National Grid Wants to Buy Natural Gas Contracts
October 30, 2015
An environmental legal group is challenging a new rule in Massachusetts that allows electric utilities such as National Grid and Eversource to buy natural gas contracts — contracts that are essential to fund the many pipeline projects proposed or underway across southern New England.
The Conservation Law Foundation (CLF) and other environmental groups oppose the pipelines, fearing they will lock the region into decades of natural gas use at a time when states should be cutting their fossil fuel use to lessen the impacts of climate change.
Big electric users such as Walmart also have questioned the practice of letting electric utilities — also called electric distribution companies (EDCs) — buy the contracts for fear it will increase energy bills.
“In fact, having EDCs procure any pipeline capacity may unnecessarily over-allocate costs and risks to the EDC (and Massachusetts retail ratepayers) without sufficient demonstration of a defined benefit to its retail customers,” Walmart wrote in a letter to the Department of Public Utilities prior to its approval of the new rule.
Large gas users such as power plants and distribution companies typically buy the 20-year pipeline capacity contracts to ensure they have gas to run their power facilities or deliver it to homes and businesses. Pipeline companies rely on the contracts to secure Wall Street financing and build the projects, which have big price tags.
The controversial Northeast Energy Direct Project, proposed by Kinder Morgan Inc., costs $3.3 billion. Houston-based Spectra Energy has a $3 billion natural gas pipeline projects in the works, in Connecticut, Rhode Island, and Massachusetts.
Thanks to the pipeline contracts, opponents say, these expensive projects will be paid by the public.
“Massachusetts has no legal authority to require the hardworking families and businesses that pay their monthly electric bills to bankroll the construction of a gas pipeline that will be obsolete by the time it’s completed,” CLF president Bradley Campbell said in a prepared statement.
With the backing of Gov. Charlie Baker, the Massachusetts Department of Public Utilities (DPU) approved the practice Oct. 2 without a public hearing. The action was questioned or opposed by Attorney General Maura Healey, the Low-Income Energy Affordability Network, Rep. Gailanne Cariddi, D-North Adams, Essential Power Massachusetts LLC, Food & Water Watch New England, RENEW Northeast, 350 Massachusetts for a Better Future, the town of Northfield, Environmental Entrepreneurs, Environmental Defense Fund, Acadia Center, Environmental League of Massachusetts, Mass Energy and Entergy Nuclear Power LLC.
Natural-gas companies and electric utilities support the measure. National Grid argued that pipeline capacity contracts are needed to fund more pipelines that will meet winter demand for natural gas. During a cold snap in January and February 2014 the heightened need for natural gas caused a 50 percent increase in gas rates for retail customers.
“So, even though there are ample supplies of low-cost domestic natural gas available from the Marcellus supply region and elsewhere in North America, the lack of additional pipeline capacity results in extremely high prices for those natural gas buyers, particularly electric generators in Massachusetts and throughout New England, who do not hold firm capacity,” National Grid wrote in its letter of support to the DPU.
Opponents argued that thanks to reserves of liquefied natural gas, natural-gas demand was met during a much colder spell in February. Many of the opponents of the PUC decision argued that future peak demand could be met with better planning and increased use of renewable energy and energy-efficiency programs.
“Expanded gas pipeline capacity for the purposes of electricity generation may undermine our state’s transition to renewable energy resources and presents the possibility of significant stranded assets should such pipeline infrastructure prove unneeded,” wrote the Environmental League of Massachusetts in its comments to the DPU.
The Conservation Law Foundation’s appeal was filed in the Massachusetts Supreme Judicial Court on Oct 26. Legal proceeding are not expected until after Jan. 1.
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