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Needing pipeline capacity, ConEd to launch gas demand response program

Highlights

Programs each for large, small consumers

Intended to reduce peak-day gas requirements

Arlington, Virginia — Aiming to reduce the need for new gas pipe or other costly alternatives, Consolidated Edison will be able to launch a pilot program to manage gas demand after a New York state regulator gave its approval.

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Utility subsidiary Consolidated Edison of New York will be able to spend about $5 million over three years to reduce residential and commercial customer gas demand in New York City and Westchester County, according to an order from the New York State Public Service Commission.

"Demand response has proven to be an effective tool to manage demand and save costs on the electric system," PSC Chair John Rhodes said in a statement. "This pilot program will be among the first-of-its-kind in the country, and should provide valuable insights for energy system planning and for further demand reduction approaches of all gas utilities."

ConEd has increasingly had to rely on so-called delivered services, or gas brought to the company's system from third parties. During the winter heating season in 2014-2015, ConEd relied on delivered services for 5% of its gas needs, but by winter 2017-2018, delivered services reached 17%. The company expects delivered services to meet 22% of gas needs by 2023 unless the region gets access to new gas pipeline capacity.

The utility said the gas demand response pilot program that the PSC approved could meet about 1% of the pipeline capacity shortfall by 2023 by reducing customer peak day requirements.

FUEL SWITCHING

The company pointed to a few factors that have driven -- and continue to drive -- rising gas use, including environmental programs requiring residential switches from heating oil to cleaner alternatives and gas' lower price compared to other fuels.

"Con Edison notes that, absent company actions, it may be unable to meet demand from new firm gas customers on peak usage days, and ... may need to institute moratoriums on attaching new firm gas customers where pipeline capacity is not available," the PSC order said.

The program will have two parts: one focused on incentivizing reduced gas use at large commercial and industrial customers, and one aimed at residential and small commercial customers with internet-connected smart thermostats. The larger commercial demand response pilot would be performance-based and would include customer incentive payments based on peak-day gas usage reductions.

INCENTIVE PAYMENTS

The utility plans over three years to dedicate $580,000 to meter data collection; $2.9 million to customer incentive payments; and $1.57 million to pilot administration, including incremental staffing requirements, marketing, outreach and education, and integrating the pilot into the company's overall demand response management system.

ConEd is also pursuing an enhanced gas energy efficiency program that the state PSC approved in July. The commission on August 9 said the utility's approach to "non-pipes alternatives" to improving reliability and limiting infrastructure constraints represented a "more holistic view of a gas utility's obligation to meet the needs of its customers by exploring alternatives to its traditional utility business model."

--Sarah Smith, S&P Global Market Intelligence, newsdesk@spglobal.com

--Edited by Gail Roberts, newsdesk@spglobal.com