Understanding the SJC Decision While Keeping a Vigilant Eye on Big Gas

The Future of Spectra’s Access Northeast Pipeline Looks Dim [but Baker’s continued pro-pipeline stance and Enbridge’s new influx of capital give us pause]

AUG 26, 2016 GREG CUNNINGHAM Conservation Law Foundation

Last week’s unanimous decision from the Massachusetts Supreme Judicial Court, ruling in favor of CLF and finding that the state’s Department of Public Utilities cannot legally tax the Commonwealth’s electric consumers to cover the cost of new interstate gas pipeline, is reverberating throughout New England. Since the decision was released, not only have the Massachusetts electric utilities that sought to impose the gas charge on their customers withdrawn their requests from the DPU, but actions in each of the other New England states have called into serious question the future of the region’s biggest pipeline proposal – Spectra’s Access Northeast.

Access Northeast is the last vestige of the unholy alliance between Big Gas and the region’s electric utilities. That alliance was designed to reap huge profits by overbuilding New England’s gas pipeline system and supplying us with more natural gas, ­at a time when our region already over-relies on this climate-polluting fossil fuel. Meanwhile, the costs and risks of these ventures would be heaped on electric consumers (you and me). Like its former climate change co-conspirator, Kinder Morgan, Access Northeast now appears to be on the road back to Houston thanks to strong regional resistance and a Massachusetts high court that has signaled to the entire region the legal and economic folly of these massive pipeline proposals.

Without Massachusetts, Access Northeast Cannot Move Forward

Leading up to the Court’s decision, utilities commissions across New England were each weighing the legal and policy merits of proposals between their own state’s utility companies and Spectra – proposals that were virtually identical to the one CLF challenged in Massachusetts’ highest court. The days since the Court’s decision have seen those same utilities commissions scrambling to assess the implications of the decision on those proposals.

For CLF and our allies, the implications are clear: if Spectra’s Access Northeast cannot move forward in Massachusetts – which was key to the project’s economic feasibility ­– then it cannot move forward anywhere in New England.

Why? Because, according to Spectra, the Access Northeast project is dependent upon each state’s electric utility (really its customers – again, you and me) paying its share of the project’s costs, allocated in proportion to that state’s share of the regional electricity demand. Prior to the court’s ruling, those costs would have been rationed out to electric consumers in Maine, Connecticut, New Hampshire, Rhode Island, and Massachusetts, the state with the highest electricity demand.

But the Supreme Judicial Court’s decision lets Massachusetts consumers off the hook –meaning that those of us living in the rest of New England (except Vermont, which never bought into this scheme) will now have to cover the Commonwealth’s and Vermont’s share of the costs, which represent 50% of the region’s total. If the project proceeds at the size originally planned (and Spectra has asserted multiple times since the Court’s decision that it will), we would all need to pay at least double what had originally been proposed.

In an effort to help bring clarity to this new reality, this week CLF filed motions with the utilities commissions in Rhode Island, Massachusetts, and New Hampshire asking that the gas proposals in each state be dismissed because Spectra’s own “all states pay their fair share” requirement cannot be met. In Maine, CLF requested that the Commission, which is in the process of drafting an order approving a contract with Access Northeast, re-open its hearing to consider the fact that the Massachusetts high court decision will prevent the state from purchasing capacity on the proposed pipeline.

More Risk and Much Less Reward

Spreading the financial risks of Spectra’s pipeline across far fewer consumers only increases those risks – and decreases the project’s promised benefits (which the state commission staff and experts that have assessed them to date have determined to be outweighed by the cost). The financial risks of the project to Massachusetts consumers were a key factor in the Supreme Judicial Court’s decision. Its observations about the effect of putting the cost of pipeline projects on electric consumers should resonate throughout the region and inform the decisions made by each utilities commission considering the issue. The Supreme Judicial Court found that the ANE proposal:

“would reexpose ratepayers to the very types of risks that the Legislature sought to protect them from when it enacted the restructuring act. . . . [G]as-fired generating businesses are unwilling to assume the risks associated with long-term gas pipeline capacity contracts because there ‘is no means by which they can’ assure recovery of those contract costs. Shifting that risk onto the electric ratepayers . . . is entirely contrary to the risk-allocation design of the restructuring act.”

While the Supreme Judicial Court’s decision was based on Massachusetts law and so has limited impact legally in other states, every New England state has so-called “restructuring” laws similar to the ones referenced by the Court opinion. Over the last 20-plus years, those laws have required electric utilities to sell off their power plants and their associated price-volatile fuel obligations and to own and manage only the electric transmission system. As such, when the Court says that the Access Northeast proposal re-exposes electric consumers to the risks from which such laws sought to insulate them, it is speaking to every state and every electricity consumer in New England and telling us that this pipeline is a bad deal.

Let’s hope that our utility commissioners, with whom the fate of the Access Northeast project now rests, are listening.

Plan B for a pipeline

September 1, 2016  Written by Bruce Mohl for Commonwealth Magazine

Some say Baker’s new approach faces legal hurdles

ONE OF THE BIG MYSTERIES on Beacon Hill is how Gov. Charlie Baker is going to accomplish one of his top remaining energy priorities – building a new natural gas pipeline into the region.

His original plan was dealt a mortal blow a couple weeks ago when the Supreme Judicial Court ruled that existing state law doesn’t allow an electric utility to charge its customers for the money to finance a natural gas pipeline.

Yet the governor is pushing ahead, and so are the companies behind the Access Northeast pipeline project – Spectra Energy, Eversource Energy, and National Grid. Both the governor and the firms argue that a new pipeline will bring in enough cheap natural gas during the winter months to reduce electricity prices and save ratepayers billions of dollars. In a letter to policymakers last week, officials from the three companies said “a do-nothing scenario is untenable” and “our path forward is clear.”

The problem is that the path forward is anything but clear, which is probably why they didn’t mention what path they will follow in their letter. Through a spokesman they turned down a request for an interview.

In the wake of the SJC decision, executing on Baker’s original plan now requires a change in state law, and that’s not going to be easy in a Legislature that went on record in opposition during the current session. The Senate voted 39-0 to block the plan, and close to 100 House members expressed a similar viewpoint in a letter to House Speaker Robert DeLeo.

Environmental groups are also mobilizing on the issue. The group 350 Mass Action is calling on lawmakers to sign a pledge not to accept any checks above $200 from executives, in-house lobbyists, and other employees of coal, oil, and gas companies and the utilities that transport their products. The 10 targeted companies include Spectra Energy, Eversource, and National Grid, the three firms behind the Access Northeast pipeline project. More than 30 lawmakers and legislative candidates have signed the pledge.

Earlier this week, Baker’s secretary of energy and environmental affairs, Matthew Beaton, raised the possibility of a pipeline Plan B. Under his Plan B, natural gas utilities instead of electric utilities would sign the long-term contracts for natural gas capacity that are needed to finance a new pipeline. Beaton’s approach avoids the legal problems cited by the SJC in its decision, but it raises others.

Natural gas utilities currently purchase gas under long-term contracts for their customers. The utilities typically buy more gas than they need as a cushion in case demand rises unexpectedly because of unusually cold weather. If the cushion isn’t needed, the unneeded gas is sold on the spot market, typically to power generators who need gas but are unwilling to enter into long-term contracts for the fuel. (Power generators typically contract to sell power in three-year increments, while long-term contracts for natural gas pipeline capacity last 20 years.)

The cushion has worked reasonably well in winters past, except in 2013-14 when unusually low temperatures caused homeowner demand for gas to rise, eliminating the cushion. During that winter, many power generators couldn’t find enough gas to operate their power plants, and the gas that was available skyrocketed in price. The end result was a huge spike in electricity prices.

Beaton hasn’t laid out in detail his Plan B, but it appears from his brief comments this week that gas utilities would increase the size of their cushion, enough to finance a new pipeline. The utilities would provide gas needed by their customers, and what’s left over would be sold on the spot market to power plant operators who need fuel.

The upside of plan B is that it utilizes the existing system for purchasing gas. The downside is that it takes the existing system to the breaking point. Several experts consulted by CommonWealth suggested state regulators would have a problem with a gas utility buying more gas than its customers need just so the region’s power generators won’t run short of fuel. In a sense, the experts said, Plan B has gas customers subsidizing the rates of electricity ratepayers. The experts said Plan B would either be shot down by state regulators or end up before the Supreme Judicial Court, the same place where Plan A lost steam.

“Conceivably it would work,” said Dan Dolan, president of the New England Power Generators Association, of Plan B. “But I still don’t think it would pass legal muster.”

Eversource and National Grid withdraw natural gas application

Although Eversource and National Grid have withdrawn support for the Spectra pipeline (read below), it appears that Spectra is not ready to call it quits just yet.

Statement from Spectra counsel to the Sharon Town Administrator, sent Aug. 24:

“The need for additional gas supply into New England has not changed despite the recent ruling of the MA Supreme Judicial Court (the “SJC”).

Algonquin Gas, as the sponsor of the Access Northeast Project, is certainly disappointed with the SJC’s decision.  However, that decision only spoke to the state statutes which regulate the generation and distribution of electricity in Massachusetts, and not to the need for additional supplies of natural gas into the Commonwealth.

Thus, Algonquin Gas is in the process of evaluating the path forward to ensure that it is consistent with the Court’s decision while also providing the natural gas infrastructure so urgently needed by New England’s electric and gas consumers.  We will communicate the results of that review as soon as it is completed.”


UPDATE Aug. 24, 2016 — From State Representative, Lou Kafka of Sharon:

“It has come to my attention that since my post yesterday, with regard to Eversource withdrawing its petition for the pipeline, National Grid has also withdrawn its petition. This leaves only Spectra Energy’s petition. The three companies were a team on the proposed pipeline and these withdrawals will certainly weaken Spectra’s position. Congratulations again to everyone who has stood up to fight this proposal and I assure you I will continue work in opposition to the proposal.”


Aug. 23, 2016 — From State Representative, Lou Kafka of Sharon:

OLYMPUS DIGITAL CAMERA“For many months now my colleagues and I have been working hard to stop the Spectra Pipeline from being built. Representatives John Rogers, Paul McMurtry, and I tried to cut off funding for the project with an amendment to the “Energy Omnibus Bill” which would have prohibited electric and gas companies from charging rate payers for the project. Representative Walter Timilty, with our support, then led the charge with a standalone bill to do the same.

Last week the Supreme Judicial Court ruled that energy companies can not pass pipeline construction costs on to ratepayers. Our tactic of cutting off the project’s funding was clearly the right way to go, as Eversource announced this morning that it is withdrawing its petition for the pipeline. Congratulations to everyone who worked hard and lent their voices to oppose this project.”

Read the full story from the State House News Service.

Thank you, Lou – and all who have helped to oppose the pipeline!

The pipeline tax is dead!

Gavel and scalesMajor, groundbreaking news!

August 17, 2016  —  Today, the Massachusetts Supreme Judicial Court ruled that the proposed pipeline tax is illegal.  Electric and gas utilities can not charge their customers to build new gas pipelines!

Read the decision here: http://www.mass.gov/courts/docs/sjc/reporter-of-decisions/new-opinions/12051.pdf

From Boston Globe, “SJC rejects Baker’s plan to impose fees for gas pipelines”

From Conservation Law Foundation, “Massachusetts’ Highest Court Rejects Public Subsidies for Fossil Fuels”

New MA Energy Bill Promotes Clean Power

wind turbines offshoreGood news for Massachusetts!

Governor Baker recently signed into law an energy bill to diversify the state’s energy portfolio by requiring utilities to enter into long term contracts to secure offshore wind and hydropower, and authorizing the largest procurement of offshore wind ever in the United States

In addition, the legislation supports efforts to repair natural gas leaks and stop dangerous methane leaks.

The Conservation Law Foundation summarizes the legislation nicely.  “The finished bill represents an important core consensus in the Commonwealth that cannot be denied: Fossil fuel power is a thing of the past, and Massachusetts’ future will be powered by clean energy.”

Hopefully Spectra Energy is paying attention…

Read more…

 

Action Alert: Call for the Energy Bill

The following legislators must reconcile the House and Senate versions of the bill ( H4385 and S2400). Please call each one and tell them you want the bill to explicitly ban a surcharge or tax for new gas pipelines, as in the Senate version.

 phoneHonorable Brian Dempsey (D-Haverhill), Chairman of House Committee on Ways & Means, 617-722-2990
Honorable Thomas Golden (D-Lowell), Chairman of the Joint Committee on Telecommunications, Utilities, and Energy, 617-722-2263
Honorable Bradley Jones (R-North Reading), House Minority Leader, 617-722-2100
Honorable Benjamin Downing (D-Pittsfield), Chairman of the Joint Committee on Telecommunications, Utilities, and Energy, 617-722-1625
Honorable Marc Pacheco (D-Taunton), Senate President Pro Tempore, 617-722-1551
Honorable Bruce Tarr (R-Gloucester), Senate Minority Leader, 617-722-1600

Here’s a handy script, in case you aren’t sure what to say:

Thank you for working to advance comprehensive energy legislation, H4385 and S2400. I am calling to ask you to push for a strong final clean energy bill. Here are my priorities regarding the legislation:

  1. I oppose the “pipeline tax,” and urge you to protect ratepayers and our environment by prohibiting subsidies for new gas pipelines, as the Senate has done.
  2. I support provisions within the House energy bill which would require the repair of all gas leaks during road projects (including “grade 3” or non-hazardous leaks), and support provisions within the Senate energy bill related to collective bargaining for these repairs.
  3. I support procurement of 2000 megawatts of offshore wind. I am pleased both chambers have chosen to support offshore wind, and urge you to go big!
  4. I support decommissioning planning and financing for Pilgrim Nuclear Power Plant.
  5. I support accelerating the Renewable Portfolio Standard to 2%/year to grow local, clean energy.

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