A class-action lawsuit accusing Eversource Energy and Avangrid Inc. of artificially increasing natural gas spot market prices to benefit their electric generating assets between 2013 and 2016 has been dismissed by the U.S. District Court for the District of Massachusetts.
The lawsuit alleged that Eversource and Avangrid violated federal and state antitrust laws, and sought relief in the form of damages, restitution or disgorgement of profits and recovery of legal costs.
The court dismissed all of the federal claims made by a group of New England residents, saying the group had "not stated a cognizable antitrust claim," and the court declined to exercise jurisdiction over the state law claims [Civil Action No. 17-12274].
"Due to the preclusive effect of the filed rate doctrine, federal and state antitrust claims, as well as state tort actions, that require courts to set aside or second guess rates approved by FERC must fail as a matter of law," the court said in an order issued Tuesday.
In a complaint filed last November, lawyers with Hagens Berman Sobol Shapiro LLP accused the utilities of using their "substantial market power" to carry out "covert interference with the natural operation of competitive forces in the interdependent natural gas and electricity markets," resulting in New England customers being "overcharged by billions of dollars on their electric bills.
According to the lawsuit, local distribution companies owned by Eversource and Avangrid used their priority capacity contracts on Algonquin Gas Transmission (AGT) to artificially reduce regional gas supply and increase regional spot market prices in the constrained New England market by releasing unused capacity too late in the day for it to be picked up on the secondary market.
The parent companies allegedly directly profited from those higher prices "in the form of increased use of and higher prices paid to their non-gas-fired electric power plants."
The claims in the lawsuit appeared to borrow heavily from research published by the Environmental Defense Fund (EDF). The EDF researchers found that from 2013-2016 utilities owned by Eversource and Avangrid regularly "scheduled far more pipeline capacity" on AGT "than they ended up using the next gas day. Repeatedly, these companies down-scheduled their orders at the end of the gas delivery day -- too late for that unused capacity to be made available to the secondary market," resulting in higher spot market prices.
EDF concluded that the practices, which it estimated had cost customers $3.6 billion, were within the utilities' contractual rights but pointed to the need to improve market design in New England.
Eversource issued a cease and desist order in December and threatened to take legal action against EDF over what it said were "false and misleading statements" about the utility's natural gas pipeline scheduling practices. Eversource also released an analysis by Levitan & Associates that it said discredited EDF's "defamatory claims."
An inquiry by Federal Energy Regulatory Commission staff, prompted by EDF's allegations, found no evidence of anticompetitive withholding of natural gas pipeline capacity on AGT by New England shippers.