Plan B for a pipeline

ONE OF THE BIG MYSTERIES on Beacon Hill is how Gov. Charlie Baker is going to accomplish one of his top remaining energy priorities – building a new natural gas pipeline into the region.

His original plan was dealt a mortal blow a couple weeks ago when the Supreme Judicial Court ruled that existing state law doesn’t allow an electric utility to charge its customers for the money to finance a natural gas pipeline.

Yet the governor is pushing ahead, and so are the companies behind the Access Northeast pipeline project – Spectra Energy, Eversource Energy, and National Grid. Both the governor and the firms argue that a new pipeline will bring in enough cheap natural gas during the winter months to reduce electricity prices and save ratepayers billions of dollars. In a letter to policymakers last week, officials from the three companies said “a do-nothing scenario is untenable” and “our path forward is clear.”

The problem is that the path forward is anything but clear, which is probably why they didn’t mention what path they will follow in their letter. Through a spokesman they turned down a request for an interview.

In the wake of the SJC decision, executing on Baker’s original plan now requires a change in state law, and that’s not going to be easy in a Legislature that went on record in opposition during the current session. The Senate voted 39-0 to block the plan, and close to 100 House members expressed a similar viewpoint in a letter to House Speaker Robert DeLeo.

Environmental groups are also mobilizing on the issue. The group 350 Mass Action is calling on lawmakers to sign a pledge not to accept any checks above $200 from executives, in-house lobbyists, and other employees of coal, oil, and gas companies and the utilities that transport their products. The 10 targeted companies include Spectra Energy, Eversource, and National Grid, the three firms behind the Access Northeast pipeline project. More than 30 lawmakers and legislative candidates have signed the pledge.

Earlier this week, Baker’s secretary of energy and environmental affairs, Matthew Beaton, raised the possibility of a pipeline Plan B. Under his Plan B, natural gas utilities instead of electric utilities would sign the long-term contracts for natural gas capacity that are needed to finance a new pipeline. Beaton’s approach avoids the legal problems cited by the SJC in its decision, but it raises others.

Natural gas utilities currently purchase gas under long-term contracts for their customers. The utilities typically buy more gas than they need as a cushion in case demand rises unexpectedly because of unusually cold weather. If the cushion isn’t needed, the unneeded gas is sold on the spot market, typically to power generators who need gas but are unwilling to enter into long-term contracts for the fuel. (Power generators typically contract to sell power in three-year increments, while long-term contracts for natural gas pipeline capacity last 20 years.)

The cushion has worked reasonably well in winters past, except in 2013-14 when unusually low temperatures caused homeowner demand for gas to rise, eliminating the cushion. During that winter, many power generators couldn’t find enough gas to operate their power plants, and the gas that was available skyrocketed in price. The end result was a huge spike in electricity prices.

Beaton hasn’t laid out in detail his Plan B, but it appears from his brief comments this week that gas utilities would increase the size of their cushion, enough to finance a new pipeline. The utilities would provide gas needed by their customers, and what’s left over would be sold on the spot market to power plant operators who need fuel.

The upside of plan B is that it utilizes the existing system for purchasing gas. The downside is that it takes the existing system to the breaking point. Several experts consulted by CommonWealth suggested state regulators would have a problem with a gas utility buying more gas than its customers need just so the region’s power generators won’t run short of fuel. In a sense, the experts said, Plan B has gas customers subsidizing the rates of electricity ratepayers. The experts said Plan B would either be shot down by state regulators or end up before the Supreme Judicial Court, the same place where Plan A lost steam.

“Conceivably it would work,” said Dan Dolan, president of the New England Power Generators Association, of Plan B. “But I still don’t think it would pass legal muster.”