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AEC Update: Report Suggests Manipulation by Utilities

A recent report issued by the Environmental Defense Fund (EDF) entitled “Vertical Market Power in Interconnected Natural Gas and Electricity Markets” has drawn the attention of both Connecticut and Massachusetts Utility Regulators, and both have opened investigations into allegations contained in the report.

The first to respond to the report was Connecticut through its Public Utilities Regulatory Authority, or PURA, announcing its decision to investigate the actions of two utilities: Eversource Energy, headquartered in Hartford, Conn., and Boston, Mass., and Avangrid, based in New Haven, Conn. The allegation contained in the EDF report was that the utilities’ practice of reserving capacity for natural gas deliveries on the Algonquin Gas Transmission Pipeline for next-day deliveries and then abruptly canceling the reservation at the last minute was deliberate and manipulative. This practice of last-minute cancellations, according to the report, left no time for anyone else to step in and use the available pipeline capacity. This drove up the price of natural gas and in turn electricity prices, according to the EDF report. The Environmental Defense Fund is based in New York, N.Y. Eversource and Avangrid have both dismissed the report as “a complete fabrication.” The AEC e-Alert on Oct. 18 reported on this Connecticut story and can be accessed from the AEC website https://www.americanenergycoalition.com.

A week later the EDF report caught the attention of Massachusetts utility regulators when the Massachusetts Department of Public Utilities said it would look into the allegations. The AEC reported on the Massachusetts decision in an e-Alert dated Oct. 25.  That AEC e-Alert can also be accessed from the AEC website https://www.americanenergyhcoalition.com.  To access the entire EDF report go to: https://www.edf.org/sites/default/files/vertical-market-power.pdf.

The EDF report was commissioned in an effort to show that additional natural gas interstate pipeline capacity for New England is unnecessary.  In trying to make the case that existing pipeline capacity is adequate for current and near-future needs, the authors stumbled across the utilities’ practices. The report stopped short of saying the practices were illegal, instead concluding that the actions by the utilities “artificially constrained pipeline capacity” and in the process artificially raised natural gas and electricity costs to homeowners. The EDF report says that this practice cost consumers $3.6 billion over three years. Further, the report accused the utilities of deliberately manipulating the natural gas market for the sole purpose of increasing utility profits.

This story has the potential to become a blockbuster; so, stay tuned. The AEC will be following the Connecticut and Massachusetts public utility investigations and will be reporting on the unfolding developments.—Thomas J. Tubman

 

Thomas J. Tubman is the executive director of the American Energy Coalition, which promotes the benefits of oil heat in comparison to other energy sources, particularly natural gas.

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