October 12, 2017
CT Green Guide

Report: Artificial natural gas scarcity cost ratepayers $3.6 billion

Matt Pilon
Matt Pilon
A Spectra pipeline marker in Berlin

A team of researchers said Wednesday in a report that New England ratepayers incurred $3.6 billion in added costs from 2013 to 2016 from alleged actions by Eversource and Avangrid that artificially constrained natural gas supply on the Algonquin pipeline.

The economists, from the Environmental Defense Fund, UC Santa Barbara, the University of Wyoming and Vanderbilt University, analyzed public data from delivery nodes on the pipeline, finding that the utilities "routinely" ordered large deliveries, "then sharply reduced those orders at the last minute."

"This 'down scheduling' consistently came too late for anyone else to buy or utilize that capacity, thus limiting available gas supply in the wholesale market," EDF said in a press release about the report.

The effect, the report said, was a 20 percent increase in electricity prices -- which are closely linked to natural gas prices in New England -- over the three-year period. Overall capacity was constrained by 3.5 percent, while capacity used to supply gas-fired power plants was constrained by 14 percent, the authors said.

EDF spokesman Jon Coifman said the report is not accusing either utility of directly profiting from higher prices caused by down scheduling, because state regulators require gas utilities to return much of that excess revenue to ratepayers. Connecticut is the strictest state in New England, requiring that 99 percent of that revenue be returned to ratepayers, which the authors said may reduce utilities' incentives to efficiently use their excess pipeline capacity.

"It is not for us to speculate about any company's motive," Coifman said. "Our focus is on the distortions in the market that these actions causes."

"The analysis shows the substantial impact that corporate decisions can have on crucial energy markets under today's outmoded rules, whether or not those impacts are intentional."

The report said that both utilities could have an incentive to spur higher electricity prices, because each operates in the gas and electricity markets.

In an in-depth story on the report, Utility Dive quoted one of the report's authors, who said that higher gas prices leading to higher electricity prices could benefit Eversource because it is in the midst of selling off three power plants in New Hampshire.

Eversource spokeswoman Tricia Modifica denied the report's findings, stating: "We do not engage in any behavior to 'artificially constrain capacity.' "

She called the report "a complete fabrication."

"It appears to be fabricated by anti-pipeline proponents who are trying to make the case that pipeline shortages in New England are due to capacity withholding," she said. "To the contrary – it is well documented that New England pipeline demand greatly exceeds the supply on cold days."

Meanwhile, Avangrid spokesman Michael West said the company was still reviewing the 74-page report. He said Avangrid follows all laws and regulations and hasn't benefitted financially from any movement in wholesale pricing.

Both utilities said their gas delivery orders are aimed at ensuring customers have gas, even in extreme weather.

A spokesman for Connecticut's Public Utilities Regulatory Authority said Thursday that the agency is reviewing the report.

Read more

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Natural gas remains concern for N. England winter


Read the report on pipeline constraints

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