct pipeline through Franklin County.
In its unanimous decision Wednesday, the court said state regulators made a mistake in approving the tariffs and authorizing utilities to sign long-term contracts for natural gas generating capacity.
The justices said passing the costs on to ratepayers would violate the intent of state laws regulating electric companies.
“The SJC got it right,” said Senate President Stan Rosenberg in a written statement. “Existing law prohibits passing the cost of building new pipelines onto ratepayers. When the Massachusetts Senate debated the energy bill this session, the Senate voted 39-0 to prohibit utility companies from passing the cost of building new infrastructure on to ratepayers. To do otherwise would have been unprecedented and contrary to the best interests of the Commonwealth. Ratepayers deserve to have confidence that the matter is settled, and now they do.”
Rep. Stephen Kulik, D-Worthington, said of the court action, “I think it’s a really good decision, the right thing for ratepayers and for energy policy.” Kulik had previously advocated against the electricity customers’ tariff for gas infrastructure being included in energy legislation.
As an outgrowth of a New England-wide plan more than two years ago for a regional tariff to pay for pipelines and transmission lines, Kulik said, “I blame the utility commissioners for starting this dialogue. It’s over today.”
The decision was cheered by environmental groups including the Conservation Law Foundation, which filed suit to stop what it dubbed a “pipeline tax” on consumers.
“This is certainly the decision we hoped for and what we expected, given what the law actually says,” said Kathryn Eiseman, president of Pipeline Awareness Network – NE. “Thanks go not only to the parties that brought the appeal, but to our legislators — Representative Kulik in particular — for making sure that the law wasn’t amended to nullify this decision.”
Peter Lorenz, a spokesman for the state Executive Office of Energy and Environmental Affairs, said, “Massachusetts has some of the highest electricity rates in the nation and without additional gas capacities and a diverse energy portfolio, the trends will continue to rise overtime. The Department of Public Utilities respects the Supreme Judicial Court’s decision, and while the federal government remains the deciding authority on pipeline siting decisions, the Baker-Polito Administration believes meeting the region’s energy demands without raising costs for consumers requires additional natural gas along with the wind and hydroelectric power provisions recently signed into law.”