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Quick US FERC action on Mystic dispute could aid survival of Everett LNG facility: motion

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Quick US FERC action on Mystic dispute could aid survival of Everett LNG facility: motion

Highlights

FERC urged to act to help New England fuel security

Uncertainty is impacting Everett's gas sales: Mystic

  • Author
  • Kate Winston
  • Editor
  • Gary Gentile
  • Commodity
  • Electric Power LNG Natural Gas

To protect New England fuel security, the Federal Energy Regulatory Commission should promptly explain which costs of the Everett LNG facility can be recovered through Constellation Mystic Power's rates, so that Everett knows how much to charge third parties for gas, Mystic said in an emergency motion.

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The current regulatory uncertainty means that Everett is conservatively pricing gas deals, decreasing the chance of third-party sales that could support the viability of the Massachusetts LNG terminal beyond 2024, according to the motion filed by Mystic and Constellation Energy Generation.

If the LNG terminal shuts down due to a lack of sales, "[t]hat would create much larger reliability problems for both electric and gas service in New England over the coming years," according to the motion (ER18-1639) posted by FERC late Nov. 22.

Everett is capable of supplying 35% of natural gas demand on peak winter days in New England, where gas supplies are already constrained, the motion said. And the region faces prospects of a winter storm crisis where both electric and gas service are interrupted, according to the motion. "The stakes are high," the motion said.

The issue revolves around a reliability-must-run, or RMR, agreement to keep the Mystic gas-fired units running from June 2022 to May 2024. That agreement also helps Mystic recover the bulk of the costs associated with the Everett facility, which fuels the power plant.

Court decision

In August, the US Court of Appeals for the District of Columbia Circuit found that FERC acted arbitrarily and capriciously when it allowed nearly all of the Everett's operating costs to be recovered from ratepayers. The court partially vacated and remanded the underlying FERC orders (Constellation Mystic Power v FERC, 20-1343).

Now, Mystic is asking FERC to act by Jan. 9, 2023, on the remanded issues.

There is strong interest from local distribution companies to sign up for gas from Everett, the motion said. But, because FERC has not acted on the DC Circuit's remand, Everett faces regulatory uncertainty that interferes with its ability to enter commercial arrangements, the motion said.

Specifically, Everett does not know what share of its costs must be recovered from third-party sales and what share can be recovered from Mystic, the motion said. "It thus must conservatively price its third-party offers, decreasing the likelihood that they will result in transactions that would support the acquisition of additional [LNG]" the motion said.

Everett's future

Regulatory uncertainty from the remand also affects the viability of Everett after the Mystic agreement ends in 2024, the motion said. If the facility does not enter into arrangements to support continued operations by the Spring or early Fall of 2023, Everett will likely shut down at the end of the Mystic deal, the motion said.

Mystic asked FERC to resolve two issues by Jan. 9. The first issue concerns the amount of Everett's fixed costs that will be recovered from Mystic and its customers. The second issue involves whether, if Everett continues operating after the Mystic plant shuts down, ratepayers can claw back costs that Everett recovered by selling fuel to Mystic during the RMR deal, the motion said.

FERC should maintain its plan to allocate 91% of Everett's costs to Mystic, and continue to reject the clawback, the motion argued. However, Mystic is willing to restore an additional credit under which Mystic customers would receive a share of the margin earned from forward transactions, the motion said.

Because resumption of such margin sharing would resolve cost causation issues, there can be no credible claim that more is needed, especially in light of other existing credits, Mystic said.