Gov. Andrew Cuomo said he intends to revoke National Grid USA's license to distribute natural gas in downstate New York, escalating a dispute with the utility over an ongoing gas connection moratorium. He gave National Grid 14 days to argue its case and present remedial actions before he takes action.
The governor, in a Nov. 12 letter to National Grid leadership, said the company failed to fulfill its duty to provide "adequate and reliable service" since a May decision to stop providing new gas hookups in New York City and Long Island. He said the basis for the moratorium — the state's refusal to permit a new pipeline to ease capacity constraints — is evidence National Grid also failed to plan to meet future supply.
"There are only two theories to explain National Grid's actions. Either National Grid was grossly negligent in relying exclusively on the speculative construction of a private pipeline to meet the demands that it was statutorily required to provide; or, National Grid deliberately defrauded the people of the state by not developing or pursuing existing supply options to force approval and reliance on a private pipeline to further their business interests at the cost of the consumer," Cuomo said.
"National Grid has made clear that its only plan for future supply was based on a single, speculative project: construction of a private pipeline through New Jersey and New York," Gov. Andrew Cuomo said.
Source: State of New York
"Either alternative clearly violates your certificate of operation in the State of New York," he concluded in the letter to National Grid PLC CEO John Pettigrew and John Bruckner, president of the company's New York operations.
Cuomo's latest maneuver brings the state and National Grid to the brink of a rare use of state power: stripping a major utility of its certificate of public convenience and necessity, the license that underpins its ability to provide service. That license comes with privileges rare beyond the world of utilities, including a guaranteed rate of return and the power of eminent domain, but companies must demonstrate they can provide reliable service and their operations are in the public interest.
National Grid distributes gas in parts of New York City and Long Island through Brooklyn Union Gas Co. and KeySpan Gas East Corp.
"National Grid is in receipt of the letter from Governor Cuomo and will review and respond accordingly within the timeframe outlined in the letter. We continue to work with all parties on these critical natural gas supply issues on behalf of all our customers in downstate New York," the company said in a statement.
The dispute has it roots in New York's refusal to grant a critical water permit to Williams Cos. Inc.'s Northeast Supply Enhancement pipeline project. National Grid imposed a gas moratorium in May following the decision, saying it could not safely hook up new gas customers because supply was growing too tight.
Cuomo floated the idea of stripping National Grid of the license in August after reports surfaced that the company refused to hook up existing customers that had suspended service. On Oct. 24, the governor ordered the New York Public Service Commission to present grounds for revoking the license after National Grid outlined why it refused service to the customers and how it planned to address the issue.
"Your recent admission to the Public Service Commission that 'more could have been done to communicate with customers' effectively concedes that National Grid improperly denied service to over 1,100 households and is demonstrable evidence of both your inability to provide adequate service and take advantage of the public you serve," Cuomo said in the Nov. 12 letter.
Cuomo reiterated his previous argument that it was "risky at best" to depend on the Northeast Supply Enhancement project to address gas supply constraints. He said the moratorium was "either a fabricated device or a lack of competence," saying the company did not adequately consider alternatives to the pipeline ahead of time.
"The choice was never between the pipeline or an immediate moratorium. There were, and are, certainly other short-term solutions. That was your legal obligation," he said.
National Grid's "abuse of their customers, the adverse economic impact caused by stalling private development, and the associated diminution of tax revenues to local governments," shows the company's operations are not in the public interest, Cuomo wrote.
Should Cuomo follow through on the threat, it could lead to a court battle if National Grid does not prevail in challenging the Public Service Commission's decision, Richard Berkley, executive director of the Public Utility Law Project of New York, recently told S&P Global Market Intelligence.