Foley Hoag Secures Massachusetts SJC Victory for ENGIE Gas and LNG

August 25, 2016

Foley Hoag LLP recently secured a victory on behalf of its client ENGIE Gas & LNG (“ENGIE”) in the Massachusetts Supreme Judicial Court (“SJC”). In a unanimous decision, the SJC agreed with ENGIE that the Massachusetts Department of Public Utilities (“DPU”) erred when it issued an order authorizing electric utilities to procure new gas pipeline capacity and to then seek recovery of those costs from electric ratepayers.

“This major decision provides valuable clarity from the state’s highest court on the scope of the DPU’s oversight authority,” said Foley Hoag attorney Tad Heuer, who argued the case for ENGIE before the SJC. “It also reaffirms Massachusetts’ commitment to competitive power markets.”

In June 2015, the DPU sought public comment on whether Massachusetts law allowed electric utilities to procure gas pipeline capacity and recover the procurement costs from electric ratepayers. ENGIE’s written comments to the DPU emphasized that neither the plain language of the relevant statute (nor the statute’s 86-year history) permitted such a scenario. ENGIE also observed that in 1997, the Massachusetts Legislature restructured the electric utility industry to encourage competition — and to prohibit the vertical integration of generation, distribution and transmission. Nonetheless, in October 2015, the DPU issued an order allowing electric utilities to procure gas capacity contracts and to seek cost recovery from their ratepayers.

ENGIE appealed the DPU order directly to the SJC. ENGIE contended that the DPU order was contrary to both the plain language of the DPU’s enabling act and the 1997 restructuring act.

On August 17, 2016, the SJC decided in favor of ENGIE. The SJC concluded that the DPU order “represents a significant departure from [the DPU’s] own history of administering” its enabling act, and that “the Legislature did not intend to authorize the [DPU] to approve the contracts contemplated in its order.” The SJC also held that because the fundamental purpose of the 1997 restructuring act was “to move from a regulated electricity supply market to an open and competitive market for power,” allowing the DPU order to stand would “undermine the main objectives of the [restructuring] act and reexpose ratepayers to the types of financial risks from which the Legislature sought to protect them.”

Foley Hoag attorneys Tad Heuer, Adam Kahn and Jesse Alderman represented ENGIE in this matter, with assistance from paralegal Judy Gallant.