Columbia Gas settlement tackles safety, climate change, environmental justice
via Tom DiChristopher, S&P Global
A settlement over the 2018 Merrimack Valley disaster seeks not only to facilitate a $1.1 billion takeover of Columbia Gas of Massachusetts, but also aims to advance the state's climate and social justice agenda.
The proposal approved by the Massachusetts Department of Public Utilities, or DPU, on Oct. 7 outlined how Columbia Gas, officially named Bay State Gas Co., will operate after Eversource Energy's deal to purchase the NiSource Inc. subsidiary closes. It also required Eversource and state officials to establish pathways to decarbonizing the gas grid, addressing environmental justice issues and restoring trust in communities devastated by a series of gas explosions and fires.
The settlement would resolve all investigations, claims and proceedings by DPU against NiSource and Columbia Gas over the 2018 blasts and fires in Lawrence, Andover and North Andover, which federal investigators traced to a poorly planned pipeline replacement project. As part of an earlier settlement with federal prosecutors, NiSource agreed to exit the state.
Eversource prepares to take over Columbia Gas
After the deal closes, Eversource would assign all rights under the sale to a wholly owned subsidiary, Eversource Gas Company Of Massachusetts, though the company can continue to operate as Columbia Gas for up to a year. Eversource Gas will remain legally and functionally separate from NSTAR Gas Co., Eversource's currently operating Massachusetts gas utility subsidiary.
Eversource Gas will take control of all Columbia Gas assets with a few exceptions, including labor union contracts and employee benefit plans. It will also transfer Columbia Gas' liquefied natural gas and liquid propane gas assets into Hopkinton LNG Corp., which will provide peaking services to both Eversource Gas and NSTAR.
Eversource has begun implementing a four-phase transition plan that starts with assessing and evaluating Columbia Gas operations. It will next extend the NSTAR management structure to Columbia Gas operations, and then align Columbia Gas' leadership structures and engineering, operations and construction processes with NSTAR standards. The final step is systematic planning and investment to reinforce, refurbish or replace parts of the Columbia Gas distribution system.
Settlement seeks cost savings and safety improvements for ratepayers
The settlement includes a rate freeze through Nov. 1, 2028, except for a pair of distribution rate increases and rate base resets. The first base distribution rate increase would occur on Nov. 1, 2021, and would increase revenue by about $32.8 million, largely offset by $19.8 million that Columbia Gas is currently recovering and a $6.7 million tax credit. The second distribution rate increase of $10 million would take effect on Nov. 1, 2022. By avoiding additional rate cases, the companies estimated the rate freeze would save customers $876 million.
After the deal closes, the settlement requires Eversource Gas to thoroughly evaluate its distribution system to ensure that ratepayers benefit from improved safety and reliability. Eversource committed to investigate all aspects of the operations, including gas supply, operator qualifications, leak management and various pipeline safety practices. The settlement requires Eversource Gas to publicly report and submit for DPU review its findings, a work plan and a capital budget by Sept. 1, 2021.
The settlement also orders Eversource to study whether it can achieve cost-saving efficiencies in its gas resource portfolio, either by modifying how it manages those resources or by integrating Eversource Gas and NSTAR portfolios. The settlement orders Eversource to report its findings by Sept. 1, 2021, and pass on any savings to customers.
Mass. officials push clean energy objectives
Under the settlement, Eversource will hire an independent consultant to study and prepare a report on strategies to reduce greenhouse gas emissions associated with gas sales and distribution.
The settlement also seeks to address the ongoing ban on new gas hookups in Northampton, Mass., by committing Eversource Gas to support a heat pump incentive program. Eversource Gas would reach out to customers in affected communities and provide enhanced electrification incentives. The settlement also orders Eversource Gas to consult with the Massachusetts Department of Energy Resources, or DOER, to issue $250,000 in incremental incentives for high-efficiency air-source heat pumps to residential customers across its service territory in 2021.
Eversource Gas will further spend up to $1 million on a demand response program that will provide as many as 2,000 Wi-Fi thermostats to residential and small commercial customers for three years. The DPS also ordered Eversource Gas to make a good-faith effort to enroll more residential customers in a program that seeks to reduce gas use with the help of smart thermostats.
The attorney general's office and DOER will deploy $41 million of the settlement funds to design and administer the Merrimack Valley Renewal Fund. The program will fund new building efficiency and electrification incentives, as well as grants for energy efficiency and clean energy projects, including a geothermal district, in Lawrence, Andover and North Andover.
Addressing environmental justice
The remaining $15 million in settlement funds will underwrite the Arrearage Forgiveness Fund administered by the attorney general and Eversource. Under the program, low-income residential customers in the Springfield, Brockton and Greater Lawrence service territories will receive bill credits to wipe out their outstanding balances.
In doing so, the settlement addressed concerns about mounting unpaid bills during the coronavirus pandemic and U.S. economic downturn. Other aspects of the agreement attempted to address growing concerns about social inequality and environmental justice in low-income and minority communities.
The attorney general and DOER intend to design the Merrimack Valley Renewal Fund to "foster local workforce development initiatives and training." Still, some community groups expressed concern about the settlement.
The Conservation Law Foundation argued that environmental justice has long been an issue in the Merrimack Valley, and recommended that Eversource create a long-term plan to modify its assets to achieve the state's climate goals. Groundwork Lawrence stressed the need to ensure an equitable distribution of the settlement funds, as well as protections for tenants at risk of being priced out of homes following improvements by property owners.