High Court Ruling Is A Win for Electricity Ratepayers ~ IN YOUR CORNER WITH SENATOR IVES
By: State Senator Kathleen Ives – Sept, 2016
In August, the Massachusetts Supreme Judicial Court made an important ruling, determining it to be unlawful for electric distribution companies to pass along to ratepayers the costs associated with the construction of new, privately-owned natural gas pipelines, through what some have referred to as a “pipeline tax.” This ruling is a victory for ratepayers and for Massachusetts’ renewable energy future.
The Merrimack Valley is no stranger to the threat of natural gas pipeline construction. Kinder Morgan had planned to construct 177 miles of new pipeline from Wright, New York to Dracut, Massachusetts, including a seven-mile stretch of pipeline which would have cut through the City of Methuen. The company announced they were suspending the project in April after months of steady opposition from local communities that would have been negatively impacted by the pipeline.
This was welcomed news because the project would have compromised public safety, sensitive environmental areas, and private property rights. If the Kinder Morgan pipeline project had proceeded, the company would have drilled right under the Merrimack River. The construction period and permanent placement of high-pressure gas pipeline would have subjected residents to fire risks where the emergency response burdens would have fallen solely on our local, municipal first responders. And, Kinder Morgan was preparing to enter residents’ properties against their wishes in order to survey land, store equipment and conduct construction on private property, claiming that such private property use was necessary for the project’s completion.
Another important factor in the public’s strong opposition to the project was the obscured fact that Kinder Morgan expected ratepayers to pay for the construction of the pipeline through surcharges on ratepayers’ electric bills, even if they were not natural gas customers. I voted in favor of an amendment to the Senate’s comprehensive energy legislation, which would have prohibited such surcharges. That provision, however, was ultimately not included in the final legislation.
The Massachusetts Department of Public Utilities (DPU) had previously approved this method of pipeline expansion funding in October 2015. The recent ruling by the Supreme Judicial Court directly addresses the legality of that decision.
The court ruled that the DPU’s decision to approve long-term contracts by electric distribution companies for the purchase and resale of interstate natural gas pipeline capacity was fundamentally in conflict with the legislature’s primary goal of passing the Restructuring Act of 1997. That legislation sought to disrupt the monopoly enjoyed by some utility companies which allowed them to control the generation, transmission, and distribution of electricity. The Restructuring Act opened up competition in electricity generation and limited electric distribution companies to the business of planning for, building, and operating electricity distribution infrastructure, such as poles, wires, and substations. Allowing distribution companies to purchase pipeline capacity would re-insert those companies into the generation side of that industry, which would be bad for consumers.
Far worse for consumers would have been assuming all the risk associated with the construction of gas pipelines, with no promise of a reward in terms of lower rates in the future. In their own words, gas-fired generation businesses said they were unwilling to finance pipeline expansion projects themselves because there “is no means by which they can assure recovery” of those costs. Why then, should those costs be shifted to the ratepayer?
I travelled to multiple public hearings to speak out against the Kinder Morgan pipeline, which would have reduced property values for my constituents in Methuen, harmed conservation land which Massachusetts taxpayers have spent $360 million over the last seven years alone to protect, and threatened the quality of our water supply and public health by transporting fracked gas. Through my experiences with Kinder Morgan, I saw first-hand the broad-based desire of the public for a greener, long-term energy plan in Massachusetts. Encouraging more fossil fuel pipeline construction would not put our state on the path toward achieving a renewable energy future.
In July, the legislature took an important step forward by approving a major energy bill which expands our state’s renewable energy portfolio, reduces our reliance on fossil fuels, and promotes strategies to conserve energy. The legislation’s allowance of long-term contracts to procure 1,600 megawatts of offshore wind power and 1,200 megawatts of hydropower or other renewable sources such as solar, will constitute the largest procurement of renewable energy in Massachusetts history, once bidding for the contracts begins in 2017. The bill also calls on the DPU to formalize procedures to repair slow gas leaks that harm the environment and affect the rates for gas customers, and establishes a tax incentive program for commercial and industrial property owners to invest in energy efficient upgrades for their facilities.
This legislation and the safeguard provided by the Supreme Judicial Court decision are important developments in the state’s energy policy.
Senator Kathleen O’Connor Ives can be reached at Kathleen.OConnorIves@masenate.gov