Could Ratepayers Foot the Bill for New Hampshire’s Pipelines?

by | Feb 5, 2016

A January 19 order (Docket No. IR 15-124, Order No. 25,860) by the New Hampshire Public Utilities Commission (PUC) has opened the door to Eversource and other electric distribution companies [EDCs] in the Granite State to buy capacity off any natural gas pipeline in the region.

As the PUC envisions it, an EDC would purchase a long-term contract for space on a natural gas pipeline and blend the cost into its electric rates. Under such an agreement, the commission believes, everyone would win: Electric ratepayers would benefit because the new pipeline capacity would result in lower costs for electricity. Pipeline builders would use the money for construction.

According to the New Hampshire Union Leader news organization, there are at least two major gas pipeline projects in the works that could conceivably apply for ratepayer funding — the Northeast Energy Direct project proposed by energy company Kinder Morgan; and the Access Northeast expansion proposed by a partnership of Eversource, National Grid, and Spectra Energy.

Indeed, some familiar with the order have commented that Kinder Morgan could not afford to build the $5 billion project otherwise.

However, there is one major catch: There is no New Hampshire precedent for EDCs to purchase gas pipeline capacity for electric generators. The commission “intends to rule on “whether a New Hampshire EDC has the legal authority to acquire natural gas capacity resources” only if and when an EDC files a petition for the “proposed capacity acquisition and related cost recovery.”

What’s more, the commission would consider the first petition to buy natural gas capacity in two separate phases:

  • First, the PUC would review briefs submitted by the petitioner EDC, PUC Staff, and other parties regarding whether such capacity procurement is allowed under New Hampshire law. If the Commission were to rule against the legality of such acquisition, the petition would be dismissed.
  • Second, if the petition were to be deemed legal, the PUC would then examine the appropriate economic, engineering, environmental, cost recovery, and other factors presented by the actual proposal. This second phase would involve the usual procedural features of discovery, testimony, rebuttal testimony, and cross-examination, provided in any adjudicative proceeding before the commission.

The PUC expects that any acquisition of gas capacity by a New Hampshire EDC for the ultimate benefit of electric customers would be undertaken “through an open, transparent, and competitive bidding/request for proposals (RFP)-type process,” in which competitors of the New Hampshire EDC’s corporate affiliates or business partners would also be able to participate.

Already, there is word of mouth that National Grid – which on January 15 applied in Massachusetts for gas capacity on the Northeast Energy Direct and Access Northeast pipelines – may do the same in New Hampshire.

But legislation may block that process. State Representative Jim McConnell (R-District 12) is among the lawmakers sponsoring a bill, HB 1101, that would prohibit “any tax or fee on ratepayers to fund a gas pipeline” – and thus settle the legal question completely, if not to the delight of the commission or the EDCs at least much to the satisfaction of anti-pipeline activists.

Such a move has not been unanticipated. The PUC has acknowledged that, at minimum, approving such pipeline capacity would be problematic. The commissioners noted, “It is clear to the commission, from a review of the Staff Report, stakeholder comments, and ancillary materials made publicly available through this investigation, that no consensus exists regarding the potential legality of such an acquisition of gas capacity by a New Hampshire EDC. Furthermore, we expect that such a capacity acquisition would be highly controversial.”

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