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Regulators are investigating two energy companies accused of market manipulation

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After researchers with the Environmental Defense Fund (EDF) released a report accusing two New England energy companies of market power abuse, utility regulators have started to take action.

EDF released the report earlier this month alleging local gas distribution companies ran by Eversource and Avangrid reserved more pipeline space on the Algonquin pipeline, located in Connecticut and Massachusetts, than was needed and would cancel some of it last minute, driving up energy prices.

"The claim is that our gas companies operated differently than the other gas companies in New England," Joseph Rosenthal, attorney for Connecticut's Office of Consumer Counsel, said. “They created an artificial shortage, which in turn cost customers money.”

According to the report, the companies used a practice called "capacity withholding," which researchers said increased the prices of gas by 38 percent and the price of electricity by 20 percent over three years and resulted in electricity customers in the area to pay $3.6 billion in higher prices.

The Public Utilities Regulatory Authority (PURA) in Connecticut has now launched an investigation into the two companies, and the Department of Public Utilities in Massachusetts will conduct a review.

Senator Richard Blumenthal (D-CT) has also called on the Federal Energy Regulatory Commission to investigate the allegations, according to a press release.

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Connecticut’s Consumer Counsel Elin Swanson Katz said the practice of reserving more pipeline space than is needed is a “legitimate practice” used by energy companies in the region to protect customers from shortages.

“If people don’t have natural gas in a polar vortex than people can die, so we want them to be conservative. The question is overly conservative negative impacts on the market. That’s certainly a different story, and we would look at adjusting the practices," Katz said.

If people don't have natural gas in a polar vortex than people can die, so we want them to be conservative."
Elin Swanson Katz, Connecticut Consumer Counsel
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Regulations also would have prevented Eversource and Avangrid from making money off increased gas prices, but the report alleges that the motivation could have been the companies other utility subsidiaries, such as electricity, that could have benefited from the practice.

“There was no way that they could make money in their regulated businesses as a gas utility," Katz said. “They make more money in those non regulated businesses, like wind," she said.

Avangrid and Eversource both responded to the report denying any wrongdoings, and said that their practice of reserving pipeline space is to protect the consumer.

In a statement to Circa, Avangrid said they did not benefit financially from electricity prices, and said, "It should also be noted that the 101 MW of renewable generation had no affiliation with the Connecticut and Massachusetts gas companies as they were owned by separate companies until AVANGRID was formed in December 2015."

"This 'report' was published earlier this year and is a complete fabrication as evidenced by the lack of credibility it has received in the industry. The underlying concept is not only false and misleading, but concerningly irresponsible as it lacks any understanding of how gas procurement actually works," Eversoruce told Circa in a statement.

No hearings or forums have been scheduled by PURA regarding the investigation as of now.

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