Analysis: A Time When A Regulator Took Gas Utility Problems Seriously

Gov. Charlie Baker. (Jay Saulnier file photograph for WHAV News.)

Gov. Charlie Baker spoke during a press conference in the wake of Thursday's explosions and fires across the Merrimack Valley. (Jay Saulnier photograph for WHAV News.)

Cover of National Transportation Safety Board report on 2012 Columbia Gas explosion.

In the aftermath of natural gas-related fires and explosions covering three communities, attention is turning to how events came to pass and whether Columbia Gas had enough regulatory oversight.

Back in 2014, the National Transportation Safety Board criticized Columbia Gas for a 2012 pipeline explosion in Sissonville, W. Va., blamed on pipe corrosion. Investigators concluded, “the failure to detect the corrosion (was) because the pipeline was not inspected or tested after 1988.” The agency said three houses were destroyed by the fire, and several other houses were damaged. Unlike the Lawrence death of 18-year-old Leonel Rondon, there were no deaths or serious injuries in West Virginia.

Beyond rust, however, the federal agency found the company “did not recognize the significance of the situation or begin to shut down the system…” despite “many pressure deviation alerts.” The Board said the use of “Strategically placed automatic shutoff values or remote-controlled valves would have isolated the three pipelines and shortened the duration of the intense fire,” among other findings.

Effect of Cozy Political Relationships: Haverhill Gas

Regulators and industry have been criticized for enjoying too cozy a relationship with a revolving door between the two sides. Those dealings have always pit consumer interests against corporate profits. A showdown over just that fact, concerning a Haverhill-based gas utility, took place early in the 20th century. That’s when a Massachusetts attorney general took the unprecedented step of asking the legislature for more money to fight Haverhill Gas Co.

It all started with allegations former Haverhill state Rep. and Sen. Samuel W. George was a little too friendly with the utility industry. Utilities are a unique business operation. They are guaranteed a profit by the government provided they serve the “public interest, convenience and necessity.” The concept evolved because it was difficult to ensure any meaningful competition to help self-regulate the industry. Typically, only one company could tear up the streets to install electric and gas distribution systems.

Haverhill Gas, fighting regulators over a scheme to raise rates and make gas users pay dividends on the company’s wildly inflated stock price, found a friend in George. As a state senator in 1898, he proposed legislation allowing the private consolidation of electric and gas companies. The petition failed, but Gov. John L. Bates named George in 1903 to one of only three slots on the state Board of Gas and Electric Light Commissioners. While there was never any proof George was bribed by new Haverhill Gas owners Stone and Webster, the commission suddenly stopped defending its Haverhill decision and the case languished for years.

Today, untoward relations between regulator and industry are a little subtler. Take, for example, a gas industry front group, The Coalition to Lower Energy Costs Inc., formed in 2014. Its leaders included two former state Department of Public Utilities commissioners, Eugene J. Sullivan Jr. and Barbara Kates-Garnick. As DPU commissioner, Sullivan voted to approve Boston Gas Co.’s $80.5 million purchase of Essex County Gas Co. (formerly Haverhill Gas), then based in Amesbury, in 1998. Kates-Garnick also worked as vice president of government affairs for Boston Gas after the Essex County Gas Co. merger.

‘Complete Victory’ Over Utility More Than 100 Years Ago

There have been times when activists succeeded in giving regulators the upper hand. Massachusetts Attorney General James M. Swift intervened in the Haverhill Gas matter after George’s departure from the scene. Swift filed suit against Stone and Webster in U.S. District Court Jan. 30, 1913. Demonstrating his resolve, Swift successfully asked the legislature and Gov. Eugene N. Foss for $15,000 to carry on litigation early in 1913. Another $7,500 was granted in April of the following year and $11,500 in July 1914.

After 15 years of litigation, Swift’s successor, Attorney General Thomas J. Boynton, reported “complete victory” in 1914.

Deregulation of the utility industry in recent years, however, have reversed Swifts and Boynton’s gains. The former Bay State Gas Company was purchased by NiSource in 1999 in a wave of consolidation that swept virtually every utility in the state.

Massachusetts Attorney General Maura Healey.

Attorney General Maura Healey’s office declined WHAV’s request for formal comment, deferring to Massachusetts State Police and local police. Officials said Healey’s office is monitoring the situation and urging residents and first responders to be safe.

Earlier this month, Healey negotiated an agreement with Columbia Gas to reduce the company’s proposed rate increase for its 321,000 gas customers by more than $11 million. It also prevents Columbia Gas from imposing any other base distribution rate increases before March 2021. Healey’s office pushed the matter recognizing the gas company would greatly benefit from reduced federal taxes.

Over the past two years, various Columbia Gas representatives donated $3,550 to Healey’s election campaign. The amount includes $700 from Stephen Bryant, president, Columbia Gas of Massachusetts. NiSource Inc. PAC of Massachusetts, with an address in Columbus, Ohio, contributed another $1,000 during that time, according to the Massachusetts Office of Campaign and Political Finance.