New England's state-by-state effort to secure its naturalgas supplies by having electric utilities purchase capacity on new pipelineshas been dealt another blow with a dismissal by New Hampshire regulators ofEversource Energy'spetition to purchase natural gas capacity from 's Access Northeastpipeline project.
The New Hampshire Public Utilities Commission issued anorder Oct. 6 rejecting Eversource's request for a 20-year capacity contractwith Spectra subsidiary AlgonquinGas Transmission LLC on the grounds that the proposedratepayer-backed contract and distribution rate tariff are inconsistent withstate law. The decision comes in the wake of an Aug. 17 by the Massachusetts SupremeJudicial Court that overturned a Massachusetts Department of Public Utilitiesorder allowing electric distribution companies, or EDCs, to purchase naturalgas capacity from Access Northeast for natural gas-fired power plants.
Spectra's Access Northeast project with Eversource andNational Grid USAwould expand the existing Algonquin gas pipeline and storage system up to925,000 Dth/d. Supporters of the project argue that this would help stabilizeNew England's volatile electricity prices and secure its grid reliability aswintertime constraints can send prices soaring and push the grid to failure.
The New Hampshire PUC order said allowing Eversource topurchase long-term gas capacity to be used by gas-fired generators, and toinclude the net costs of those purchases and sales in its electric distributionrates, would allow Eversource to reenter the generation market at the risk ofits customers. The order said that would violate state law to keep unregulatedgeneration and fully regulated distribution separated.
"We acknowledge that the increased dependence onnatural gas-fueled generation plants within the region and the constraints ongas capacity during peak periods of demand have resulted in electric pricevolatility," said the order. "Eversource's proposal is an interestingone, with the potential to reduce that volatility; but it is an approach that,in practice, would violate New Hampshire law following the restructuring of theelectric industry. If the General Court believes EDCs should be allowed to makelong-term commitments to purchase gas capacity and include the costs in distributionrates, the statutes can be amended to permit such activities."
In a statement that also mentioned that the lack of gasinfrastructure had cost New England consumers $2.5 billion during the polarvortex of early 2014, Arthur Diestel, a spokesman for Spectra, said Algonquinis "extremely disappointed" with the state regulators' ruling."The PUC's decision leaves New Hampshire and New England in a perilousposition without sufficient gas capacity for electric generation during coldwinters," Diestel said. "We remain committed to working with the NewEngland states to provide the infrastructure so urgently needed for electricconsumers."
Martin Murray, a spokesman with Eversource, said in astatement that the order presents an "interesting conundrum" since thecommission's staff had directed utilities to propose solutions to reduce energybills after previously recognizing that constraints in New England's naturalgas supply are contributing to "unacceptable" volatility inelectricity prices.
Murray echoed Diestel's concerns and those expressedrecently by the head of the regional power grid operator, the , who in a recentinterview told S&P Global Market Intelligence that New England's energysituation is "precarious" and could become unsustainable in comingyears. A previous effort to secure New England's energy supplies and gridreliability by having the costs associated with a new pipeline paid under theRTO's tariff fell apart in 2014.
"New England's energy needs must be met, and costslowered. Doing nothing is not acceptable," Murray said. "The NH PUCorder does not move us closer to a solution, and that should concern all of uswho depend on a reliable supply of electricity and are seeking stable pricing."
The Conservation Law Foundation, an environmental advocacygroup that has opposed Access Northeast, welcomed the commission's decision."The PUC recognized the irresponsibility and illegality of such a schemeby plainly rejecting this proposal," said Tom Irwin, director of thefoundation in New Hampshire. "This important decision is another nail inthe coffin for a risky pipeline that we don't need, we don't want, and we can'tafford."
National Grid is a subsidiary of . Eversource'sNew Hampshire subsidiary is the Public Service Co. of New Hampshire.