National Grid USA's settlement with the New York utility regulator may not be sufficient to compensate customers impacted by a 2019 natural gas moratorium, which could lead them to pursue lawsuits against the company, according to consumer and building construction groups.
National Grid on Nov. 25, 2019, agreed to pay up to $7 million to address financial hardships among residents and businesses denied gas service during the six-month moratorium on new hookups. However, some consumer and business advocates believe the total cost to customers will easily surpass that figure.
"My personal opinion is it is nowhere near the amount of money that will be proven to be the actual losses on the ground at the end of the day," said Richard Berkley, executive director of the Public Utility Law Project, or PULP, a consumer advocacy group.
Berkley acknowledged the state had to prioritize a deal that would assure customers had access to heat heading into winter. National Grid stopped signing up new gas customers in May after the state refused to permit a new pipeline. However, the prospect that funds will run out before customers are made whole means PULP is counseling New Yorkers about whether they could pursue additional compensation through litigation against National Grid.
The New York Public Service Commission and the Department of Public Service did not provide a response. National Grid said it created a "comprehensive program of offerings" that includes bill credits, customer assistance funding, deposit waivers, and reduced-interest or no-interest loan assistance.
"To be clear, there were no violations of law or regulations, but the moratorium clearly created hardships for some applicants, and we’re committed to assisting those customers," National Grid spokesman Domenick Graziani said. "The settlement agreement allows us to move past several challenging issues and get back to the business of serving our customers safely and reliably."
Businesses, residents face 'many, many millions of dollars of losses'
New York State Attorney General Letitia James is still collecting complaints and investigating whether National Grid misled customers and regulators about the need for a moratorium. The company's settlement with utility regulators does not bar James from bringing charges or striking a separate settlement.
Additional claims could yet surface as PULP continued to direct New Yorkers to online portals operated by National Grid and James' office, where they can report impacts from the moratorium.
National Grid denied service to more than 3,700 new and existing customers between May and October 2019, according to utility regulators. The $7 million assistance plan would pencil out to about $1,890 per claim if spread evenly among those customers.
While some may not qualify for that much, others have incurred losses well beyond that figure, Berkley said. That includes customers who opted for alternative fuel or electric heating and cooking in lieu of gas hookups, as well as small business owners like housing and hotel developers, he said.
"Those people have probably incurred many, many millions of dollars of losses," Berkley said. "So I don't think that's going to be close to enough, and people are going to go to the courts and see what they can get there."
The combined financial losses for at least 50 Long Island real estate developments alone have easily climbed into the millions of dollars, according to Mitch Pally, CEO of the Long Island Builders Institute, an industry association that tracked projects impacted by the moratorium.
In some cases, developers have failed to secure certificates of occupancy or bank financing because National Grid would not provide gas service, Pally said. Being denied service meant losing revenue from units that the developer could not sell or rent, or even paying for alternative housing for incoming residents, he added.
Developers face continued uncertainty over gas supply
Pally said it remains unclear to many developers which costs will qualify for compensation. National Grid's claims website says small and medium businesses can seek reimbursement for "documented loss of revenue and costs associated with obtaining occupancy permit, fees, and professional services."
The company is also offering a $200 credit to residential and small business customers and a 50% refund on security deposits. The program lasts through Nov. 26 or until the $7 million assistance plan runs dry.
If those funds prove insufficient, some developers could sue National Grid as a last resort, Pally said.
Yet builders have another concern. Under the settlement, National Grid can deny service to large businesses and industrial customers beginning March 31, 2021, if it cannot develop a long-term supply solution. That provision has left Long Island builders, who typically develop projects over several years, facing continued uncertainty over gas service, Pally said.
"The assumption at the moment is that there will be a longer-term plan," he said. "But what will be in that longer-term plan? Who will be eligible for gas? Is there going to be a new deadline? Those are all issues that we don't know the answer to at the moment."