Environmental groups are crowing about a $100 million “surprise” they say was quietly squirreled away in the state budget and could be redirected to promoting energy efficiency instead of gas pipeline infrastructure.
The prohibition contained in supplemental budget legislation will have little effect on the proposed merger of Washington Gas with Canada-based Altagas, which is nearing final approval. It will, however, delay Gov. Larry Hogan from spending $100 million from the utility merger to help expand natural gas use in the state, according to some environmental groups.
“The surprise is (Hogan) doesn’t get the $100 million he thought he gets,” said Mike Tidwell, executive director of the Chesapeake Climate Action Network.
A spokeswoman for Hogan downplayed the meaning of the legislative language, saying similar provisions have been made in past mergers including those under other governors.
The two sentences in a bill called the Budget Reconciliation and Financing Act bars the governor from spending any of the money through the Maryland Energy Administration without legislative approval. The delay could effectively push off such approval until next year.
“The legislature will get to see exactly how the governor proposes to spend it,” said Sen. Richard S. Madaleno Jr., who worked to add the language in the last session and is a candidate for governor in the Democratic primary.
Madaleno said he and other lawmakers believe the funding should go to improving the existing natural gas pipeline system for residential and commercial customers. The $100 million would augment a controversial 2013 law that was meant to pay for such upgrades by allowing utilities to assess as much as a $2 per month surcharge.
Amelia Chassé, a Hogan spokeswoman, rejected the characterization that the language was a surprise or ultimately a restriction on the use of the money.
“We’re committed to working with the legislature to ensure the funds are spent in a responsible manner that supports expanded energy infrastructure in the state,” said Chassé, adding that there was no legislation passed in the 2018 session specifying how the money could be spent.
Chassé said the restriction “simply requires funds from the merger to go through the budgetary process, which they would in any case. We are confident that the legislature will join our administration in expanding energy infrastructure, and do not believe there will be any barrier to ensuring these funds are spent in a productive and responsible manner.”
The $100 million would be paid to the state of Maryland as part of a merger agreement in which Canada-based Altagas acquires Washington Gas.
A statement from the Maryland Energy Administration in December announced the five-way agreement saying the $100 million was meant to “kick-start a natural gas expansion in unserved areas throughout Maryland.”
“It’s clearly meant to get people to burn more gas,” said Tidwell.
Groups such as Tidwell’s have had a hot-and-cold relationship with Hogan — praising him for a 2017 ban on fracking in Western Maryland but also condemning him for allowing a nearly 4-mile pipeline in Western Maryland that will connect fracked gas operations in Pennsylvania and West Virginia.
The language, touted by groups like Tidwell’s, appears to have come about as a result of opposition from environmental groups and industries, including heating oil distributors who grew concerned that expanded natural gas competition could harm their businesses.
About $30 million would go toward promoting economic development and job creation in areas of Maryland underserved by natural gas. The bulk of the funding, which would not be passed on to ratepayers, would be spent in the Washington Gas service area. That payment is due to the state within four months of the final approval of the merger.
The balance, about $70 million, would come in over 10 years to improve natural gas infrastructure and would be recouped in rates charged to customers in the Washington Gas service area, which serves about 1.1 million customers in the District of Columbia and six Maryland counties, from Frederick County in the north to St. Mary’s County in the south.
Utility shareholders, federal regulators and state regulators in Maryland and Virginia have already approved the merger.
A final decision from the D.C. Public Service Commission is expected soon.