Mass. ruling casts doubt on Maine plan to subsidize natural gas pipeline expansion
Courtesy / Conservation Law Foundation
David Ismay, the Conservation Law Foundations' lead attorney on the Access Northeast Pipeline Project.
A Massachusetts court ruling against having electricity ratepayers in Massachusetts pay a portion of the cost of expanding natural gas capacity in New England raises uncertainty about a similar plan recently endorsed by the Maine Public Utilities Commission last month.
In its July 19 unanimous approval of a plan in which Maine electricity customers would pay up to $75 million annually to expand natural gas pipeline capacity in New England, Maine’s PUC stipulated that Massachusetts, Connecticut, Rhode Island and New Hampshire must adopt similar plans before that subsidy could begin. The PUC still needs to issue a final order in that case.
The action was seen as a way to lower Maine's electricity costs by ensuring a more reliable supply of natural gas, which generates half of New England's electricity.
In its Aug. 17 decision, the Massachusetts Supreme Judicial Court ruled that the Massachusetts Department of Public Utilities erred in its approval of ratepayer-backed, long-term contracts as a way to leverage additional natural gas pipeline capacity in order to lower electricity costs.
“[T]he department’s order would re-expose ratepayers to the very types of risks that the [Massachusetts] Legislature sought to protect them from when it enacted the restructuring act,” the court ruled. “Both the Department of Energy Resources and the Department of Public Utilities noted that gas-fired generating businesses are unwilling to assume the risks associated with long-term gas pipeline contracts because there ‘is no means by which they can’ assure recovery of those contract costs. Shifting that risk onto the electric ratepayers … however, is entirely contrary to the risk-allocation design of the restructuring act.”
The Massachusetts’ case involves the $3 billion Access Northeast pipeline project proposed by Spectra Energy Corp., Eversource Energy, National Grid, which is intended to connect with 60% of New England’s electricity-generating power plants and, according to its developers, result in $1 billion to $2.5 billion in annual savings in energy costs starting as early as 2018.
Two of the three Maine PUC commissioners endorsed the Access Northeast project in the commission’s July 19 ruling.
Reaction to court ruling
Preti Flaherty lawyer Anthony Buxton, who serves as counsel the Coalition to Lower Energy Costs and the Industrial Energy Consumer Group, characterized the Massachusetts court ruling as “a serious defeat for New England electricity and natural gas consumers who seek relief from billions of dollars in unnecessarily high winter energy costs.”
“The great irony of today’s decision is that it rules unlawful having electric ratepayers shoulder the burden for paying for increased gas pipeline capacity,” he said in a written statement sent to Mainebiz on Aug. 17. “The reality recognized by five New England states is that electric ratepayers already pay year in and year out the huge windfall costs caused by inadequate gas pipeline capacity. Each of these states has concluded, as have more than 30 studies, that it would be far less expensive for consumers to pay for additional pipeline capacity than it is for them to pay the annual windfalls caused by inadequate gas pipeline capacity. Unfortunately, the court failed to recognize the current, existing harm to electricity consumers and the savings that would occur.”
But the Conservation Law Foundation, which was among the parties that had filed the appeal decided in their favor by Massachusetts’ highest court, applauded the ruling as an affirmation of well-established state and federal law.
“This is an incredibly important and timely decision,” David Ismay, CLF’s lead attorney on the case, said in a written statement. “Today our highest court affirmed Massachusetts’ commitment to an open energy future by rejecting the Baker administration’s attempt to subsidize the dying fossil fuel industry. The course of our economy and our energy markets runs counter to the will of multi-billion dollar pipeline companies, and, thanks to today’s decision, the government will no longer be able to unfairly and unlawfully tip the scales.”
Ben Tettlebaum, a staff attorney with the CLF in Maine, told Mainebiz in a phone interview today that in light of the court ruling CLF believes the best response by Maine’s PUC is to “dismiss the proceeding” and drop the plan approved on July 19 to commit up to $75 million annually from Maine ratepayers to facilitate the Access Northeast natural gas pipeline expansion.
He noted that the Maine PUC conceivably could pivot and issue a final order based on an alternative proposal favored by Commissioner Carlisle McLean at the July 19 meeting, which would provide ratepayer support for the much smaller Portland Natural Gas Transmission System's Continent to Coast expansion project connecting Atlantic Canada natural gas supplies with the Maritimes & Northeast Pipeline in Westbrook.
But CLF opposes ratepayer support for that idea as well, he said.
“We’re watching this very closely, not only in Maine but in every New England state,” Tettlebaum said. “We’re committed to fighting this.”
Buxton, for his part, isn’t conceding defeat.
“This decision is but one battle in a long war,” he said. “New England has the highest electric and gas costs in the continental Unites States. High energy costs are like pneumonia; you may survive the first and second bout, but eventually the pneumonia wins. High energy costs severely impair the health and welfare of New England society. This is the sort of problem that healthy civilizations solve by causing proper infrastructure investment. We have more work to do.”
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