Editorial: Pipeline ratepayer rip-off nixed

Published: 8/18/2016 6:16:00 PM

A decision Wednesday by the state’s highest court halts one of the most outrageous business boondoggles in recent memory — the notion that people who buy electricity should pay for a private company’s natural gas pipeline.

Believe it or not, that was the funding mechanism the state Department of Public Utilities accepted last October. The Conservation Law Foundation and a competing energy company challenged the DPU’s approval. And in an unanimous ruling Wednesday, the state Supreme Judicial Court said such an arrangement is prohibited by a 1997 state law.

The deal between electric utilities and pipeline builders represented the worst sort of corporate welfare. Writing for the court, Justice Robert Cordy said it was “unreasonable” for electricity customers to shoulder the financial risk of constructing pipelines.

Allowing the tariff, Cordy wrote, would “re-expose ratepayers to the very types of risks that the Legislature sought to protect them from” when it updated a 1930s-era law two decades ago.

The biggest loser is Spectra Energy, which had partnered with Eversource and National Grid in a project to construct the Access Northeast pipeline in central and eastern Massachusetts. Filings related to that project were immediately suspended.

A Spectra spokesman said the SJC’s decision leaves electricity customers at risk in another way — vulnerable to higher energy costs during times of peak demand, when electricity generators buy gas on the spot market rather than through long-term contracts.

But the decision halts what might have been a monumental ratepayer rip-off. Critics of the now-dead Northeast Energy Direct pipeline proposed by Kinder Morgan’s Tennessee Gas Co. built a credible case that natural gas brought to Massachusetts through lines financed by electricity ratepayers might have moved right on through the state to export overseas.

Under the tariff plan the SJC struck down, that would have been like compelling taxpayers to build a highway for drivers in another country.

The region’s legislative delegation tracked this issue closely and had reason to celebrate Wednesday’s ruling. Senate President Stanley C. Rosenberg hailed it as a big win for consumers, protecting them from being stuck with pipeline construction costs even before such a system began to deliver gas.

To make matters worse, Rosenberg noted in a statement Wednesday, ratepayers’ investment, through add-ons in their electricity bills, would have enriched a private company if a pipeline funded through tariffs were later sold.

In western Massachusetts, the issue may seem moot, given the collapse of Kinder Morgan’s project, but it is not.

If the court had upheld the DPU ruling allowing tariffs for pipeline construction, that could have spurred later interest in projects like the NED line. “Ratepayers deserve to have confidence that the matter is settled,” Rosenberg said, “and now they do.”

In late June, with this issue hanging fire before the court, Rosenberg led the Senate to a 39-0 vote on a bill that would have safeguarded electricity ratepayers from being saddled with pipeline costs. While 90 members of the House indicated support for a similar measure, no such bill was taken up in their chamber by Speaker Robert DeLeo.

The state does have some of the highest power costs in the country. Gov. Charlie Baker’s push to increase the use of electricity produced by wind and hydro generation will help answer the need for new energy sources. Baker supported the tariff, so this week’s decision is a setback for his administration. It is a win for environmentalists who rightly argue that we must do all we can to reduce the use of fossil fuels that contribute to global warming.

Over the years of dispute that surrounded the NED project, people learned a few things.

One is that the state’s perceived energy shortage may be driven by fear more than facts. Attorney General Maura Healey’s independent study of energy needs found that the shortage comes only at peak times and that alternatives, including conservation, could address that.

Healey followed up on that by filing a brief in April before the SJC in support of the Conservation Law Foundation’s challenge of the DPU action. Usually, the AG’s office acts to support the legal positions of other state agencies. Not in this case. On the tariff issue, the office found that existing law didn’t allow it.

Investors, not ratepayers, should build pipelines. If the demand for natural gas is really there, they win. That’s how the private enterprise system works. If not, it should never be ratepayers who lose.


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