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ConEd may sell pipeline stakes as it reconsiders gas transmission investments

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ConEd may sell pipeline stakes as it reconsiders gas transmission investments

Consolidated Edison Inc. will no longer invest in long-haul natural gas pipelines and may sell its existing portfolio, the company said just days after outlining plans for adopting alternative energy technology.

"I don't expect we'll be making any further investments in those types of gas transmission assets," Chairman, President and CEO John McAvoy said during an Aug. 26 investor presentation about environmental, social and governance issues.

The executive made the observation after being asked about the utility's stakes in the Stagecoach Pipeline & Storage Co. LLC joint venture with Crestwood Equity Partners LP and the Equitrans Midstream Corp.-led Mountain Valley Pipeline LLC. ConEd "certainly would" also consider monetizing those assets, McAvoy added.

"We made those investments five to seven years ago, and at that time we — and frankly many others — viewed natural gas as having a fairly large role in the transition to the clean energy economy," McAvoy said. "That view has largely changed, and natural gas, while it can provide emissions reductions, is no longer ... part of the longer-term view," particularly in the U.S. Northeast where state regulators have blocked pipeline projects.

ConEd is one of several utilities looking to ramp up their renewable energy footprint as cracks appear in the role of natural gas as a bridge fuel between hydrocarbons and cleaner forms of energy. As of mid-July, 13 of the 30 largest U.S. publicly traded electric and gas utilities had set goals to achieve either zero or net-zero greenhouse gas emissions by 2050 or earlier or have set a goal of 100% clean electricity. At least 10 plan to reduce emissions of greenhouse gases, primarily methane, from their gas distribution and retail sales operations. Many of these efforts involve replacing older gas delivery pipelines.

Dominion Energy Inc., which is targeting net-zero emissions by 2050, recently agreed to sell its gas transmission and storage business to Berkshire Hathaway Energy for over $9.7 billion. A driving force behind that decision was Virginia's Clean Energy Economy Act enacted in April, according to Dennis Sperduto, principal analyst with Regulatory Research Associates, a group within S&P Global Market Intelligence.

"Legislation ... requires 100% of the power sold to Appalachian Power Co.'s customers to be sourced from renewables by 2050 and 100% of the power sold to Dominion electric utility subsidiary Virginia Electric and Power Co.'s customers to be sourced from renewables by 2045," Sperduto wrote Aug. 20.

Meanwhile, other utilities such as DTE Energy Co., Duke Energy Corp. and Southern Co. are holding onto their gas midstream assets to balance the intermittent performance of any future wind and solar projects.

"We're doing all sorts of other 'money where our mouth is' activities to deal with carbon," Southern Chairman, President and CEO Thomas Fanning said July 30. "That's why we're confident, as we think about the portfolio going forward, that we're investing in optionality that's going to be able to keep gas part of the solution."

The pivot toward renewable energy has emerged as a movement within the pipeline sector itself. Pipeline company Williams Cos. Inc. used its second-quarter earnings call to tout its growing renewable energy credentials, which include developing solar energy installations at selected facilities and existing renewable natural gas projects as "accretive investments" as opposed to just a "cost savings opportunity."

Earmarking $200 million to $400 million for solar opportunities for the next few years, Williams is the only U.S.-based pipeline company with discreet capital allocations for renewables, but that could change if Democrats win the White House.

"When you looked at who addressed renewables head on, I think that was one of the questions coming into Q2 [earnings]: Who would actually be able to speak to a potential pivot amidst an energy transition?" energy investment bank Tudor Pickering Holt & Co. analyst Colton Bean said in an interview. "If there's an administration change in November, I certainly think that's going to garner a lot more attention."