Liberty wants to charge ratepayers $7.5 million for a project that never happened

By: - June 17, 2021 6:15 am
A ring of natural gas flame

Of the $9.1 million Liberty spent on the Granite Bridge project, the company is asking to recover $7.5 million over the course of five years. (Photo illustration by Christopher Furlong | Getty Images)

Liberty is asking the state to sign off on a $7.5 million bill for ratepayers in connection with the company’s efforts to construct the Granite Bridge pipeline, a move the state’s consumer advocate says runs afoul of well-established New Hampshire law.

The Granite Bridge pipeline was a contentious project that would have cost $340 million in total. After facing significant pushback, Liberty ultimately withdrew the proposal last year. But now the utility is asking the Public Utilities Commission to allow it to recoup some of the costs associated with the now-abandoned project by charging ratepayers.

Consumer Advocate Don Kreis said granting the request would fly in the face of the “bedrock” of New Hampshire law, which clearly states that utilities cannot charge ratepayers for projects that aren’t completed.  

The typical standard is that only projects considered “used” and “useful” can be factored into the rates that a utility is charging to its ratepayers. New Hampshire law is more explicit on this point, and the Anti-Construction Work In Progress law – commonly called Anti-CWIP – has been on the books since 1979.

Kreis, who is also an energy attorney, says the law is unambiguous about this issue.

“If there’s one thing about New Hampshire law that is absolutely clear it is that if a utility invests money in a project, and that project is never placed into service, you can’t put it into rates, period,” Kreis said.

For Kreis, the Granite Bridge project, which was never completed, fits this description precisely. He says customers shouldn’t have to pay for something that isn’t benefiting them, and utilities can’t expect to be shielded from all risk.

Kreis said utilities “want to make profits. They want guaranteed profits and to take as much business risk as possible and shift it onto the backs of their customers. That’s not fair.”

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And that’s what New Hampshire’s law was designed to prevent, according to attorney and former state representative Bob Backus, who was involved with legal proceedings at the time the law was established.

“The most important thing was to transfer the risk of investments going sour from captive ratepayers to the investment community, since they are well compensated for taking on risk, and the ratepayers are not,” Backus said in an email. 

Utilities often operate as a regulated monopoly – people who buy electricity are called ratepayers and not customers because they often don’t have the option to take their business elsewhere if the utility does something they disagree with, like charging too much for electricity. That’s where the Public Utilities Commission steps in, as the regulating body that determines whether this type of expense can be factored into rates or not.

Liberty’s case

Of the $9.1 million the utility spent on the Granite Bridge project, Liberty is asking to recover $7.5 million over the course of five years in Docket DG 20-105, which is currently before the Public Utilities Commission.

As a part of the docket, written testimony explaining Liberty’s rationale for the request was submitted by some of Liberty’s employees, including Francisco DaFonte, the vice president of regulated infrastructure development, William Killeen, director of energy procurement, and Steven Mullen, director of rates and regulatory affairs.

In their testimony, DaFonte, Killeen, and Mullen argue that the costs were necessary “to conduct due diligence” on one of only two options to meet growing demand for natural gas in the region. Liberty relies on a single feed from Tennessee Gas Pipeline, and according to testimony pursuing the Granite Bridge project strengthened the company’s position to negotiate with Tennessee Gas Pipeline.

Instead of pursuing Granite Bridge, Liberty is now seeking approval for a 20-year capacity contract with Tennessee Gas Pipeline. Liberty said it was able to secure better rates because it pursued options like the Granite Bridge pipeline.

DaFonte, Killeen, and Mullen say “customers will receive the benefit associated with the company’s pursuit of the company-sponsored development option, in that the customers are the direct and sole beneficiaries of significant cost savings associated with the TGP contract.”

“As such, the company should be allowed to recover the costs to achieve that benefit,” the testimony continues.

A spokesperson for the company declined further comment on the case, stating that more information on the utility’s position would be available when the commission provides transcripts from a hearing that was held last week.

An equity issue

“The Anti-CWIP law is still the law and if this is within the orbit of its prohibition it should not be allowed,” Backus said.

He has followed the Anti-CWIP law from when it was first debated in the 1970s, as one piece of a long battle over the licensing of Seabrook.

“All hell erupted,” Backus said, when Public Service declared that shareholders would receive a dividend, even as ratepayers were being charged.

In a traditional regulatory model, the utility is a regulated monopoly that can charge ratepayers only when “the object of those investments is providing service,” Backus said.

In many states, this was considered sufficient to prevent Construction Work in Progress without additional legislation. But after the New Hampshire utilities commission allowed Seabrook to charge CWIP, the state passed additional legislation to prevent it from occurring again.

And according to Backus, the anti-CWIP law remains an important measure for ensuring equity today.

The utilities commission will make a determination on whether Liberty can charge ratepayers for costs associated with Granite Bridge. There is no public timeline about when a decision will be made.

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Amanda Gokee
Amanda Gokee

Amanda Gokee is the New Hampshire Bulletin’s energy and environment reporter. She previously reported on these issues at VTDigger. Amanda grew up in Vermont and is a graduate of Harvard University. She received her master’s degree in liberal studies, with a concentration in creative writing, from Dartmouth College. Her work has also appeared in the LA Review of Books and the Valley News.

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