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Bar News - September 17, 2014

Environmental, Telecomm, Utilities & Energy Law: NESCOE: Making Regional Energy Project Decisions Behind Closed Doors?

NESCOE, a little-known energy organization, in recent months has become a lightning rod for opponents of fracking and the Northern Pass Project.

The announcement in August that the New England States Committee on Electricity (NESCOE) would delay action on two regional energy construction projects – one for Canadian hydroelectric power and the other for a natural-gas pipeline construction – brought relief to Granite Staters concerned about losing local control of energy transmission siting decisions.

Still, NESCOE’s postponement only drew more attention to a little-known energy organization that in recent months has become a lightning rod for opponents of natural gas “fracking” and the Northern Pass project. So, what is NESCOE and how has it landed at the center of the most controversial energy issues in our state?

NESCOE is a nonprofit corporation originally formed in 2005 by the six New England governors to assist in the coordination of regional energy issues. Until 2013, NESCOE was a wholly owned subsidiary of The New England Governors’ Conference Inc. (NEGC).

After NEGC was absorbed into the Coalition of Northeast Governors (a group that includes the six New England governors plus the governor of New York), NESCOE became a standalone Connecticut corporation. NESCOE is governed by a board of six managers, each appointed by a New England governor. Each state has a single vote that is weighted to reflect the state’s relative electric load within the region’s overall load.

NESCOE, however, is more than just a forum for the governors and state agencies to discuss regional energy issues. Since its inception, NESCOE has been formally designated as New England’s “regional state committee” entitled to full party status in Federal Energy Regulatory Commission (FERC) proceedings. Most significantly, NESCOE’s activities are funded by electricity ratepayers through a region-wide federal power tariff approved by FERC and administered by the Independent System Operator for New England (ISO-NE), the “regional transmission organization” that oversees bulk electricity transmission throughout New England.

Until now, NESCOE has sought recovery only of its own annual operating costs, which are included in the ISO-NE tariff and approved without much fanfare each year by FERC. But in 2012, the six New England governors decided to use NESCOE as the vehicle for selecting two regional energy transmission projects for ratepayer funding. The decision reflected a consensus that coordinated efforts were needed to reduce regional energy costs and accelerate the availability of cleaner forms of energy, particular natural gas, which has seen falling prices as supplies have increased. NESCOE would solicit proposals from utility companies to bring the construction costs of one renewable energy transmission project and one natural-gas pipeline project within the ratepayer-funded provisions of the ISO-NE tariff.

The NESCOE initiative raised particular concern in New Hampshire, which has seen vocal opposition to Northern Pass, a proposal to build a transmission corridor through New Hampshire to bring Canadian hydropower to southern New England.

In response to the Northern Pass proposal, the New Hampshire Legislature in 2011 enacted House Bill 648, which prohibits utility companies from using eminent domain to take private land for any electric transmission project that is not eligible for regional cost allocation through ISO-NE’s federal power tariffs. The understanding at the time was that only projects deemed “necessary” for system reliability could be eligible for ISO-NE tariffing, and Northern Pass did not meet that standard.

The 2012 NESCOE initiative, however, opened up a new path for Northern Pass to qualify for ISO-NE tariffing, which would restore Northern Pass’s authority to use eminent domain under New Hampshire law.

In addition, opponents of hydraulic fracturing or “fracking” – the controversial extraction process by which previously untapped reserves of natural gas have been brought to market – grew concerned that the NESCOE federal tariffing initiative would bring “fracked” natural gas to New Hampshire without adequate state review.

These concerns only increased when the Conservation Law Foundation submitted public-records requests this summer to NESCOE and the six New England governors seeking information about industry contacts and other details of the NESCOE initiative. In a July 14 statement, NESCOE rejected CLF’s requests on the ground that “NESCOE is not a state government agency and is not subject to the state laws CLF references.” In addition, all six New England governors have asserted executive privilege as the basis for withholding some or all of the requested documents.

Nonetheless, the governors of New Hampshire and Maine provided CLF with a significant number of documents, and the resulting disclosures shed light on NESCOE’s internal decision-making process.

NESCOE e-mails revealed, for example, that a utility industry attorney drafted the rationale that became the basis for the natural-gas component of NESCOE’s 2012 tariffing initiative. In another noteworthy email exchange about the two NESCOE initiatives, a NESCOE attorney suggested “that the nexus between [the] two potential deals be discussed in nonpublic fora” and “behind closed doors” because “the court of public opinion can be fickle and recalcitrant,” to which the NESCOE manager from Maine replied: “True.”

The disclosures, as well as the rejections of CLF’s record requests, brought renewed scrutiny to NESCOE. How can it be that an entity created and managed by government officials can operate beyond the reach of the public’s right to know?

Public records acts vary in their scope from state to state. As the New Hampshire Supreme Court made clear in the recent dispute involving the Local Government Center, Chapter 91-A was enacted to require the greatest possible public access to the records of public bodies. NESCOE may nonetheless believe it falls outside the definition of “public body” in Chapter 91-A, an issue that awaits the resolution of CLF’s records requests.

NESCOE’s decision last month to postpone action indefinitely on the tariffing of transmission projects offers an opportunity to consider how much influence NESCOE should have in resolving New Hampshire’s energy controversies. It also allows time for state policymakers to evaluate how entities like NESCOE fit within the framework of our state laws.

Paul J. Phillips

Paul J. Phillips is a member of the energy and telecommunications practice at Primmer Piper Eggleston & Cramer in Manchester.

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