Massachusetts Attorney General Maura Healey filed an initial brief last week in the matter of National Grid’s request for approval of a special contract with luxury real-estate developer One Dalton LLC, recommending that the state’s Department of Public Utilities (DPU) deny the request.
The reported stated that the special contract would pave the way for construction of the Back Bay/ South End pipeline to service the luxury hotel and condominiums of One Dalton.
The attorney general cited that the special contract would, “set a precedent that would allow customers with the greatest economic resources to avoid paying their full capital investment obligations and obtain special distribution rates at the expense of other customers.”
One Dalton is located in the Back Bay area of Boston, where it is constructing a new building for hotel and residential uses, and has requested gas service from National Grid.
National Grid’s current gas infrastructure in the Back Bay is insufficient to serve the needs of the customer. In order to meet the current demand National Grid will need to install an approximately 4,100-foot gas-main extension from its intermediate-pressure system.
Due to the extensive scope of the project, One Dalton is required to pay a multi-million dollar capital contribution, also known as a contribution in aid of construction (CIAC), to support a portion of the total cost of the project.
Since a capital contribution of this magnitude is unusual and would be a financial burden on One Dalton, the parties have negotiated an off-tariff agreement that allows the customer to pay a portion of the capital contribution over time as part of the gas distribution rate.
The agreement also obligates the customer to a rate structure for distribution service over the 20-year term that guarantees National Grid a revenue stream that would be unavailable under tariff rate.
National Grid established no justification for allowing it to charge One Dalton a special, off-tariff rate for distribution service. By National Grid’s description, One Dalton is a core, firm-service customer with no energy alternatives or ability to bypass National Grid’s distribution system.
The report stated that the lower, off-tariff rate would serve as a discount on the total CIAC that the customer has to pay, undermining the DPU’s policy that customers must bear the cost of infrastructure projects required to provide them gas distribution service.
The agreement was effective as of Dec. 1, 2017, subject to the Department of Public Utilities review. Gas distribution service to One Dalton will begin around October 2018, after construction of the gas facilities to reach the building is complete.
DPU held a public meeting on Dec. 15, at which six members of the public spoke out against this project and the office of the attorney general’s intervened.
“We applaud the attorney general’s recommendation that DPU deny the special contract between National Grid and One Dalton LLC,” said Emily Norton, Massachusetts Chapter director for the Sierra Club. “This special contract is nothing more than a sweetheart deal for a luxury real-estate developer, that would require ratepayers to subsidize carbon pollution for the wealthy and force Boston communities to live with the daily pollution and threat of leaks from a dirty fracked gas pipeline.”