DPU squeezing utilities on gas pipe replacement front

Yahoo

02-05-2025

BOSTON (SHNS) – Gas companies were told late Wednesday night they need to immediately begin ratcheting down the amount of money they can bill customers for efforts to replace old and leaking natural gas pipelines until reaching the lowest level allowed under state law in two years.
Department of Public Utilities Chair James Van Nostrand said the orders his department issued mean that gas customers 'will be able realize these savings this year,' at a time when the high cost of energy is a top concern for residents and policymakers.
The orders require companies to immediately reduce their Gas System Enhancement Plan (GSEP) revenue caps to 2.5%. The existing scheme limits utilities' GSEP charges on customer bills to 3% of the previous year's revenue.
The orders also require the state's six local gas distribution utilities — Berkshire Gas, Eversource Gas of Massachusetts, Liberty Utilities, National Grid, NSTAR (owned by Eversource), and Unitil — to reduce those revenue caps to 2% next year and to 1.5% in 2027, which DPU said is the minimum allowed by state law. DPU had raised the cap from 1.5% to 3% in 2019.
'For far too long the gas companies have continued to spend on unnecessary GSEP projects, costing the state's ratepayers billions for over a decade. GSEP represents the second largest cost in the gas delivery charge, which spiked this winter,' Van Nostrand said. 'These changes will ensure a well-maintained gas system by requiring gas utilities to address the issue of leak-prone pipe in a more affordable manner.'
DPU said customers whose gas provider is spending to the current 3% cap will see a GSEP surcharge that is 17% percent lower as a result of the order.
GSEP was introduced as part of a 2014 gas leaks law and a 2019 examination of the safety of natural gas infrastructure in Massachusetts found the program had been 'a legislative and regulatory success.' The program encourages utilities to replace leak-prone pipes by maintaining a mechanism for companies to recover the costs associated with replacement.
DPU said it determined the safety of the gas distribution system can be maintained at a lower level of GSEP spending and said there are more affordable ways to address leak-prone pipes. The orders direct gas utilities to consider repairs, the use of 'advanced leak technology,' and the implementation of non-pipeline alternatives instead of pipe replacement.
Past discussions of changes to the GSEP program have been met with resistance in some corners, including from the New England Gas Workers Alliance and gas workers' unions. NEGWA President John Buonopane said Thursday afternoon that his union is 'alarmed' by DPU's approach to GSEP changes and charged that the department's order 'will put natural gas customers, utility workforce, first responders, and the public in harm's way.'
Others have argued it would be unwise to reduce investment in the gas system at a time when renewable energy plans are stalling. A business-backed group suggested the change is being driven by a desire to shift completely away from natural gas.
'The DPU's order presumes that rather than replacing pipes to maintain a safe and reliable distribution system, the Commonwealth's entire natural gas network can be decommissioned over the next 3-to-5 years. This assumption is not only unrealistic – but dangerous given that only 15-17% of New England's electricity is renewable after nearly two decades of investment, projects in the pipeline are still falling far short of what is needed, and the current Administration in Washington's open hostility toward wind power,' the Mass Coalition for Sustainable Energy said in a statement. The group added, 'The Commonwealth's ability to pursue an urgent and robust housing and economic development agenda that benefits all of its residents and businesses depends on a safe and reliable natural gas system. Our coalition believes the DPU needs to reexamine this order and ignore unrealistic, ideologically driven assumptions that put our safety and economic future at risk.'
DPU said capital spending covered under the GSEP program has increased by 21% annually since 2015, but the number of miles of pipe replaced has only increased by less than 3% annually over the same period.
Utilities spent $1.32 million per mile of pipe replaced in 2015, and in 2025 are spending $3.46 million per mile, the department said. Put another way, the miles replaced per $10 million in GSEP spending has declined from 7.59 miles in 2015 to 2.89 miles in 2025. DPU said the 'fundamental issue' with the GSEP program as it has existed 'is the lack of any meaningful incentive for cost containment.'
'Given the 4,049 miles of leak-prone pipe still remaining to be replaced, it will cost an estimated $13.7 billion in additional GSEP spending if the [gas companies] continue down the current path of relying primarily on pipe replacement and failing to control costs in any meaningful manner,' DPU wrote in the order. It added, 'Ratepayers simply cannot afford to continue down this path, and the Department would be failing our obligation under the GSEP statute to ensure that plans operate in a balanced manner, if we do not take significant action in these proceedings to reform the GSEP process.'
Last year's energy and climate law included Senate-initiated measures meant to address what some said was wasteful spending in the GSEP program, to explicitly align it with the state climate mandates, and to shift the GSEP program's focus away from pipe replacement and toward alternatives like pipe repair and networked geothermal.
'Yesterday's order shows that the DPU is taking implementation of that new law seriously,' Senate Majority Leader Cindy Creem, who sponsored legislation reforming the GSEP program last session, said. 'I'm grateful to the DPU for taking action that will both reduce cots for Massachusetts residents and advance our climate goals.'
There were approximately 1.7 million natural gas customers in Massachusetts as of a 2019 'Future of Gas' report, with 91% being served by either National Grid or Eversource. Berkshire Gas Company, Liberty Utilities and Unitil together served another 7% of customers while the state's four municipal gas companies served the remaining 2%.
Kaitlyn Woods, an Eversource spokesperson, said the company will 'continue on behalf of our customers to safely, efficiently, and cost-effectively address aging, leak-prone pipe across the state' while it reviews the decision from DPU.
'Massachusetts' gas distribution system contains a disproportionately higher percentage of leak-prone (and aging) infrastructure when compared to the national average due to when the system was constructed. This critical work aligns with legislation that was enacted to improve the safety of the gas distribution system as well as the state's mandated emissions reduction goals, which has resulted in the amount of gas leaks across Massachusetts being cut in half since 2014,' she said. 'Eversource will remain vigilant in prioritizing the safety of our gas system for our customers and the public.'
In a statement late Thursday afternoon, National Grid said it is 'dedicated to exploring viable alternatives to gas infrastructure for heating, including targeted electrification and networked geothermal.' The company said it was reviewing the DPU order and would 'remain focused on maintaining our existing network' serving more than 950,000 customers.
'By taking steps to incentivize gas companies to control costs, to evaluate more affordable solutions to replacing leak-prone pipes, and to explore non-gas pipeline alternatives, the DPU sent clear direction to the gas industry that it is time to move beyond gas,' Marilyn Ray Smith of Gas Transition Allies said. 'Over the past 10 years, the Gas System Enhancement Program has enabled gas companies to spend ratepayer money at a premium to replace outdated methane gas pipes, undermining Massachusetts's climate goals and driving up gas bills as a result.'
Attorney General Andrea Campbell said the DPU orders reflect 'nearly all of our office's recommendations' to rein in GSEP spending.
'It is fundamentally unfair to charge ratepayers billions of dollars to prop up the gas system as the Commonwealth works to decarbonize,' Campbell said. 'Gas bills skyrocketed this winter, and ratepayers need relief. Our office's advocacy has resulted in significant reductions to the amount that gas companies can bill to customers for unnecessary investments in gas infrastructure that does nothing to achieve our climate goals.'
Another Gas Transition Allies member, Audrey Schulman, likened the GSEP program to 'investing our children's money in infrastructure they aren't likely to be able to use.'
But others are less certain that Massachusetts is ready to shun fossil fuels. Hours before the DPU filed its orders, the House's point person for energy policy cracked open the door to possibility of changes to the state's commitment to reach net-zero emissions by 2050 in light of major federal policy changes.
'While we have passed major climate legislation the past few sessions, we are in the process of reviewing all of our climate and emission mandates, goals and plans. With the new administration in Washington pulling funding, and with the president's executive order preventing the development of new offshore wind, we must reevaluate and try to figure out the new reality of meeting our climate change goals without a federal partner and without our planned energy diversification,' Telecommunications, Utilities and Energy Committee Chair Rep. Mark Cusack said.
Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.