Court Overturns Pipeline Denial

Concord Monitor
Published: 5/24/2018 12:14:12 AM
Modified: 5/24/2018 12:14:23 AM

Concord — The state Supreme Court has given new life to Eversource Energy’s multiyear effort to use money from electricity rates to help pay for a natural gas pipeline, and possibly to the stymied Northern Pass hydropower transmission project.

The high court on Tuesday struck down a 2016 Public Utilities Commission ruling that denied Eversource’s request to use electric rates to pay for increasing capacity on the Algonquin pipeline, which carries natural gas from New York through Connecticut to eastern Massachusetts and Boston.

The court sent the matter back to the PUC, and Eversource officials didn’t say what specific action they might take.

However, the ruling could spark the totally unrelated Northern Pass project, the controversial proposal to bring hydropower from Quebec through New Hampshire.

Eversource “will revisit the PUC’s denial of the Power Purchase Agreement with Hydro Quebec ... over the Northern Pass transmission line,” spokesman Martin Murray said in a statement.

“The PUC’s denial ... was based on the same flawed legal analysis that the Supreme Court today overturned,” Murray wrote.

No matter what happens with the power purchase agreement in that case, however, Northern Pass would still need to overcome its rejection by the Site Evaluation Committee.

Murray argued on Tuesday that the PUC denial “resulted in the (Site Evaluation Committee) never considering the economic and environmental benefits” of the project.

The Site Evaluation Committee is slated today to discuss whether to rehear the Northern Pass application.

Tuesday’s Supreme Court ruling came out of efforts to build more pipeline capacity carrying natural gas from New York or Pennsylvania into New England, which now uses gas to fuel about half of its electricity.

Some plans, notably the Kinder Morgan proposal to run a line through southern New Hampshire, foundered in part because of public opposition to new pipelines in towns along the route.

The Algonquin proposal from Eversource and Spectra Energy, which owns the existing pipeline, seemed to bypass this obstacle because it would expand an existing pipeline.

However, the project, called Access Northeast, faced a financial problem that has vexed all of New England’s pipeline proposals: a mismatch in financing.

Pipeline companies won’t commit to multibillion-dollar construction projects without contracts extending at least a decade or more. Long-term gas contracts are the norm with heating firms, because there is a relatively stable heating demand every year.

However, power plants, whose income is affected by fuel prices that fluctuate greatly, won’t sign natural gas contracts extending out more than a few years.

Without long-term commitments from power companies as well as heating companies, firms like Spectra have balked at building new gas pipelines in New England.

Eversource wanted to provide the funding stability for Access Northeast by signing a decades-long capacity contract with Spectra Energy to help fund the expansion, and then recoup any cost from its electricity rates, which must be approved by regulators.

In rejecting this proposal in 2016, the PUC said it would be the functional equivalent of Eversource operating a power plant, which is forbidden under the state’s 1996 deregulation of the electricity industry.

However, Tuesday’s 3-1 New Hampshire Supreme Court ruling found that PUC regulators misinterpreted state law about energy deregulation, particularly the relative importance of functional separation — that is, separating the business of transmitting electricity from the business of generating it.

“Had the legislature intended to require the PUC to prioritize the ‘functional separation’ policy principle above all other principles identified in the statute ... it would have said so,” Chief Justice Robert Lynn writes in the ruling.

“We discern that the primary intent of the legislature in enacting RSA chapter 374-F was to reduce electricity costs to consumers. ... We disagree with the PUC’s ruling that the legislature’s ‘overriding purpose’ was ‘to introduce competition to the generation of electricity.’ ”

The decision is based largely on the words “should” and “shall” in different parts of state law.

“The use of the word ‘should’ allows the PUC to exercise its discretion and judgment; in contrast, the word ‘shall’ establishes a mandatory duty,” Lynn wrote.

In his dissent, Associate Justice Gary Hicks writes that the ruling “misses the forest for the trees” because the PUC decision “was well within the discretion the legislature delegated to the PUC.”

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