The Role of the Commonwealth

in Preventing Overbuild of

Natural Gas Infrastructure

January 17, 2017

State House Briefing

“It’s a Federal Matter” “It’s a Federal Matter” “It’s a Federal Matter” “It’s a Federal Matter” ---- Not exclusively ...Not exclusively ...Not exclusively ...Not exclusively ...

� Federal Energy Regulatory Commission (FERC)

� Mass Energy Facility Siting Board (EFSB)

� Mass Department of Environmental Protection (DEP)

� Mass Office of Coastal Zone Management (CZM)

� Mass Department of Public Utilities (DPU) ...

Legal Role of Department of Public Legal Role of Department of Public Legal Role of Department of Public Legal Role of Department of Public Utilities (DPU)Utilities (DPU)Utilities (DPU)Utilities (DPU)

� Reviews pipeline capacity contracts filed by

utilities

� Contracts establish “need” for pipeline

� Proceedings allow for intervenors

� May grant survey access to pipeline

companies over objection of landowners

Impacts to Conservation LandImpacts to Conservation LandImpacts to Conservation LandImpacts to Conservation Land

� Article 97 Land

� Privately Owned Conservation Land

Financing of Interstate Gas Pipeline ProjectsFinancing of Interstate Gas Pipeline ProjectsFinancing of Interstate Gas Pipeline ProjectsFinancing of Interstate Gas Pipeline Projects

Pipeline capacity contracts (“precedent

agreements”)

� Capacity contracts form the commercial

foundation for interstate gas infrastructure projects.

� DPU reviews capacity contracts under Section 94A of chapter 164.

Financing of Interstate Gas Pipeline ProjectsFinancing of Interstate Gas Pipeline ProjectsFinancing of Interstate Gas Pipeline ProjectsFinancing of Interstate Gas Pipeline Projects

� Gas utilities traditionally contract for gas capacity

� DPU must find contracts in “public interest” to approve

because ratepayers ultimately foot the bill

� “Public interest” is defined in DPU case law, not statute

� SJC: Electric utilities may not contract for gas

capacity.

� Ruling based on statute that utilities want to change

DPU’s “Public Interest” Capacity Contract ReviewDPU’s “Public Interest” Capacity Contract ReviewDPU’s “Public Interest” Capacity Contract ReviewDPU’s “Public Interest” Capacity Contract Review

DPU considers “price” and “non-price” factors -- theoretically.

� Does not consider environmental or health impacts,

community impacts, siting

� Standard is a) consistency with utility’s long term planning,

and b) alternatives analysis

� Alternatives analysis is limited and, in practice, weighted in

favor of utility’s proposed contract.

The “Pipeline Tax” IdeaThe “Pipeline Tax” IdeaThe “Pipeline Tax” IdeaThe “Pipeline Tax” Idea

� Normally, local gas companies make contracts for

pipeline capacity

� Access Northeast tried another tack:� Tried to market their unnecessary pipeline as serving

electric generation needs

� Idea was to have all electric customers in New England states with gas plants pay for their pipeline

� RI, CT, and ME changed their laws to allow this

� Access Northeast plowed ahead in MA and NH without state law changes...

SJC Says “Pipeline Tax” Unfair to SJC Says “Pipeline Tax” Unfair to SJC Says “Pipeline Tax” Unfair to SJC Says “Pipeline Tax” Unfair to RatepayersRatepayersRatepayersRatepayers

SJC ruled DPU’s order would “undermine the main objectives of the [restructuring] act and reexpose ratepayers to the types of financial risks from which the Legislature sought to protect them.”

Coming in 2017: Pipeline Tax Plan B?Coming in 2017: Pipeline Tax Plan B?Coming in 2017: Pipeline Tax Plan B?Coming in 2017: Pipeline Tax Plan B?

� Since Access Northeast is blocked from charging MA electric

customers for their unnecessary pipeline by MA law:

� Legislation to enable Plan A?

� Plan B: Try to force gas customers to pay for their unnecessary pipeline in new DPU proceedings

DPU Reform DPU Reform DPU Reform DPU Reform Bill:Bill:Bill:Bill:

� Strengthens Intervention Rights

� Bans “pipeline tax”

� Creates statutory “public interest” standard

� Requires review of siting impacts

� Requires detailed alternatives analysis

� Prohibits contracts that impact Article 97 land

� Survey access authority limited to after

FERC approval