Hagens Berman: Class-Action Lawsuit Accuses New England Utility Companies of Causing $3.6 Billion in Excessive Electricity Costs
Suit says Eversource Energy and Avangrid’s years-long manipulation
impacted six states: Massachusetts, Maine, Vermont, New Hampshire,
Connecticut and Rhode Island
BOSTON–(BUSINESS WIRE)–New England residents today hit Eversource
Energy and Avangrid Inc. with a class-action lawsuit stating that
the two energy companies caused electricity consumers to incur
overcharges of $3.6 billion in a years-long scheme that impacted six
states and affected 14.7 million people, according to the lawsuit filed
in federal court in Boston.
The lawsuit, filed Nov. 14, 2017, in the U.S. District Court for the
District of Massachusetts states that 7.1 million retail electricity
customers and an overall population of 14.7 million people have been
affected by Eversource and Avangrid’s “unique monopoly” spanning at
least from 2013 to 2016. The scheme raised electric prices by at least
20 percent for those living in Massachusetts, Maine, Vermont, New
Hampshire, Connecticut and Rhode Island. The complaint alleges the
scheme violates multiple federal and state competition laws and state
consumer protection statutes.
Eversource and Avangrid own multiple electric utility subsidiaries,
including United Illuminating, Connecticut Light and Power Company,
Central Maine Power Company, Western Massachusetts Electric Company,
NSTAR Electric Company and Public Service Company of New Hampshire.
If you lived in New England during the relevant time period, you may be
affected. Find out more about the lawsuit
against Eversource and Avangrid.
“Eversource and Avangrid are two of the largest energy companies in New
England, and we believe they chose to use their substantial market power
to unlawfully jack-up consumers’ electric bills,” said Tom Sobol,
partner at Hagens Berman, a national class-action law firm leading the
case for consumers. “It appears these companies willfully engaged in
this scheme for years, and we intend to help those affected reclaim
their losses, and stop this behavior.”
The electric overbilling scheme at the crux of the lawsuit begins with
Eversource and Avangrid’s manipulation of the amount of natural gas
available to power plants, the lawsuit states. The two companies
regularly constrained the amount of natural gas that could flow
throughout New England by reserving far more than they knew they would
need, according to the complaint. This artificially limited the amount
of gas, which is used to fuel many of the region’s power plants,
therefore pushing electric costs higher.
The lawsuit calls the market manipulation scheme the largest since
Enron: “Not since Enron’s greedy heyday during the California energy
crisis, nearly two decades ago, have American energy markets been
manipulated for private profit at such expense to everyday electricity
consumers.”
Eversource operations generate approximately $8 billion in revenue each
year.
What Led to Rising Rates
The lawsuit states that Eversource and Avangrid’s anticompetitive scheme
had an enormous and wide-ranging impact on the New England electricity
market as a whole.
According to the lawsuit, New England wholesale electricity cost $5.05
billion in the three-month period from December 2013 through February
2014 – nearly the same cost for wholesale electricity incurred by the
region during all twelve months of 2012.
Natural gas is delivered to and distributed within New England by
pipeline. The principal arterial natural gas pipeline in New England is
the Algonquin Gas Transmission Pipeline, which is owned in part by
Eversource, according to the lawsuit. Eversource and Avangrid both
uniquely have substantial natural gas utilities and electric utilities,
tasked with providing gas and electricity to residential and commercial
customers. To operate the gas utilities, Eversource and Avangrid have
contractual rights to order and use natural gas transmission capacity in
the Algonquin pipeline, allowing them to make daily orders in advance to
reserve a portion of the pipeline, a limited space that also carries gas
to power plants and industries.
While companies stand to incur a penalty if they request more pipeline
space than they use, Eversource and Avangrid, however, have unique
“legacy contracts” according to the lawsuit, allowing them to adjust
their pipeline reservations throughout the day. This means they can cut
back their reserved amount at the last moment.
The two energy suppliers routinely request much more than their needed
space in the pipeline, taking up space other competitors could use and
reducing supply. Then, the two wait until the last possible moment to
reduce their requested space to avoid a penalty for over-use. This
timeframe leaves no way for competition to use the pipeline, limiting
the amount of gas that flows to power plants, restricting supply, and
raising costs across New England.
“Reduced natural gas supply, caused solely by the Defendants’
last-minute downward order adjustments, resulted in spot market natural
gas prices that were 38% higher than they would otherwise have been on
average,” the lawsuit states. “During the cold winter months,
Defendants’ conduct resulted in spot market natural gas prices that were
nearly 70% higher than they otherwise would have been.”
This directly caused electricity prices across the region to spike 20
percent higher than they would have been otherwise, according to the
lawsuit, leaving utility customers paying the price.
Hagens Berman Sobol Shapiro LLP is a consumer-rights class-action law
firm with 11 offices across the country. The firm has been named to the
National Law Journal’s Plaintiffs’ Hot List eight times. More about the
law firm and its successes can be found at https://www.hbsslaw.com.
Follow the firm for updates and news at @ClassActionLaw.
Contacts
Hagens Berman Sobol Shapiro LLP
Tom Sobol, 617-475-1950
[email protected]
