Proposed gas supply agreements between Constellation Energy and Massachusetts gas utilities that would keep the Everett Marine Terminal operating through 2030 are facing significant pushback from environmental organizations and the state Attorney General’s Office in time-constrained proceedings at the Department of Public Utilities.
Everett is an LNG import facility located just outside of Boston and is the only facility in the region that can directly import and inject LNG into the gas system. The main customer of Everett, the Mystic Generating Station, is set to retire at the end of May at the conclusion of a two-year cost-of-service agreement with ISO-NE, threatening the future of the import facility.
The impending closure of Mystic has put a looming deadline on finalizing the Everett contracts, which initially were announced in February. (See Constellation Reaches Agreements to Keep Everett LNG Terminal Open.) The gas supply agreements would extend through winter 2030.
Constellation, the owner of both Everett and Mystic, has said it will be unable to keep the terminal open after the plant closes without the contracts, and it can void the contracts if they are not finalized by May 1.
This May deadline has led to expedited regulatory proceedings (DPU 24-25, 24-26, 24-27 and 24-28), in which the AGO and several environmental organizations have raised concerns about the cost and environmental impacts of the agreements.
“Despite taking years to negotiate their gas supply contracts with Constellation, the LDCs [local distribution companies] see … fit to provide the department only two months to conduct a proceeding that would normally take about six months from filing to decision,” the Conservation Law Foundation (CLF) commented in March.
The organization initially was granted “limited intervenor” status in the proceeding by the DPU, allowing it to examine impacts on low-income customers, the consideration of alternatives and environmental justice effects. The status also potentially enabled the organization to eventually appeal the results of the proceeding.
However, the DPU rescinded this status April 1 following a protest from the utilities, which argued that giving CLF the ability to appeal any decision would mean “effectively vesting CLF with the ability to negate or veto a department decision approving the proposed contracts.”
The DPU responded by downgrading CLF to “limited participant” status, which would prevent the organization from appealing the results. Environmental advocates expressed disappointment with the decision and dismissed concerns about a “dilatory appeal.”
A CLF appeal had the potential to threaten the contracts only if the state Supreme Judicial Court (SJC) thought the issues stated in the appeal merited a hearing by the full court, said Joe LaRusso, senior advocate at the Acadia Center. “What the DPU denial of CLF’s intervenor status prevents, then, is CLF filing a meritorious appeal to the SJC and a potential direct challenge to DPU approval of the contracts.”
Cost Concerns
The contracts at issue likely will come at a hefty price for ratepayers; according to Brattle Group consultants hired by the AGO, the contracts would cost a combined $946 million, which ultimately would be passed on to ratepayers.
Brattle estimated $375 million would go to covering Everett’s operating costs, while charges associated with procuring LNG would amount to about $489 million and a third group of charges tied to how much gas actually is delivered to the utilities would be about $81 million.
The latter two charges are indexed and will vary over the course of the contract, but most of the costs (an estimated $864 million) must be paid regardless of how much LNG ultimately is needed.
“The agreements result in very high prices and, therefore, will be costly to Massachusetts ratepayers,” the consultants wrote in testimony submitted by the AGO.
The consultants specifically expressed concerns about the LNG supply costs included in the agreements, noting they “do not provide any transparency into Constellation’s upstream LNG supply costs, which means Constellation may have the ability to build in a markup above its own cost of procuring and transporting LNG cargoes to Everett.”
“The agreements have a pricing formula with poorly explained adders and multipliers that result in significant premiums,” the consultants noted. “The LDCs claim that these adders and multipliers cover the (unknown) costs of LNG procurement and (unexplained) risks faced by Constellation that would accompany its procurement obligations, though they do not know whether this is true and have no way to verify it.”
Climate Consequences
Throughout the proceedings, the utilities have emphasized the agreements are a temporary solution to preserve the reliability of the gas network, which is threatened by the region’s pipeline constraints.
In a statement, an Eversource Energy spokesperson called the contracts “a temporary and necessary solution to maintain reliability during the coldest times of the year and serve as a bridge to the clean energy future.” They also noted the agreements will increase system reliability without requiring any new gas infrastructure or pipeline expansions.
However, environmental advocates in the state are worried the agreements ultimately could function as a bridge to an expanded gas network, instead of decreased gas demand.
National Grid and Eversource, the two largest gas utilities in the state, project natural gas demand to continue to grow in the leadup to 2030. A recent DPU order and state climate laws passed in recent years are intended to reverse this trend. (See Massachusetts Moves to Limit New Gas Infrastructure.)
National Grid’s contract with Constellation would authorize the utility to purchase increasing quantities of gas through 2030, with the maximum seasonal quantity more than quadrupling between the winter of 2024/25 and the winter of 2029/30.
“I would suggest these contracts are not some stopgap measure but a continuation of the gas industry’s playbook to ensure a transition off gas does not happen in our commonwealth,” Cathy Kristofferson, secretary and treasurer of the Pipe Line Awareness Network for the Northeast, said at a public hearing.
In September, Enbridge announced a new project to significantly increase the capacity of its Algonquin Gas Transmission Pipeline network from New York to Massachusetts with an in-service date of late 2029. (See Enbridge Announces Project to Increase Northeast Pipeline Capacity.) Eversource has confirmed it offered a bid for capacity in the open season for the project, while National Grid has not responded to multiple inquiries into whether it also bid into the open season.
“It is not lost on some of us that the six-year contract length sought in these proceedings coincides with the six-year in-service time frame forecast by Enbridge for their Project Maple” expansion, Kristofferson added.
Enbridge submitted comments in favor of the Everett agreements, writing that “New England continues to be underserved by natural gas.”
“The New England region requires additional natural gas infrastructure to maintain reliability, deliver energy affordability and help the region achieve its policy goals with respect to greenhouse gas emission reductions,” the company added.
Priya Gandbhir, senior attorney at CLF, said a prolonged reliance on natural gas is “not an acceptable path forward” and echoed concerns about Enbridge’s capacity expansion proposal.
“If these contracts are going to be approved, it needs to be on the way to our clean energy future,” Gandbhir said, adding that the proceeding underscores the need for holistic energy planning in the state. “I remain very skeptical that the intent of the LDCs is to use this as a bridge to clean energy.”
