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Massachusetts High Court Quashes ‘Pipeline Tax’

August 18, 2016 By Cheryl Kaften

The Massachusetts Supreme Judicial Court on August 17 struck down (Docket No. SJ-2015-0437) what had been characterized as a “pipeline tax” – a mechanism under which electrical ratepayers in the Bay State would foot the bill for natural gas pipeline expansion.

The ruling in Conservation Law Foundation V. Department of Public Utilities ,written by Justice Robert Cordy, represents a victory for the litigant, which has opposed the growth of pipelines, reported Mass Live.

In its decision, the court declares it unlawful for Massachusetts to force residential electricity customers to subsidize the construction of private gas pipelines, requiring the companies themselves to shoulder the substantial risks of such projects.

In addition, the local news outlet said, the court’s finding was a win for Engie Gas & LNG which imports liquefied natural gas, a competing fuel, into New England. The parties last fall filed separate petitions naming the state’s Department of Public Utilities.

The case had been brought after the administration of Massachusetts Governor Charlie Baker (R), through its Department of Energy Resources, in 2015 asked the Department of Public Utilities (DPU) to find a way in which electrical utilities could help provide stable financing for natural gas pipeline capacity.

Following that instruction, last October, the DPU issued an order stating that it has the authority to approve long-term contracts by Bay State electric companies for interstate natural gas pipeline capacity. The utilities would then be authorized to re-sell natural gas to the market, including the power sector, through a third party.

National Grid followed up in January by opening a docket at the DPU seeking pipeline capacity; Eversource has done the same.

Cordy’s opinion stated that the mechanism would undermine the objectives of the state’s 1997 utility restructuring act and re-expose ratepayers to financial risks that lawmakers sought to mitigate two decades ago.

The 1997 law broke up vertically integrated energy monopolies and forced electric utilities to sell their power-generating assets, according to the report on Mass Live. The law created a competitive market for electricity.

“We conclude that the legislature did not intend to authorize the department to approve the contracts contemplated in its order, but rather intended, with limited exceptions, to regulate the gas and electric utilities differently,” Cordy wrote.

State energy officials had characterized the situation as a “mismatch” of needs and incentives that requires a “solution,” wrote Justice Robert Cordy in his opinion.

In reaction to the decision, the Conservation Law Foundation’s lead attorney on the case, David Ismay, stated: “This is an incredibly important and timely decision,” adding,. “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. The course of our economy and our energy markets runs counter to the will of multi-billion dollar pipeline companies, and, thanks to today’s decision, the government will no longer be able to unfairly and unlawfully tip the scales.”

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