Eversource Capitalizes on 2018 Merrimack Valley Gas Explosions

Perri M., Chris K., James H.

The Merrimack Valley has been the site of uncertainty and turbulence since   gas explosions rocked the region on September 13, 2018. Numerous explosions displaced several hundred families, killed one person, required 22 hospitalizations, and destroyed hundreds of homes. Columbia Gas (CG), a subsidiary of Bay State Gas Company (NiSource is its parent company), took the blame for the accident, citing negligence and faulty natural gas pipelines. As winter approached, residents of Lawrence and surrounding communities were told to evacuate their homes and seek shelter as the state mandated repairs. Lawrence educators provided warm clothing to children, and community members began discussions on how to heal. From those discussions, Pueblo Verde emerged as a community-based environmental justice organization. #TakeBacktheGrid is proud to support their efforts.

For over two years, Massachusetts state agencies were in dialogue with energy companies on how to move forward from the traumas of 2018. In July 2020, Attorney General Maura Healey presented a settlement deal with Columbia Gas. The deal would bring debt relief for 26,000 low-income ratepayers within CG’s service area, and CG would cease operations in MA and pay a criminal fine of $53,030,116. It also laid out a plan for Eversource to take over Columbia’s assets and operations throughout the Commonwealth for $1.1 billion. Despite a series of virtual, multilingual hearings scheduled a month before the intended settlement closure date where community residents and statewide environmental justice activists pleaded with Massachusetts to reject or at least strengthen the Eversource deal, the AGO moved forward with the settlement. In this blog post, we parse through the jargon of the settlement order and summarize the main points. 

According to the settlement, Eversource Gas Company of MA (EGMA) was incorporated as a subsidiary of Eversource on May 15, 2020, to own and operate Bay State’s business. As part of the settlement deal, EGMA will increase the distribution component of its rates by $32.8 million on November 1, 2021, and by $10 million on November 1, 2022. These increases are approved in the settlement and thus do not have to go through the general rate case process. Furthermore, EGMA estimates that its transaction costs will reach $15 to 20 million and wants these costs to be considered “eligible for recovery”. The settlement permits EGMA to recover these costs, subject to the Department of Public Utilities’ review and approval, but caps the amount eligible for recovery at $5 million. In other words, Eversource wants and may be allowed to profit on the backs of ratepayers. Eversource’s intent to recover even a single dollar in acquisition costs through their customers is especially egregious considering state residents’ concerns about utility debt buildup during the pandemic. 

The two-step increase to EGMA’s distribution rate base (the utility’s distribution capital assets that are eligible for profit-generation) will increase rates for its customers. The settlement notes that the initial increase of $32.8 million will materialize as annual bill impacts of no greater than three percent. The second increase of $10 million will materialize as annual bill impacts of no greater than two percent. #TakeBacktheGrid rejects all new rate hikes and fundamentally opposes the terms of this request from Eversource.  According to September 2020 reporting to the Department of Public Utilities (DPU) under docket 20-58, Massachusetts residents have accumulated $710.9 million in electricity and gas debt to Investor-Owned Utilities (IOUs) like Eversource and National Grid. That is an increase in debt of roughly 40% in the last 12 months.

In addition to the two-step distribution rate base increase, the settlement includes two “rate base resets”–one on November 1, 2024 and the following on November 1, 2027. During these resets, EGMA will have the opportunity to adjust its rates to account for any new capital additions. This could mean additional rate hikes for EGMA’s ratepayers.

As part of the merger, Eversource plans to offer employment to all Bay State business employees “in good standing.” If a facility closes or needs to lay off employees, EGMA will provide thirty days’ advance notice to the Attorney General and Department of Energy Resources (DOER).

They also plan to implement a Comprehensive Safety Assessment and pursue “clean energy initiatives.” They must file and make publicly available their statement of findings, work plans, and associated capital budgets every six months as part of their safety assessment. They will hire an independent consultant to research a “Clean Energy Business Case Analysis,” to be completed by September 2021. Among their goals, EGMA intends to begin a “heat pump incentive program” and provide thermostats to commercial customers.

In response to the settlement, three intervenors–Groundwork Lawrence, Conservation Law Foundation, and Laborers’ International Union of North America (LIUNA)– filed written comments. The settlement also received comments from the town of Longmeadow, also served by Bay State. Groundwork Lawrence remains skeptical of the gas distribution company’s ability to guarantee residents’ safety. They proposed four changes to the settlement (pages 36-37):

  1. Require the Attorney General to dedicate resources to protecting tenants that may be evicted or priced out of their homes because of housing updates made by landlords through a Merrimack Valley Renewal Fund initiative.
  2. Amend the Municipal Clean or Energy Efficiency initiative to specifically include climate resiliency projects on municipal owned land.
  3. Amend the Public Affordable Housing Energy Efficiency initiative to allow for Community Development Corporations and Community Action Agencies/Programs nonprofit organizations to apply for funding.
  4. Clarify whether there will be a cap on administrative costs for the Removing Energy Efficiency Barriers and Increased Access to Efficient and Clean Energy for Low and Moderate Income Residential and Multi-unit Housing program within DOER and how much money will go towards projects and infrastructure within municipalities.

The Conservation Law Foundation, meanwhile, encouraged DOER to draft a long-term plan that addresses Eversource’s plans to repair the environmental and economic consequences from the 2018 explosions, and describes how Eversource intends to respond to state climate change goals. LIUNA is especially concerned that the settlement does not adequately address labor standards for contractors who perform work on the inherited EGMA system. Importantly, they are concerned that it may appear to Merrimack Valley residents that Eversource and the AGO do not care about safety and economic development standards. They assert these concerns can only be mitigated through increased training, safety, and labor standards. They urged the DOER to reject the settlement until it addresses proper labor and safety standards. The Town of Longmeadow requested that the settlement include an evaluation of the Longmeadow Project, a point of gas delivery that Columbia Gas (having purchased the project from Tennessee Gas Pipeline Company) plans to install in Longmeadow.

Other comments from the public highlighted the need to meet the state’s decarbonization goals, the lack of transparency and short review time, hiring and training practices, and concern over distribution rate increases.

Based on our recent conversation with the Home Energy Efficiency Team (HEET), the main proponent of the geothermal microdistrict idea, it appears that the proposed geothermal microdistrict pilot program will be entered into an open bidding process by the AGO, and Eversource will be required to pay $4 million to this pilot per the settlement agreement. At a time when we urgently need an ambitious plan for decarbonization and public power, this gas settlement fundamentally protects gas infrastructure and investor-owned utilities with this pilot program.
As Eversource and the Attorney General’s Office enter negotiations with key stakeholders, we support all efforts by Pueblo Verde and community residents to have a seat at the table.We agree with all settlement changes Groundwork Lawrence proposed, particularly those that pertain to housing. As the pandemic wears on, MA families are saddled with utility debt and eviction concerns, and the AGO must ensure that Merrimack Valley residents are protected from further anxiety over their economic, emotional, and physical security. We underscore our opposition to new rate hikes that will hurt customers who are already aching from economic constraints. We support LIUNA’s response regarding labor, safety, and good jobs. The AGO should support renewable energy infrastructure that creates green jobs and tackles climate injustices. We call on the AGO to support a Massachusetts Just Green Stimulus that prioritizes economic recovery, community resiliency, and safe, healthy homes.

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