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Spectra Energy Partners plans Access Northeast, a pipeline that would fuel 60 percent of New England's gas-fired generation. However, power plants won't sign long-term contracts for pipeline capacity. Massachusetts regulators had hoped electric utilities would step in to sign such contracts and pass the costs to ratepayers. Proponents had argued that the mechanism would lower wholesale electricity costs. (Spectra Energy)
(Spectra Energy)
BOSTON -- Fossil fuel foes, a liquefied natural gas company and a trade association representing power generators celebrated Wednesday's news that natural gas pipeline growth in New England will not be financed by electrical ratepayers in Massachusetts.
Meanwhile, the administration of Gov. Charlie Baker cautioned that new natural gas capacity is needed to meet the region's power demands without raising costs. Similar sentiments were expressed by electrical utilities and a major pipeline developer.
In a closely watched case, the Massachusetts Supreme Judicial Court on Wednesday struck down a mechanism where electric utilities would be allowed to forge 20-year contracts for natural gas pipeline capacity, sell that capacity to power plants and pass the costs to their retail customers.
State energy officials had said the plan would provide stable financing to expand natural gas capacity to the region, thereby driving down the cost of wholesale electricity. Foes countered that ratepayers should not shoulder the risk associated with major pipeline development, and said there is no guarantee the scheme would benefit consumers.
Letting electric companies purchase natural gas on behalf of power plants would violate the state's 1997 utility restructuring law, wrote Justice Robert Cordy in his Aug. 17 opinion.
Last year, the Conservation Law Foundation sued the Department of Public Utilities over its adoption of the mechanism, and the case was heard in May by the state's highest court. Filing a separate complaint was Engie Gas & LNG, which imports liquefied natural gas, a competing fuel. The office of Attorney General Maura Healey filed an amicus brief opposing the DPU mechanism.
Electrical utilities under Eversource Energy and National Grid since last fall have been seeking DPU approval for capacity on Access Northeast, an interstate line that would serve a cluster of New England power plants. The DPU has suspended evidentiary hearings on those contracts until the department's review of the court's decision is complete, said a Baker administration spokesman.
Access Northeast, proposed by Algonquin Gas Transmission, is a project of Spectra Energy, Eversource Energy and National Grid.
While fully half of Massachusetts' power generation depends upon natural gas, plant owners have been unwilling to enter into contracts for pipeline capacity, preferring to buy fuel on the spot market. The conundrum is that pipeline developers need to have such contracts lined up when seeking federal approval. The idea was that electric utilities could commit to the pipelines on behalf of the generators.
An amendment to this year's state energy bill that would have banned the pipeline funding mechanism did not make it into the final version signed by Baker this month.
The following represents a range of reactions to Wednesday's court ruling:
Peter Lorenz, spokesman for Gov. Baker's Executive Office of Energy and Environmental Affairs:
"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 over time. 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."
Senate President Stan Rosenberg, D-Amherst
"The SJC got it right. 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."
Algonquin Gas Transmission, LLC spokesman Arthur C. Diestel:
"Algonquin, as the sponsor of the Access Northeast Project, is extremely disappointed with the decision of the Massachusetts Supreme Judicial Court. This leaves Massachusetts and New England in a precarious position without sufficient gas capacity for electric generation during cold winters. The lack of gas infrastructure cost electric consumers $2.5 billion dollars during the Polar Vortex winter of 2013 and 2014. While the Court's decision is certainly a setback, we will reevaluate our path forward and remain committed to working with the New England states to provide the infrastructure so urgently needed for electric consumers."
Eversource Energy spokeswoman Caroline Pretyman:
"Although we respect the Court's decision, it leaves the region in a precarious position without sufficient gas capacity for electric generation during cold winters -- which drives electricity prices up for our customers. We've been working with Spectra and National Grid to address this issue. Access Northeast is a solution that could save New Englanders approximately $1 Billion a year -- savings that help consumers and businesses stay competitive. The project would also displace oil and coal-fired generation with cleaner-burning natural gas -- reducing regional emissions and improving the environment.
While the Court's decision is certainly a setback, we will re-evaluate our path forward and remain committed to working with the New England states to provide the infrastructure so urgently needed to ensure reliable and lower-cost electricity for customers."
National Grid spokeswoman Danielle Williamson:
"This is a disappointing setback for (Access Northeast), which is designed to help secure New England's clean energy future, ensure the reliability of the electricity system, and most importantly, save customers more than $1 billion annually on their electricity bills. We will explore our options for a potential path forward with Access Northeast and pursue a balanced portfolio of solutions to provide the clean, reliable, and secure energy our customers deserve. While natural gas remains a key component in helping to secure New England's long-term energy future, the recently passed clean energy bill also presents a welcomed opportunity to support the development of large-scale clean energy, such as hydro and wind."
Massachusetts Attorney General Maura Healey:
"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. We know from our 2015 electric reliability study that there are cleaner and more affordable options for meeting our energy needs. 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."
The Conservation Law Foundation:
"This is an incredibly important and timely decision," said David Ismay, CLF's lead attorney on the case. "Today our highest court affirmed Massachusetts' commitment to an open energy future by rejecting the Baker Administration's attempt to subsidize to 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 in their favor."
ENGIE Gas & LNG spokeswoman Carol Churchill:
"In an important decision today, the Massachusetts Supreme Judicial Court ruled that the MA Department of Public Utilities does not have the authority to review and approve ratepayer-subsidized long-term contracts by electric utility companies for natural gas pipeline capacity. The decision means electric ratepayers should not be required to bear the risk of these multi-billion dollar contracts.
We continue to believe that Massachusetts and New England's natural gas capacity needs can be met most efficiently by existing (liquefied natural gas) infrastructure available to the region, diversifying the region's portfolio into renewables, and continuing to encourage and reward energy efficiency and energy storage. The state and region are clearly headed in the right direction, and this decision will allow us to continue on this path."
Mass Power Forward, a coalition of environmental groups:
"Today, the Supreme Court upheld critical laws shaped to protect consumers and combat climate change. The regressive "pipeline tax" approved by Governor Baker's Department of Public Utilities would have effectively transferred wealth from ratepayers to large pipeline and utility companies, forcing customers to promote expansion of fossil fuels against their will."
New England Power Generators Association spokesman Dan Dolan
"The Court appropriately and strongly upheld the restructuring act to guard against consumers subsidizing energy infrastructure projects in Massachusetts. The DPU has now suspended consideration of these contracts. NEPGA has, and continues to, take no position on the pipelines themselves or any other energy infrastructure project. Our issue is with how these initiatives are financed. It is on that score that we fully support the Court's ruling today."
The power generators association previously said the mechanism would interfere with competitive power markets, giving an unfair advantage to certain players.
The state's highest court heard oral arguments in the case in May.
Justice Cordy wrote that the mechanism would expose ratepayers to financial risks lawmakers sought to mitigate with the 1997 law, which broke up integrated energy monopolies and forced electric utilities to sell their power-generating assets, creating a competitive market for electricity.
Mary Serreze can be reached at mserreze@gmail.com