trending Market Intelligence /marketintelligence/en/news-insights/trending/9uqYi0fxE3kGD5EnDa9NMA2 content esgSubNav
In This List

Eversource bashes report saying utilities caused jump in Northeast power prices


Activity Volumes Across the Equity Capital Markets Dropped Significantly in 2022


Insight Weekly: PE firms shift strategies; bank earnings kick off; bankruptcies plummet

Case Study

A Large Energy Company Manages its Exposure with Robust Tools to Assess Creditworthiness and Set Credit Limits


Insight Weekly: Stocks limp into 2023; GCC banks set for rebound; deep-sea mining faces pushback

Eversource bashes report saying utilities caused jump in Northeast power prices

Researchers backed by the Environmental Defense Fund said utilities were responsible for making New England gas pipeline constraints worse by blocking access to capacity, a charge strongly disputed by the utilities, which called the report "a complete fabrication."

The researchers' report concluded that Eversource Energy and Avangrid Inc. withheld gas transportation capacity and, in so doing, caused a large inflation of gas and electricity prices at peak periods in New England.

"In recent years, the region's wholesale natural gas and electricity markets have experienced severe, simultaneous price spikes. While frequently attributed to limited pipeline capacity serving the region, we demonstrate that such price spikes have been exacerbated by some gas distribution firms scheduling deliveries without actually flowing gas. This behavior blocks other firms from utilizing pipeline capacity, which artificially limits gas supply to the region and drives up gas and electricity prices. We estimate that capacity withholding increased average gas and electricity prices by 38% and 20%, respectively, over the three-year period we study," the report's authors wrote.

"As a result, customers paid $3.6 billion more for electricity," they said. The authors said the money went to electric power generators and their fuel suppliers.

Levi Marks of the University of California, Santa Barbara; Charles Mason of the University of Wyoming; the Environmental Defense Fund's Kristina Mohlin; and Matthew Zaragoza-Watkins of Vanderbilt University wrote the report.

Eversource spokesman Michael Durand blasted the research. "This 'report' was published earlier this year and is a complete fabrication as evidenced by the lack of credibility it has received in the industry," he said.

The Environmental Defense Fund, along with other organizations, has for years challenged the idea that New England's pipeline infrastructure is constrained. The group has moved to block attempts by states and pipeline developers to build more pipeline, including the abandoned Access Northeast pipeline project by Eversource, Spectra Energy Partners LP and National Grid plc, which would have expanded Spectra Energy's Algonquin Gas Transmission LLC system. The Environmental Defense Fund says changes in the gas market would encourage better use of existing pipelines and provide a better market signal for investment in pipelines or alternatives such as gas storage or batteries.

The report focused on the utilities' actions on the Algonquin system, one of two major pipelines in New England, but the authors noted that other vertically integrated companies occupy other constrained gas transportation markets, and they suggested further research in other regions. This withholding of pipeline capacity might have been within the utilities' rights, but the costs show the need to improve regulation and coordination between the gas and electric power markets, the authors said.

Durand called the report "false and misleading" and said it lacks "any understanding of how gas procurement actually works."

"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," Durand said. "To the contrary, it is well documented that New England pipeline demand greatly exceeds the supply on cold days."

Durand said Eversource's pipeline capacity is dedicated to serving customers under state and federal regulations and the company has no ability to withhold capacity that is used to ensure reliable service on the coldest days. The gas supply Eversource purchases for customers is "a strict pass-through cost," so the company would not benefit from higher prices caused by withholding capacity, he said. "Again, this is well understood in the industry and is further evidence that the report is not credible."

"We do not engage in any behavior to 'artificially constrain capacity,'" Durand said. "Our focus and actions are driven by our responsibility to ensure our customers have enough gas — we can't run the risk that they are left in the cold."