December 17, 2018

CT regulator wraps pipeline review, finds utilities acting properly

Photo | Contributed
Photo | Contributed
An Eversource gas crew working in Griswold.

For the past 14 months, Eversource and Avangrid have been defending against a research report that claimed their natural gas pipeline scheduling practices had added $3.6 billion to New England ratepayers' costs over a three-year period.

The report, written by researchers from the Environmental Defense Fund (EDF) and several universities, claimed the utilities routinely reserved more pipeline space than they needed, then reduced those orders at the last minute. That made natural gas more scarce, thereby driving up energy prices for power plants and others, the authors alleged.

The utilities have said they're simply ensuring that they will have enough capacity to meet customer demand in cold weather.

So far, that utilities' pushback against the report has been successful, as they've won rulings from their federal regulator, as well as from a judge in Massachusetts who dismissed a proposed class action lawsuit on behalf of ratepayers.

Last month, they racked up another win.

On Dec. 12, Connecticut's Public Utilities Regulatory Authority (PURA), which soon after the EDF report was published opened a review of "gas supply portfolio, asset strategies and practices," issued a decision finding in favor of the utility companies.

The utilities, PURA wrote, had managed their gas portfolio assets using "prudent strategies" and "in accordance with [PURA's] directives and expectations." Their asset management strategies take into account unpredictability in temperatures and customer demand, and the fact that the utilities are required to have additional gas available in case retail marketers are unable to supply it, the decision said.

PURA limited the scope of its investigation from the outset, saying it did not intend to analyze whether existing market rules should be changed.

The Conservation Law Foundation (CLF) argued in the proceeding that changes were needed to make certain gas transactions more transparent to regulators. Specifically, CLF argued, gas utilities' off-system sales (which occur when they have excess capacity), happen within a "black box," making the market less efficient and making it harder for PURA to regulate the sales.

PURA disagreed, writing that off-market sales benefit both the utilities and their ratepayers and that it has necessary mechanisms in place to audit secondary market transactions on an annual basis.

"While it is unfortunate that PURA and other agencies had to spend extensive time and resources to review these erroneous claims, we appreciate PURA's careful examination of this matter and its ultimate conclusion that we acted properly and in the best interest of our customers," Eversource spokesman Mitch Gross said.

"PURA's final decision confirms what we've said all along: that SCG and CNG's management of their natural gas portfolios was consistent with their obligation to provide reliable service to customers under all weather and service conditions," Avangrid spokesman Edward Crowder said.

Environmental Defense Fund spokesman Jon Coifman said his organization, which was not a party to the PURA proceeding but did provide some testimony submitted into the record, continues to stand by its original analysis.

The Fund's report didn't ascribe any motives to the utilities or allege that they'd broken any laws, Coifman noted.

"Our goal was, and is, to show that the rules governing the wholesale natural gas market and its interaction with the wholesale electric markets are in dire need of reform," he said.

EDF has called for better transparency, new pricing structures, and better alignment of risks and rewards, which it says could lower costs, drive new innovations and "provide a more honest picture of the true need for new gas supply capacity, and the most cost-effective ways to meet it."

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