MA Highest Court Quashes State’s Attempt to Allow Electric Power Suppliers to Fund Increased Gas Pipeline Capacity Via Passthroughs to Ratepayers
In a decision dated August 17, 2016, the Supreme Judicial Court of Massachusetts vacated an order of the Massachusetts Department of Public Utilities (MDU) which would have had the effect of subsidizing, via a pass-through to ratepayers, the cost to electric energy suppliers of developing increased natural gas pipeline capacity into the state. This was also a big win for plaintiff ENGIE Gas & LNG LLC (formerly GDF Suez Gas NA LLC), a major importer of LNG. See
MDU saw a problem in the limited availability of natural gas pipeline capacity for gas-fired electric generation and attempted to solve that problem through an expansive reading of Massachusetts law. MDU would have permitted electric power companies to sign long-term contracts, typically 20 years, with natural gas suppliers to permit the suppliers to secure funding for new pipeline construction. MDU also saw that the electricity producers wouldn’t be willing to take on the risk of those contracts and authorized the electric generators to pass the cost of the pipeline capacity through to consumers.
ENGIE has an LNG import facility in Massachusetts. Because of the competitive threat the MDU order posed to ENGIE’s business, it sued to overturn the order. An interesting twist is that the independently elected Attorney General of Massachusetts, a Democrat (the Governor is Republican), filed an amicus brief in the case also urging vacation of the MDU decision, in part because the Attorney General had already taken the public position that Massachusetts did not need more gas pipeline capacity and should look to renewable sources of energy to meet future electric energy demand.
Now the ball is back in the Legislature to consider whether to amend the law to authorize the subsidy program that the MDU proposed. But the SJC decision also keeps very much alive the issue whether there is a natural gas capacity problem, leading to higher electric energy prices, that cannot be resolved without additional gas pipelines, or whether new sources of alternative energy, wind, solar, hydropower, plus LNG, can meet the State’s electric energy demand.
Kenneth A. Reich, Esq., Principal, Kenneth Reich Law, LLC
Steve Kalish, Esq.
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