Class action lawsuit acuses utilities Eversource, Avangrid of bilking customers out of $3.6 billion

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By Friday, Nov 24 News  5 Comments
An Eversource lineman tends to an Eversource transmission line.

Boston — A new lawsuit brought on behalf of all electric ratepayers in New England targets two of the largest investor owned utilities (IOUs) in the region for allegedly manipulating wholesale energy markets, resulting in inflated natural gas and electricity costs and higher bills for consumers.

Eversource Energy and Avangrid Inc. are named defendants in a complaint filed November 16, 2017 in U.S. District Court for the District of Massachusetts in Boston. The complaint stems from a study released in October finding that the two energy conglomerates artificially constrained natural gas pipeline capacity routinely over a several-year period, which caused a spike in spot market gas prices and led to overall higher electricity costs. The total economic effect on electricity consumers, according to the study, was $3.6 billion in overcharges.

Attorney Tom Sobol whose firm has brought the class action law suit.

A class action lawsuit filed by Hagens Berman Sobol Shapiro – a nationally recognized class-action law firm specializing in consumer rights protection against large corporations – is now attempting to recover these overcharges from the utilities.

“Eversource and Avangrid are two of the largest energy companies in New England, and we believe they chose to use their substantial market power to unlawfully jack-up consumers’ electric bills,” attorney Tom Sobol, partner at Hagens Berman, said in a press release. “It appears these companies willfully engaged in this scheme for years, and we intend to help those affected reclaim their losses, and stop this behavior.”

Eversource and Avangrid both own natural gas utilities and electric utilities. The “scheme” arises from their natural gas operation – specifically reserving more capacity on the Algonquin pipeline than they needed and cancelling the reservation at the last moment, preventing competing companies from using the gas. Eversource and Avangrid have unique “legacy contracts” allowing them to adjust their pipeline reservations throughout the day, the suit states. This allows them to cancel capacity right before they would incur a penalty for overbooking.

Since competitors could not subsequently request capacity on the pipeline, gas supply was artificially constrained, causing spot market gas prices to spike and electricity costs to be higher than they otherwise would have been.

The effect of the utilities’ “down scheduling” on the pipeline included a 38 percent increase in spot market gas prices on average, and a 70 percent price increase during the coldest winter months. Electricity prices were at least 20 percent higher from 2013 to 2016, the period covered in the study. Ratepayers in the region ended up paying $3.6 billion extra as a result.

According to the complaint, 14.7 million residents across the region, including 7.1 million retail electric customers, were affected by this allegedly illegal scheme. “Defendants’ abuse of their substantial market power caused an anticompetitive injury, in the form of higher electricity bills, to all New England electricity consumers,” the complaint states. The utilities’ behavior violated state consumer protection statutes and federal and state competition and antitrust laws, the suit claims.

Pipes waiting to be installed along Tennessee Gas Pipeline’s controversial Connecticut Expansion natural gas pipeline through Otis State Forest. The manipulation of gas supplies not only increased electricity rates but also justified the construction of new pipelines despite absence of demand. Photo: Ben Hillman

Motivation for constraining gas supply may lie in the fact that Eversource and Avangrid both own non-gas-fired power plants in addition to electric and gas service subsidiaries. Higher spot market gas prices make this non-gas electric generation more competitive in the market. As the lawsuit points out, “Defendants are able to profit directly from artificially higher natural gas spot market prices in the form of increased use of and higher prices paid to their non-gas-fired electric power plants.”

The complaint further points to the fact that the utility giants used the higher electricity costs in the region as justification for the need for new natural gas pipelines. Investing in additional pipeline infrastructure would directly benefit these companies, and they even went so far as to try to convince lawmakers and regulators that consumers should pay for this infrastructure through a “pipeline tax.”

A 2015 study by the Massachusetts Attorney General’s Office (AGO) concluded that additional natural gas pipeline capacity is unnecessary to ensure electric grid reliability. The AGO is reviewing the findings of the study underpinning this lawsuit with expressed concern. “The allegations in the report are concerning and require careful assessment and analysis,” said Chloe Gotsis, spokeswoman for Attorney General Maura Healey’s Office. “We are reviewing the report and gathering additional information. Based on our review, we will take any appropriate action.”

Mike Durand, a spokesman for Eversource, said the company is reviewing the lawsuit and it denies any alleged wrongdoing. “The allegations underlying this lawsuit are untrue and baseless,” he said in an emailed statement. “The expenditure of resources to further these false claims is regrettable for all parties involved.”

Avangrid responded to a request for comment with the following statement:

“The Company is reviewing the allegations in the complaint and will vigorously defend against these claims. Southern Connecticut Gas (SCG) and Connecticut Natural Gas (CNG) are obligated to provide safe and reliable natural gas service to their customers. SCG and CNG reserve and nominate/schedule pipeline capacity to help protect customers from interruptions – including during unpredictable, extreme weather conditions. These companies operate in Connecticut, where they are required to serve as the “supplier of last resort” for retail, commercial and industrial natural gas customers interconnected to the gas distribution companies. In providing service to customers, AVANGRID seeks to comply with all state and federal regulatory requirements.”

But according to this lawsuit, the utilities’ “abusive” behavior constitutes the largest energy market manipulation scheme since the Enron scandal: “Not since Enron’s greedy heyday during the California energy crisis, nearly two decades ago, have American energy markets been manipulated for private profit at such expense to everyday electricity consumers.”

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5 Comments   Add Comment

  1. Mike says:

    You can be sure nobody will serve any jail time for this alleged crime, if found guilty. Slap on the wrist fine, neither company will admit any to any wrongdoing, and the records will be sealed. After allegedly bilking consumers of billions of dollars, it is particular ironic to see Eversource’s spokesperson lament the “expenditure of resources to further these false claims…”

  2. Robert Feuer says:

    Our state government has been remiss to investigate, discover, and redress the ever rising consumer costs of electricity in the face of massive, upwards of eighty percent, reduction of all input electric generating fuel costs since 2008. Until this underlying study surfaced here in 2017, our utility rate setting commission, has been toothless in the face of a decade of patent price gouging by the power companies serving Massachusetts. One might ask why our taxes go up while the protection from such illicit public behavior has gone on for a decade unabated. Since 2008, all electric generating fuel input costs, coal, gas, oil, uranium have plummeted upwards of eighty percent. Has anyone in Massachusetts seen such a decrease in their electric bill? I asked this question of our state representative and senator in Feb. 2015. They said they were aware of the problem and working on it. I do not believe “working” was an operative word. Mike is spot on. This is a “public good” issue. Private remedies through the class action lawsuit will not address nor rectify criminal behavior and abuse of state sanctioned monopoly power, but rather slap some wrists, and for pennies on the dollar, permanently exonerate criminal wrongdoing against the public good. Martha Coakley’s office best step up to the plate and rectify this harm, as well as clean up the state’s utility regulatory commission.

    1. David says:

      100% agreed Bob. Our elected officials often forget that it’s not corporations and “donors” for whom they are supposed to be working. A rampant, societal plague!

    2. Bob says:

      Very well said. Spot on.

  3. Edward Gibson says:

    Well honestly something should be done because I am sick and tired of paying more for a delivery fee for my electricity then I use I don’t make a lot of money and there is five of us that live in this house we do have an electric hot water heater my electrical bill usually runs $60 a month it cost me $70 a month to have it delivered I think that’s a little outrageous last month when we lost power for 2 and 1/2 weeks we ended up paying more for that much luck TriCity then we had in the two months prior or the month after I think this is wrong somebody should be punished

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