By Erin Murphy

As New York implements a sweeping new climate law and moves toward decarbonization of its energy systems, state regulators are beginning to develop a framework to ensure the natural gas system is part of the transition.

EDF has long advocated that the New York Public Service Commission harmonize its natural gas policies with the state’s ambitious climate goals because natural gas distribution and combustion is a significant contributor to the state’s greenhouse gas footprint. Last month, the commission took a major step forward by initiating such a proceeding to develop a long-term planning framework for gas utilities.

How we got here

New York enacted the Climate Leadership and Community Protection Act last year, requiring an 85% reduction in statewide greenhouse gas emissions by 2050, from 1990 levels. Meeting this standard will require significant engagement from the state’s natural gas utilities, since natural gas combustion was the source of 34% of New York’s GHG emissions in 2016, according to the state GHG inventory.

Successful long-term planning will prevent utilities from relying on outdated assumptions — such as expecting continuous growth in gas demand — that could lock in infrastructure investments and hinder New York from meeting its climate goals. A planning framework will also help ensure compliance with the CLCPA, which requires that the commission consider the state’s greenhouse gas reduction goals when assessing utility proposals.

In a further demonstration of the need for more rigorous supply planning oversight, two major gas utilities in New York declared moratoria on new gas customers over the last year. As the commission states, “conventional gas planning and operational practices adopted by natural gas utilities have not kept pace with recent developments and demands on energy systems.”

A planning process that gives thorough consideration to non-pipeline alternatives (such as demand response and efficiency programs), available capacity on existing gas pipelines, and other supply options could alleviate the possibility of a future moratorium.

The commission’s order

The commission expressly included many of EDF’s recommendations in its order initiating this proceeding. Highlights of the order include:

An emphasis on transparency and public engagement. Historically, gas supply planning has involved the exchange of information between individual utilities and commission staff. But as EDF has stated, this practice does not allow for a fulsome consideration of options. In its proposal to develop a framework for long-term supply planning, the commission recognizes that there is a need for greater transparency so that stakeholders and the public can participate in the development of supply plans. This will ensure accountability and a focus on broader policy objectives such as compliance with the CLCPA. Harmonization of gas policy and statewide climate targets. The commission’s order recognizes that regulators and utilities need to find innovative pathways to ensure safe and reliable service that align with the state’s ambitious climate goals — including minimizing infrastructure investments that are at risk of becoming stranded. A stranded asset is one that ratepayers are still paying for but that is no longer in use or useful, and it is particularly important that asset costs be allocated equitably, especially with regard to low-income residential customers. The commission recognizes the need to scrutinize affiliate transactions. The lack of oversight when utilities enter contracts for gas supply with their corporate affiliates is a widespread and growing issue in New York and beyond. This type of self-dealing — in which a utility acts as both the developer and customer for a new pipeline — inappropriately offloads investment risk onto ratepayers. In its order to develop a long-term supply planning framework, the commission specifically states that affiliate contracts should be examined to ensure alignment with state policies. Holistic management of natural gas demand. As New York aims to reduce its GHG emissions, utilities must begin integrating non-pipeline solutions into their formal planning and needs assessment, and deploy rate design to incentivize peak demand reductions by a broad range of customers. In the order, the commission specifically notes that demand response may be an effective tool for managing peak demand, and that non-pipeline solutions like demand response can reduce or eliminate the need for gas infrastructure and investments. These mechanisms, however, can only be fully effective once thoroughly integrated into tariff design and planning.

This planning process for the legacy gas system will become increasingly important in New York and other states with ambitious greenhouse gas reduction goals. With California embarking on a similar rulemaking, more states can follow these models to consider climate goals, cost allocation and varied “supply” sources for the gas system. EDF looks forward to engaging with the commission, gas utilities and other stakeholders to develop a comprehensive and rigorous long-term supply planning framework in New York.