latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/ny-gas-pipe-standoff-brings-state-national-grid-to-brink-of-historic-conflict-53869914 content esgSubNav
In This List

NY gas pipe standoff brings state, National Grid to brink of historic conflict

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


NY gas pipe standoff brings state, National Grid to brink of historic conflict

Gov. Andrew Cuomo's threat to strip National Grid USA of its right to deliver natural gas in parts of New York represents a proposed exercise of state authority that sector experts say has rarely been used against a major utility in the last century, illustrating how a standoff over pipeline construction in the Empire State has created a level of brinkmanship few expected.

Cuomo directed state regulators on Aug. 27 to expand an ongoing investigation into National Grid's decision to reject new gas customers following reports that the utility had improperly shut off service to existing customers. The customers allegedly suspended service before National Grid placed a moratorium on new gas hookups — a response to New York's refusal to permit a pipeline system to expand gas capacity — and were denied when they tried to restore service.

In response, the governor ordered the New York Department of Public Service, or DPS, to prepare alternatives for gas service if National Grid is found to have violated state rules by refusing to restore the customers' service. That refusal could result in the company being prohibited from delivering gas in all or parts of its service territory in Brooklyn, Queens and Long Island.

By issuing the directive, Cuomo invoked powers spelled out in a law that allows the New York Public Service Commission to revoke or modify a company's certificate to provide utility services in its franchise territory when the company demonstrates a failure of the utility to continue to provide safe and adequate service, according to the DPS.

These types of laws were put in place in the early 1900s in response to utilities whose conduct threatened gas service reliability and public safety, according to Richard Berkley, executive director of the Public Utility Law Project, a consumer advocacy group. To his knowledge, the state has not wielded them in the way Cuomo is now threatening to since the era of President Franklin Roosevelt.

"In the area of a major gas utility or a major electric utility in New York ... it's been not in our lifetime basically — which doesn't mean it's impossible. It just means by and large the process of regulating the major utilities and the discipline of the marketplace means that they don't behave in a manner that unleashes the maximum sort of remedies," he said.

"It's an unusual thing to be even talking about this, to be honest."

Tensions over gas standoff rising

The DPS' authority to strip National Grid of its franchise is relatively straightforward under the law, in Berkley's view. If the company refused to budge on the moratorium and regulators did exercise the option, it would likely result in litigation, though the outcome would be difficult to predict, he said. But in a worst-case scenario for National Grid, the state could order the sale of its New York assets to another utility.

In response to Cuomo's directive, National Grid said it "will stand by and honor all customer commitments that were approved before we determined that we can no longer safely serve additional gas load without additional supply."

"We've been working closely with the Department of Public Service Staff and its consultants to support the commission's investigations of gas supply constraints in downstate New York and will continue to cooperate with any further inquiries while we await the results of that study," company spokeswoman Karen Young said in an email.

The DPS opened an investigation into the market conditions that contributed to a separate gas moratorium from Consolidated Edison Co. of New York Inc. shortly after the utility announced its policy in January, also in response to delay to the Williams Cos. Inc. Northeast Supply Enhancement pipeline system. The department expanded the investigation to consider National Grid's moratorium in August.

New York City Council has also joined the fray. Representatives of 17 of the city's 51 districts signed a July 31 letter to National Grid New York President John Bruckner objecting to the utility's refusal to install new gas meters in Brooklyn, Queens and Long Island and urging the company to resolve the issue before temperatures drop. The lawmakers also criticized an email campaign by National Grid in which the company implored customers to press their representatives to support the Williams Co. project.

"It is unconscionable to attempt to lobby customers by denying them heat and the ability to cook food, as part of a corporate campaign for fossil fuel extraction," the councilmembers wrote. "As a utility provider, National Grid has a responsibility to provide firm alternative service to its customers, and to take reasonable methods to lessen capacity constraint, but instead you are holding residents of Brooklyn, Queens and Long Island hostage to your demands for unsafe, unsustainable drilling."

National Grid faces legal jeopardy on two fronts

Berkley said he does not believe National Grid is lying about a gas shortage or attempting to blackmail customers with the perception of undersupply. But he said utilities need to be very transparent during the dispute because they have a legal duty to supply gas when they become franchisees.

"When someone calls them and says, 'I want gas service' or 'I want electric service,' the company, with very narrow exceptions, has to say yes. And in this case, they're saying no, and not only are they saying no, they're saying no to people they previously promised they were going to provide gas service to," he said.

Berkley acknowledged that National Grid is in a tough position. The gas moratorium has put the company on a path to triggering costly litigation and the most severe penalties in the state's toolbox. But if National Grid promises to deliver gas and then runs into supply constraints during a severe winter, it could stumble into serious legal jeopardy.

"They're obviously going to be sued in either direction, but the question is, what are they going to be sued over, and what are the likelihoods that there'll be giant class-action suits?" he said. "Will there be damages? Will there be all that kind of stuff that happens when people make a promise that they don't keep and people end up dying?"

"It's worse for them in some ways, from a legal standpoint, to put people on the system and then have to shut them off in the middle of winter."