Dive Brief:

• The Connecticut Public Utilities Regulatory Authority (PURA) has opened an investigation into allegations of power and gas market manipulation by Eversource and Avangrid, according to a release from the state consumer advocate, who is working with the regulators.
• Last week, a report from the Environmental Defense Fund charged the two utilities were artificially constraining gas pipeline capacity, particularly on the coldest days, driving up costs to consumers. Consumer Counsel Elin Swanson Katz said "claims of this magnitude must be thoroughly investigated to ensure consumer confidence."
• Sen. Richard Blumenthal (D-CT) also asked the Federal Energy Regulatory to open an investigation into the utility behavior and "order a ban or other appropriate restriction on this practice" if regulators find a market manipulation has occurred. 

Dive Insight:

Released last Wednesday, the EDF report charges that local gas distribution utilities owned by Eversource and Avangrid regularly scheduled more gas than they needed, only to cancel some of the orders later in the day — too late for the pipeline space to be resold.

The effect was to tie up some of the capacity on the Algonquin pipeline, researchers wrote — up to 7% on the most constrained days, translating into 28% of the gas that would have been used by power generators.

According to the researchers, the behavior cost consumers $3.6 billion in higher power bills over the past three years.

Massachusetts Attorney General Maura Healey (D) is reviewing the report, but as of Tuesday, had not yet opened an investigation. Now PURA appears to be taking the case a step further, according to the Office of Consumer Counsel.

“These are serious allegations that need to be thoroughly investigated, and I am appreciative that PURA responded promptly by opening this investigation," Katz wrote in a statement. "While we are generally confident that our markets function as intended, claims of this magnitude must be thoroughly investigated to ensure consumer confidence in the bills they pay."

Industry figures have called the report "irresponsible" and a "fabrication," saying that utilities have little incentive to constrain pipeline flows and that they often over-schedule capacity at the beginning of the day to ensure they have ample fuel supply.

"When weather predictions are uncertain, as they often are in New England, it is common sense to err on the side of caution in reserving gas supply and to have a safety margin or cushion to cover unexpected operational issues," Northeast Gas Association CEO Tom Kiley wrote in a Utility Dive guest post. "That is what Avangrid and Eversource did."

Regardless of their motivation, Sen. Blumenthal wrote to FERC that he wants the federal regulatory body to take a closer look.

"While the motive remains unclear, I urge FERC to immediately investigate allegations of over withholding of natural gas by these companies in Connecticut," he wrote. "[I]f it is found that market manipulation has occurred, FERC should expeditiously order a ban or other appropriate restriction on this practice and ensure that affected consumers are swiftly and fully compensated."

Blumenthal also urged FERC to "examine any specific pricing policies" that could incentivize the behavior and "recommend policy changes that can be enacted to prevent this occurrence from continuing in the future."

Federal regulators, with jurisdiction over multiple states, are likely better equipped to investigate charges of price manipulation, former Maine regulator David Littell told Utility Dive.

“Tracking the money and the gains across those [utility subsidiaries] is something that [FERC] can do, but something that state regulators are not equipped to do at all," he said when the report was published.

How FERC will respond to the letter remains to be seen. The commission could already have an investigation open without announcing it publicly, said former Chairman Jon Wellinghoff, and they have broad authority to penalize the utilities and alter market constructions if they find manipulation took place. 

“If they can conclude in FERC’s opinion … that the behavior engaged in here constituted market manipulation then FERC has full authority to seek reparations going back and jump to relief going forward,” he said. “They can also change market rules to make sure these things don’t occur.”

Whether such an investigation is active also remains unclear. On Tuesday Commissioner Cheryl LaFleur said she was aware of the allegations, but would not speak to the substance of the EDF report.