Consolidated Edison Inc. executives previewed how the utility company plans to manage significant fuel mix and demand shifts as it gears up to invest $72 billion in New York's energy transition over the next decade.
During a Nov. 29 investor conference focused on environmental, social and governance topics, Con Edison Chairman, President and CEO Timothy Cawley said the company is eyeing "a glide path over the next several decades" to protect its 1.2 million gas customers from impacts to delivery bills during that process.
Electrification in Con Edison's service territories is ramping up after New York City prohibited natural gas use in most new residential and commercial construction and New York state released a framework for strategically retiring gas distribution systems.
"We'll greatly reduce the connection of new customers," Cawley said. "Where there is a capacity increase need, we'll apply what we call non-pipes alternatives, which is really energy efficiency and demand response to avoid additional infrastructure expense in the system, all in the aim of shrinking the system."
Executives said Con Edison could spend up to $15.7 billion by the end of 2024 on green investments and safety and reliability projects.
Con Edison subsidiary Consolidated Edison Co. of New York Inc., or CECONY, which operates the largest steam distribution system in the U.S., expects steam sales to decrease by about 20% to 40% by 2050 as building electrification progresses and the company shifts to using a more efficient and lower-carbon steam supply.
To help finance that transition, the utility in November filed its first steam rate case with the New York Public Service Commission in almost 10 years, seeking a $136.7 million steam rate increase based on a 10.00% return on equity and implementing a decoupling mechanism, which protects revenue recovery even if sales decline.
During the third quarter, CECONY recorded a $65 million operating loss for its steam segment, compared with a $58 million loss for the same period in 2021, according to a Nov. 3 SEC filing.
"Steam is the only commodity where we don't have revenue decoupling," Cawley said. "We think the rate case will allow us to get past the [earnings] headwinds."
The rate case also includes zero-carbon steam production pilots, Cawley continued, focusing on technologies like "deep geothermal wells, electric boilers [and] hydrogen fuel boilers."
The utility expects seasonal demand changes as the mix of commodities and technologies becomes lower-carbon, CECONY President Matthew Ketschke said.
"With increased utilization of heat pumps for heating and electrification of vehicles, we are planning for a shift from summer to a winter peaking system sometime before 2040," Ketschke said. "This will create new operational challenges and also require additional investments."
Although Con Edison agreed in October to sell its competitive renewable energy generation portfolio to German power company RWE AG for $6.8 billion, Cawley told investors that the company still wants to play a role in developing or owning utility-scale renewables in New York.
"If a private developer develops, they'll get 20 years signed contract typically, and at the end of 20 years, that solar field is ready to produce more megawatts, and they'll re-contract," Cawley said. "Effectively, our customers will pay twice for that power. If we own it, the customers get every last bit of good out of the ... system and the panels and the interconnect."
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