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FERC Staff Finds No Evidence Natural Gas Pipe Capacity Withheld in New England

An inquiry by FERC staff, prompted by allegations made by the Environmental Defense Fund (EDF), has found no evidence of anticompetitive withholding of natural gas pipeline capacity on Algonquin Gas Transmission (AGT) by New England shippers.

Last year, EDF alleged that local gas distribution companies in New England engaged in practices to withhold pipeline capacity on AGT in order to drive up gas and/or power prices in the region.

"Commission staff took these allegations very seriously and conducted an extensive review of both publicly available and nonpublic data," the Federal Energy Regulatory Commission said Tuesday. "On the basis of that review, staff determined that EDF's study was flawed and led to incorrect conclusions about the alleged withholding. Commission staff found no evidence of capacity withholding."

FERC said it would take no further action on the matter.

EDF researchers had concluded that 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," the researchers wrote.

The utilities were operating within their contractual rights, but the practices, which led to unused pipeline capacity during cold weather periods, "show the need to consider improvements to market design and regulation."

The "unusual scheduling practices" of the Avangrid and Eversource utilities "tied up capacity that, in a well-functioning market, should have been released, or otherwise made available, to shippers. Instead, significant quantities of pipeline capacity went unutilized on many of the coldest days of the year, pushing up the price of gas," according to the researchers.

The scheduling practices cost New England customers an estimated $3.6 billion from 2013 to 2016, they alleged.

Concurrent with FERC's announcement, Eversource on Tuesday released an analysis by Levitan & Associates that it said discredited EDF's "defamatory claims." The analysts concluded that Eversource acted in conformity with regulatory obligations and industry practices when managing gas resources on behalf of customers during the three-year period.

"We spent several months analyzing the allegations made by EDF and have identified critical areas where they failed to account for the basic principles underlying Eversource's obligation to its customers," said the firm’s President Richard Levitan.

"Namely, that the company is required to have sufficient gas resources on hand to address weather fluctuations, back-stop delivery failures by third-party suppliers, and meet other demand uncertainties so that customers do not suffer the loss of gas supply during the coldest periods.”

EDF on Tuesday told NGI that it stood by the analysis of its researchers.

"EDF has been clear from the outset. Whether intentional or not, and regardless of business motives, the scheduling decisions by these two companies had a multi-billion-dollar side-effect on New England electricity users," said EDF’s Jonathan Peress, senior director energy market policy.

In November a group of New England residents filed a class-action lawsuit, apparently based on the findings of the EDF report, accusing Eversource Energy and Avangrid of artificially increasing natural gas spot market prices to benefit their electric generating assets between 2013 and 2016.

The lawsuit, filed in the U.S. District Court for the District of Massachusetts, 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."

Eversource responded to the lawsuit by threatening to take legal action against EDF, sending a cease and desist letter in which it demanded EDF retract its claims.

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