Massachusetts court bars billing electricity ratepayers for new gas pipelines

The Massachusetts Supreme Judicial Court has prohibited ratepayer-funded natural gas capacity purchases by electric utilities. The Aug. 17 decision vacated a Department of Public Utilities Commission order giving it authority to approve electric utilities’ contracts for new gas pipeline capacity if they are in the public interest.

DPUC’s Department of Energy Resources sought the order because it believed gas pipeline constraints have caused unseasonably high winter electricity prices in the Bay State. But the court said allowing electric utilities to pass pipeline capacity costs through to ratepayers violates the state’s 1997 utilities restructuring act.

Unlike gas utilities that regularly contract for capacity, Massachusetts electric utilities are generally unwilling or unable to enter into long-term firm gas contracts, it noted in its decision. “For these generators, there is added risk for such contracting because there is no means by which they can be reasonably assured of receiving enough revenue to cover the cost of securing the gas capacity over the course of each year,” it said.

Gas pipeline owners and operators, on the other hand, are not willing to build new capacity without long-term contracts, it continued. “Thus, pipeline companies do not have sufficient assurances such that they are willing to build additional pipeline capacity for gas-fired electric generators, despite the increasing gas demand for heating and as a source of supply for electric power,” the court said, adding that DOER characterized this as a mismatch which needed to be addressed.

It found the order invalid because it would undermine the restructuring act’s main objectives and reexpose ratepayers to financial risks from which the legislature sought to protect them.

A Massachusetts Petroleum Council official immediately criticized the court’s decision. “Inexpensive, clean-burning natural gas is so close yet so far away for Bay Staters, who have paid some of the highest energy costs in the nation,” Associate Director Beth Treseder said.

“This decision will not give consumers relief in energy prices, potentially causing them to needlessly spend millions more each year for electricity and gas as compared to neighboring states,” she said.

Contact Nick Snow at nicks@pennwell.com.

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