Private, Public Utilities Duel for Right to Build New England Pipelines

Creating the regulatory environment that enables New England's power market to charge electricity customers for the cost of expanding natural gas pipeline capacity is a project for the lawyers. But in the meantime, the New England States Committee on Electricity (NESCOE) is weighing 15 responses to a June request for expressions of interest from entities that could be creditworthy counterparties to deals with gas pipeline companies. Two responses stand out.

Northeast Utilities, National Grid and UIL Holdings -- investor-owned utilities that provide natural gas and electricity to nearly 7 million customers in four New England states -- submitted a proposal that asks for compensation in the form of equity participation in any pipeline expansion.

"We see a big problem here that really needs resolution, and it's not solving itself," said Anthony Marone, UIL's senior vice president for customer and business services.

But the Massachusetts Municipal Wholesale Electric Co. (MMWEC), which supplies power to 28 municipal utilities, says a nonprofit model to add pipeline capacity could save the region's electricity consumers millions of dollars.

MMWEC has the authority to build energy projects anywhere in New England. It has issued more than $4.7 billion in bonds to finance stakes in New England power plants as well as a natural gas pipeline.

Expanding gas pipeline capacity -- even along existing pipelines rights of way -- is estimated to cost up to $2 billion. And a pipeline developer working with the investor-owned utilities would expect a return on equity of around 14 percent, if recent returns of equity approved by FERC are any guide.

"We're not looking for that guaranteed rate of return of approximately 14 percent," MMWEC's CEO Ronald DeCurzio said in an interview. DeCurzio emphasized, "That's 14 percent a year over the life of the facilities in avoided costs" under the MMWEC proposal. "That saves all consumers a boatload of money."

DeCurzio shopped his plan to members of FERC during a series of meetings in Washington on July 8, where he said commissioners found the nonprofit approach to be "compelling and very interesting."

UIL Holdings' Marone dismisses MMWEC's ability to put together a deal on pipeline capacity. "I don't believe they have the ability or the track record or any experience or expertise to actually be able to accomplish this," he said.

By contrast, Marone asserts the investor-owned utilities "know how to do this; we have the expertise engaging with pipelines."

Private, Public Utilities Duel for Right to Build New England Pipelines