Monopolies have always used their power to strangle out weaker competitors. They do achieve this by offering their products at lower rates than their struggling competitors can afford. However, a recent lawsuit shows that this has been the opposite in New England’s energy sector.
A lawsuit filed against the state’s largest energy firms, Eversource Energy and Avangrid Inc. reveals shocking details on a calculated misuse of monopoly power to defraud the consumer. The two companies are accused to have made consumers pay unnecessarily high charges for electricity in the period between the years 2013 and 2016.
The scheme affected over 14.7 million people who spent more than $3.6 billion in excess costs.
The Core of the Matter
At the center of the lawsuit is the fluctuation in electricity pricing rates over the years. It had increased by over 20% for those who live in Maine, Massachusetts, Vermont, Connecticut, New Hampshire and Rhode Island. According to the attorney representing the consumers, Tom Sobol, this was a natural consequence of deliberate acts by the defendants.
Artificial Market Manipulation
The lawsuit explains how Eversource and Avangrid Inc. used their authority and privileges to manipulate the market prices. The firms consistently limited the amount of natural gas flowing to New England. This led to a shortage and a consequent increase in prices of natural gas. As expected, power plants relying on this for fuel passed the cost on to the consumer through increased electricity bills.
Outsmarting the Law
Most of the power plants in the affected areas receive their supply of natural gas via the Algonquin Gas Transmission Pipeline. The lawsuit reveals that Eversource owns part of this pipeline and consequently have unique legacy contracts which allow it to reserve space in advance.
It is alleged that Eversource and its counterpart, Avangrid Inc., daily reserved more space than they needed. This left limited space for the power plants and other facilities. The two firms always reduced the size of their reserved spaces at the last minute to avoid penalties of over-use. They knew it would be too late for another to take up space.
The result of this anticompetitive scheme is that; utility customers had to pay more for electricity than they would under a non-manipulated circumstance. It is the second largest market manipulation after Enron’s greed led to an energy crisis in California 20 years ago.