A Rhode Island Gas Lesson: Pipeline Obstruction Is Very Costly
Tom Shepstone
Shepstone Management Company, Inc.
We’re getting a Rhode Island gas lesson that illustrates the foolishness of courts and regulators who suppose “just enough” pipeline infrastructure is smart.
There was a time a couple of decades ago when “just in time” warehousing was all the rage in business planning. We don’t hear so much about it these days. “Just in time” turned out to be penny-wise and pound foolish in many situations as companies found being unprepared for demand carried high costs and discouraged customers from coming back. Yet, today, we see precisely the same “just enough” philosophy being applied to pipeline capacity by courts and regulators. The result is the sort of Rhode Island gas crisis we’re seeing this week.
Aquidneck Island is the island the state of Rhode Island is thought to be named after. It’s official name, in fact, is Rhode Island. It includes Newport and is currently in the midst of a natural gas crisis known as the Aquidneck Island Gas Incident. The incident is explained by natural gas distributor National Grid, which serves the island (emphasis added):
National Grid expects to deploy upwards of 1,000 gas workers and support personnel to assist in restoring gas service on Aquidneck Island as quickly as possible. In the meantime, updates will be provided here.
On Monday evening, out of an abundance of caution, National Grid began suspending gas service to 7,100 gas customers in Newport and Middleton. This interruption in service is due to a low transmission supply issue from our natural gas supplier—Algonguin Gas Transmission Co.
Please note that the area is safe, and National Grid has the situation under control. We know how important your gas service and safety is, and we apologize for any inconvenience this has caused, especially in the cold weather.
It’s way too early to know the precise nature of the problem, but National Grid says it’s a supply issue and from that we can probably conclude more supply would have helpful. That is to say, if Algonguin Gas Transmission Co. (a subsidiary of what is now the Enbridge pipeline system) had alternate sources of natural gas that couldn’t have hurt. And, Algonguin has been attempting to add that supply, according to this June, 2018, story on Main Public Radio, but it’s been damned difficult:
New Hampshire’s largest utility hopes regulators will revisit two big energy proposals – one dealing with natural gas and the other with Northern Pass – in the wake of a recent state Supreme Court decision.
…Eversource wanted permission to invest in a proposed, multi-state natural gas pipeline, known as Access Northeast, for electric grid reliability purposes…
The PUC dismissed both of those petitions in 2016. It said the pipeline investment would go against restructuring – and that it couldn’t approve the Northern Pass request if it had rejected the pipeline…
In that light, Eversource has asked the PUC to… prepare to receive an updated version of Eversource’s bid to invest in the proposed Access Northeast pipeline…
The PUC’s ratepayer advocate, Don Kreis, writes in a letter responding to Eversource’s filings that he wants the commission to reject the requests…
Kreis notes that the Massachusetts Supreme Court has since blocked the Access Northeast pipeline, making Eversource’s assertion that the proposal faces changed circumstances “an understatement.”
The New Hampshire Ratepayer Advocate, much like New Jersey’s, and Massachusetts Attorney General Maura Healey has effectively adopted a “just enough” pipeline capacity philosophy. He argues it’s all about restructuring and competition, but the reality is that he’s building on the foundation of a horrible decision made by the Massachusetts Supreme Court in 2017, a decision that made the Access Northeast pipeline economically unfeasible:
Eversource and National Grid, the two biggest utilities in the state, are shelving a $3.2 billion natural gas pipeline project known as Access Northeast until they can find a way to pay for it.
Their partner in the project, pipeline operator Enbridge Inc., notified the Federal Energy Regulatory Commission Thursday of the decision to withdraw the application for the project...
In August, the state Supreme Judicial Court struck down a plan put forward by the Baker administration to have electricity ratepayers pick up the tab for the pipeline expansion, ruling it wasn’t permissible under state law. As a result, other New England states put similar proposals on hold…
Access Northeast is the second massive natural-gas project in New England to be shelved because of financing problems. Kinder Morgan suspended a major pipeline plan last year.
Natural gas expansion has become one of the most hot-button issues in Massachusetts politics, with opponents fighting pipelines at every turn…
McKerlie said the hope was to start construction next year on Access Northeast, a 125-mile project that mostly involves replacing pipes with larger ones in Massachusetts and Connecticut to expand the capacity of Enbridge’s Algonquin Gas Transmission line…
Last year’s Massachusetts court decision was a setback for the two utilities, but they said at the time that they would continue to seek a way to pay for Access Northeast.
They say Access Northeast could reduce electric bills by as much as $1 billion a year across New England. They argue that a new infusion of lower-cost natural gas would more than offset the cost of a tariff, allowing power plants to burn gas on cold days, when that gas is often diverted for heating and isn’t available for making electricity…
Grid operator ISO New England, which is responsible for making sure the six states have enough electricity, remains concerned about the region’s increased reliance on natural gas as older coal-fired and nuclear power plants shut down. The utilities will play up that concern as they lobby for a change in state law that could allow Access Northeast to go forward.
“It’s clear that the New England ISO is gravely concerned about reliability in the region,” said John Flynn, a senior vice president at National Grid. “The need for this project is not in doubt. …Hopefully, we can get cooler heads to prevail and get the votes we need.”
The Access Northeast pipeline was mainly about providing natural gas to New England power plants and that’s why electric customers were being asked to help pay for it in their rates. The Massachusetts Supreme Court wouldn’t allow it, though, meaning the costs would have to be paid by other natural gas users, which makes no sense, of course, unless electric users of natural gas also pay.
These natural gas users would appear to include natural gas users on Aquidneck Island as well as other recipients of Algonguin gas. That’s because natural gas, like money, is fungible: put more of it into the system and everybody benefits. Put it in one place and someplace else will have more gas. It’s safe to say, therefore, National Grid and Aquidneck Island would have access to more gas, even if turns out this wasn’t the immediate problem in this instance.
No, a project that might have helped avoid the current Rhode Island gas crisis was killed by regulators who suppose their first duty is to green political correctness rather than the health and safety of the citizenry. And, who can forget the pols such as New York’s Gov. Cuomo and Senators Schumer and Giilibrand who fought an earlier upgrade to the Algonquin system to the bitter end in a bid to appease a handful of NIMBYs and greens? The Northeast is plagued by perhaps the worst class of politicians ever. God save the people of New York and New England; their governments are seemingly out to destroy them.
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