Court: Utilities can’t pin ratepayers with natural gas line finance costs

BOSTON (AP) — Electric utilities cannot pass on to their Massachusetts ratepayers the costs of financing new natural gas pipelines, the state’s highest court ruled on Wednesday.

The unanimous decision from the Supreme Judicial Court was cheered by environmental groups, which dubbed the proposed tariffs a “pipeline tax.” It was a setback, however, for Republican Gov. Charlie Baker’s administration, which had viewed the financing mechanism as a means of increasing natural gas capacity and stabilizing electricity prices. Natural gas is the state’s leading source of energy for generating electricity.

The Department of Public Utilities approved a rule last year that would authorize electricity distribution companies such as Eversource and National Grid to enter into long-term contracts with natural gas suppliers and recover through the tariffs some of the costs associated with pipeline construction.

The utilities argued that without those financial assurances, pipeline companies would not assume the risks involved with new construction.

The Conservation Law Foundation filed suit against the tariffs, arguing they ran afoul of a 1997 state law that restructured the electricity market in Massachusetts to separate companies that generate electricity from those that distribute it to consumers. The high court agreed. “The department’s interpretation of the statute as permitting electric distribution companies to shift the entire risk of the investment to the ratepayers is unreasonable, as it is precisely this type of shift that the Legislature sought to preclude through the restructuring act,” the justices declared.

David Ismay, CLF’s lead attorney in the lawsuit, said the ruling makes clear that residential electricity customers cannot be forced to shoulder costs for private gas pipelines.

“Today our highest court affirmed Massachusetts’ commitment to an open energy future by rejecting the Baker Administration’s attempt to subsidize the dying fossil fuel industry,” said Ismay, in a statement.

ENGIE, a company that operates a liquefied natural gas terminal in Everett, Massachusetts, also sued to block the tariffs.

The Department of Public Utilities planned to suspend hearings on agreements Eversource and National Grid had reached with Spectra Energy for its proposed Access Northeast pipeline while the agency reviews the high court decision, administration officials said. No tariffs had yet been imposed by the state.