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NY utilities signal that they will consider electrification to offset gas demand

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Essential Energy Insights - January 2021


NY utilities signal that they will consider electrification to offset gas demand

Future natural gas supply planning in New York will take into account the potential for building electrification and fossil fuel alternatives to displace gas distribution, state multi-utilities said.

The utilities addressed the issue in their initial response to a statewide regulatory proceeding that seeks to align gas planning with New York climate policies (N.Y. PSC case 20-G-0131). These policies, along with barriers to new interstate gas pipelines, are having a "profound impact" on long-term gas system planning and creating a need to evolve, the utilities said in a July 17 filing.

Moving forward, stakeholders should design the planning process to meet anticipated gas demand through "all viable supply-side and demand-side resources, such as electrification, energy efficiency, and demand response initiatives."

SNL Image

Climate policies passed under Gov. Andrew Cuomo and New York City Mayor Bill de Blasio, at microphone, have challenged regulators and utilities to rethink long-term gas system planning.

Source: New York City mayor's office

The utilities that jointly filed the report included Central Hudson Gas & Electric Corp.; Consolidated Edison Inc. subsidiaries Consolidated Edison Co. of New York Inc. and Orange and Rockland Utilities Inc.; National Fuel Gas Distribution Corp.; Avangrid Inc. subsidiaries New York State Electric & Gas Corp. and Rochester Gas & Electric Corp.; and National Grid USA subsidiaries Brooklyn Union Gas Co., KeySpan Gas East Corp. and Niagara Mohawk Power Corp.

The filing addressed a concern raised by the New York Public Service Commission, or PSC: the rising dependence on peaking services to meet gas demand. These include contracting for compressed natural gas, or CNG, delivered by truck to fill the supply gap left by a lack of firm gas transportation service. Underscoring the concerns was a recent decision by Williams Cos. Inc. to cancel a gas pipeline project into New York City after the state denied the developer a critical water permit.

An earlier permit rejection prompted National Grid to implement a moratorium on new gas hookups in 2019, precipitating a months-long standoff with the state that ended in a $36 million settlement. During the dispute, Gov. Andrew Cuomo signed into law the Climate Leadership and Community Protection Act, which codified New York's goal of achieving net-zero greenhouse gas emissions by 2050.

Also in 2019, New York City adopted a building performance standard that requires property owners to cut greenhouse gas emissions. Mayor Bill de Blasio has since called for phasing out gas use in city buildings, part of a growing movement to electrify buildings.

In the new policy environment, full or partial home and commercial building electrification is one potentially viable option for reducing peak day demand, the utilities said. Other options for maintaining safety, reliability and affordability include energy efficiency, demand-side resources and alternatives to pipelines.

The utilities also raised the prospect of tapping renewable natural gas, or RNG, a fuel refined from methane waste sources like farms, landfills and wastewater plants. However, they said RNG's potential to complement electrification depends on technology improving the availability and economics of the fuel, they said. In the longer-term, utilizing hydrogen resources through power-to-gas operations may also help decarbonize the gas distribution system, the utilities added.

The companies included the proposal to consider alternatives to natural gas in a set of design principles to guide a revamped long-term gas system planning process. The principles also maintained the utilities' duty to provide safe and reliable service while striving to meet New York's climate and economic development goals in a cost-effective manner.

As part of the filing, the companies proposed a framework for evaluating the reliability of peaking services, which regulators can use to review long-term supply plans. The framework would take into account the risk that a resource will not be available when called upon, as well as the risk that a contract for service cannot be renewed. The framework would use historical data to qualify a resource's contribution to the utility's overall capacity.

The utilities also proposed a set of standards for declaring, managing and lifting a moratorium on new service hookups in cases where supply constraints emerge. Under the proposal, utilities would seek to identify vulnerable areas up to five years ahead of halting new hookups, and they would implement a communications plan before the moratorium goes into effect.

The utilities separately filed reports on parts of their service territories that are at risk of supply constraints.