Eversource named in class-action lawsuit

Combined sources
Thursday, November 30, 2017

A class-action lawsuit has accused two utilities of conspiring to drive up energy costs in New England in a multiyear scheme affecting millions of customers.

The lawsuit filed last week in Boston federal court alleges Eversource Energy and Avangrid Inc. used their market power to “unlawfully jack up” consumer electric bills, according to a statement from attorney Tom Sobol of the law firm Hagens Berman Sobol Shapiro LLP. Court records show 12 people are listed as plaintiffs.

The suit seeks $3.6 billion in damages — the amount it claims customers were overcharged. It accuses the utilities of manipulating the amount of natural gas available to power plants by reserving more than they needed from 2013 to 2016. The scheme raised electric prices by at least 20 percent for New England residents, affecting 7.1 million electricity customers.

“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,” the suit says.

Eversource, which now has a rate case pending before the state Department of Public Utilities that would allow an 8.6 percent hike effective Jan. 1, has denied any wrongdoing, saying the analysts don’t understand gas and electricity markets.

“The pipeline capacity we reserve is done so as to meet the needs of our customers and no other purpose,” spokeswoman Tricia Modica said in a statement. “We do not engage in any behavior to artificially constrain capacity. Our focus and actions are driven by our responsibility to ensure our customers have enough gas, because we can’t run the risk that they are left out in the cold.”

A spokesman for Avangrid said the company “will vigorously defend against these claims.”

The suit follows an Environmental Defense Fund report that explored the complicated dynamics of gas and electricity markets and found that on hundreds of occasions, Avangrid and Eversource reserved a certain amount of natural gas pipeline capacity, and then decided not to use it.

Lead author Matthew Zaragoza-Watkins, a Vanderbilt University economist, told the New England News Collaborative the power companies “artificially” constricted supplies on cold days when natural gas was in high demand, particularly during the so-called “polar vortex” four winters ago.

“They had reserved it like a table at a restaurant and then that table sat empty all day long and then at the last minute they said actually we never needed that table anyway,” he said.

Making gas more scarce drives up its price, Zaragoza-Watkins said. That raises the price of electricity fueled by natural gas, in turn making other forms of electricity — from coal, oil, or renewables — more competitive in the marketplace.

So when Avangrid and Eversource withheld gas capacity, non-gas units throughout New England benefited, Zaragoza-Watkins said.

“When it’s more expensive for gas-powered power plants to run, everybody earns higher revenues.

“And what that resulted in over the three-year span of our data was about a 20 percent higher price on average for electricity, or about a $3.6 billion transfer from electricity customers, to electricity generators,” Zaragoza-Watkins said.

Eversource, headquartered in Boston and Hartford, and New Haven-based Avangrid own multiple electric utility subsidiaries throughout New England, including Western Massachusetts Electric, which serves customers throughout central Franklin County.