Constellation Energy is requesting an increase in the cost-of-operation charges in their proposed agreements with Massachusetts gas utilities to keep the Everett LNG import terminal operating through the winter of 2029/30.
In comments to the Massachusetts Department of Public Utilities, Constellation — the owner and operator of Everett — wrote that it has not entered agreements for enough LNG supply to support the continued operation of the facility (DPU 24-25, 24-26, 24-27 and 24-28).
Constellation wrote that each of the four utility contracts contains a provision, or “conditions precedent,” that allows the company “to terminate the agreements in the absence of contractual arrangements for supplying a certain total volume of LNG.”
Based on the contracts entered to date, there is a difference “between the total contracted volumes and the threshold total volume identified in the conditions precedent,” Constellation said.
To cover this gap, Constellation is asking for an increase in the “fixed non-commodity demand charge,” a provision included in each of the contracts with the Massachusetts gas utilities intended to cover Everett’s costs of operation.
National Grid and Eversource Energy, the state’s two largest gas utilities, wrote that the rate changes would result in minimal increases to ratepayer bills and urged the DPU to approve the proposed increases.
Eversource estimated that the increase would add $2.85 to next year’s bill for an average customer, with the overall agreement costing customers about $100 for the year. National Grid estimated that the increase would amount to 72 cents for its average customer in the coming year.
“Given the important reliability benefits provided by the agreement,” National Grid wrote, “the company continues to respectively request that the department approve” the request by May 1. “The agreement is still needed by the company to reliably serve customers, and there are no viable alternatives that offer the services that could be provided to the company by the agreement.”
Constellation has said the May 1 deadline is necessary to provide enough time to procure the LNG needed to fulfill the contracts. If they do not receive final approval by then, Constellation has the right to void the agreements. (See Everett LNG Contracts Face Skepticism in DPU Proceedings.)
However, the proceedings are on track to extend past May 1; the DPU has set a May 2 deadline for comments on the rate changes and a May 7 deadline for reply comments.
Throughout the DPU proceedings, environmental organizations have expressed concerns about the cost and climate consequences of the agreements.
In an April 16 filing, the Conservation Law Foundation called on the DPU to reject the contacts, writing that the gas utilities “have failed to adequately consider alternatives to these agreements and have accordingly not shown that they are in the public interest.”
Environmental groups have also argued that the cost-of-operation charges would result in gas customers ultimately subsidizing Everett’s operations for the benefit of industrial or power sector gas customers that decline to enter long-term contracts but could still purchase LNG from the facility.
“The other buyers don’t want to execute fixed contracts,” said Joe LaRusso, senior advocate at the Acadia Center. “They want to buy in the spot market. … There’s financial risk associated with executing a fixed contract.”
LaRusso added that the “non-commodity charge, paid by the utilities customers, is de-risking the other transactions that Constellation is going to enter into in the spot market with everybody else.”
