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The Price of Cuomo’s Pipeline Political Correctness: “No Gas for You”

Tom Tom Shepstone
Shepstone Management Company, Inc.

 

Andrew Cuomo is a mindless demagogue. His pipeline political correctness is making ConEd tell natural gas customers they may have to say “No Gas for You.”

A reader sent me a New York Post editorial yesterday entitled “Thanks to Cuomo, Con Ed may have to stop taking new customers.” It’s an excellent piece and right to the point; Andrew Cuomo’s demagogic pipeline political correctness is taking ConEd customers to the brink. ConEd has told the New York State Public Service Commission that it “forecasts that in the near term it may be unable to meet demand from new customers on extremely cold days.” That’s nice talk for “we may have to let you freeze.”

Yes, ConEd is sending out warning signals, but, of course, it has to do so very quietly as the Public Service Commission in New York isn’t independent as the case in Pennsylvania, for example. It is firmly under the control of Andrew’s Department of Public Services and serves his political bidding. And, pipeline political correctness is a litmus test for this governor as he attempts to appease the radical fringe and, especially, their big money funders. ConEd knows it, too, has to step to the tune of pipeline political correctness. But, the problem is getting too big to ignore.

I wrote about the ConEd problem last month but didn’t then have the benefit of the company’s original filing made a year ago and to which the New York Post editorial refers. Here’s a highlighted version and it is a spectacular overview of where pipeline political correctness is taking New York City and environs; into the deep freezer. Here are some of the more powerful excerpts (emphasis added):

Con Edison’s growth in firm customer peak day pipeline capacity needs has recently accelerated, growing at an annual rate of 4.7 percent since 2011. By comparison, firm customer peak day pipeline capacity needs grew at an annual rate of 1.9 percent during the ten years ending in 2011…

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Growth drivers over the 2011-2016 period include: local regulations that require customers to cease burning certain grades of fuel oil; customer interest in the environmental benefits resulting from oil-to-gas conversions; cost advantages of natural gas as compared to other fuel sources (which have provided economic benefit to businesses and residents of New York City and Westchester County); residential and commercial building developers’ strong preference for natural gas over other heating fuels in new construction projects; and general population growth in the area…

Con Edison forecasts an additional 23 percent growth in natural gas demand over the next 20 years

Growth in natural gas use has provided significant environmental and human health benefits to the region. In the past five years (2011-2016), Con Edison has converted more than 6,500 large buildings in New York City to natural gas largely based on recent local laws. The conversions have reduced emissions by more than 500 tons of fine particulate matter on an annualized basis, equivalent to eliminating the particulate emissions from 1.6 million cars. Conversions to natural gas from dirtier heating oils have reduced greenhouse gas emissions from converted buildings by 27 percent. In addition, these conversions have significantly reduced emissions of nitrogen oxides (NOx), sulfur oxides (SOx), volatile organic compounds (VOC), and formaldehyde5 – several of which are known carcinogens, and each of which have significant impacts on human health and the environment. In short, natural gas is playing an important role in New York’s path to a clean energy future, and has contributed to the highest air quality in New York City in the last 50 years

To address firm customer needs during periods when daily demand from its customers exceeds the Company’s contracted pipeline capacity, the Company purchases Delivered Services. The Company also utilizes its on-system liquefied natural gas (“LNG”) facility to meet customer needs on days with high customer demand, generally the coldest winter days. Figure 2 shows the Company’s current usage of available resources to meet customer peak day gas demand…

Pipeline Political Correctness

The Company currently has a portfolio of pipeline capacity rights and other equivalent resources that can meet about 83 percent of the combined needs of both Con Edison and O&R customers. Based on Company research into the contractual status of the pipelines delivering gas into its service territory, there is currently no unsubscribed pipeline capacity available on any existing pipelines. To fill the gap between existing pipeline capacity contracted by the Company with interstate pipelines and the total needs of customers on peak gas days, the Company relies on purchasing Delivered Services from the market…

Because of the recent growth in customer demand, and the fact that existing capacity is fully contracted, the Company has increased its dependency on Delivered Services from about five percent of its total needs in Winter 2014/2015 to 17 percent of its total needs in Winter 2017/2018. The Company’s current forecast of pipeline capacity shortfall increases to 22 percent by 2023/2024.

Historically, the Company has sought to use Delivered Services to meet no more than ten percent of its customers’ peak gas day needs. Unlike the Company’s contractual rights for pipeline capacity, there is no renewal right for Delivered Services and, therefore, no certainty that the Company can continue to rely on the same or increasing levels of Delivered Services from year to year, even at current usage levels, to reliably meet customer heating needs.

In addition to its service area shortfall in pipeline capacity, the Company is also experiencing locational pipeline capacity constraints at certain city gates

Absent Company actions, the Company forecasts that in the near term it may be unable to meet demand from new customers on extremely cold days, resulting in the need to institute moratoriums on attaching new firm customers in areas where pipeline capacity is severely constrained. This would deprive these customers of the environmental and economic benefits of using natural gas that would otherwise be available to them. Therefore, a plan for incremental natural gas pipeline capacity or alternatives is needed to serve new customers.

The ConEd filing then proceeds to examine possible, including efficiency programs, financial incentives that effectively price according to demand, Supposedly “smart” programs that will essentially ration gas during peak usage periods and more pipeline capacity. Some of these ideas are worthy, of course, but it’s clear ConEd is going to be forced to ration gas if it can’t get more pipeline capacity. It uses a lot of weasel words to deliver that message, bearing in mind, of course, no direct criticism of New York’s emperor is permitted when addressing him. My observations are offered in brackets.

The reliability of the Company’s natural gas deliveries to customers is paramount to public health and safety, especially given its use by firm customers for heat during the winter. Furthermore, the ability to support additional customers as they seek to convert from oil to cleaner natural gas is critical to meeting near-term state and local air quality and carbon reduction goals…

While these key program changes are expected to improve winter peak demand reduction across the Company’s gas system, the Company may choose to focus these enhancements on geographically targeted areas (based on the locations where its supply shortfalls are most severe) should the need arise…

The Company will develop a gas demand response (“Gas DR”) program to mitigate pipeline capacity needs for firm customers during the heating season. The Gas DR program is expected to result in net reductions during program events from each participating customer [that’s code for “we’ll shut you off if need be”], and to the Company’s knowledge, will be the first in the United States designed to address a system-wide need for peak gas day interstate pipeline capacity…

An essential element of the Gas DR program design is the need for customers to reduce net load over a 24-hour period corresponding to the natural gas day. Individual customers will not necessarily be required to continually reduce their usage for a full 24-hour period, provided their actions result in a net reduction in gas use for the day, compared to their individualized baselines of likely usage of natural gas on that day. The Company understands the difficulty associated with long reduction periods and intends to incorporate stakeholder input to develop a program that will attract participants. [That’s comforting.]

In total, the Company believes that the Enhanced Gas EE Program, the Gas DR Program, and the Gas Innovation Program may provide relief to meet approximately three percent of the Company’s overall pipeline capacity needs by 2023

At this time, it is impossible to predict if these non-traditional programs will provide the needed relief. As a result, the Company plans to move forward with the preliminary steps necessary for the development of a traditional pipeline solution. [“We have to plan around this unprincipled idiot governor.”]...

In 2014, the Company forecasted a need for additional pipeline capacity and began reviewing several proposed pipeline projects that could provide new pipeline capacity to the service area with a planned in-service date by the 2019/2020 heating season. As a result of this review, in early 2016, the Company was working toward agreements with the pipeline developers to move forward on two to three projects.

As this work was ongoing, the landscape for pipeline projects in the Northeast was changing. Proposed pipelines were having issues with procuring the necessary permits, resulting in project delays and cancellations. It became increasingly unclear whether the projects selected by the Company would be able to successfully complete the permitting process as these projects had aspects similar to some of the projects facing challenges. Accordingly, in late 2016, the Company modified its plan for procuring additional pipeline capacity based on the on-going events. [“Andrew Cuomo’s pipeline political correctness and abuse of the pipeline water quality certification has put us in an impossible position.”]

The Company has identified a different pipeline expansion project, the design of which acknowledges and seeks to address the permitting concerns raised to date, and hence the permitting challenges faced by pipeline developers. In addition, the project’s capacity is smaller, reflecting the potential of the programs proposed in this petition.

The project under consideration, if constructed, would deliver incremental pipeline capacity to Con Edison’s service area, solving pipeline capacity needs and providing additional reliability benefits by adding additional city gates. Unfortunately, the lead time associated with pipeline project development has also increased, so the planned in-service date of the new project will be no earlier than the 2023/2024 heating season

The Company proposes that expenditures for the Enhanced Gas EE program, the Gas DR program, the Gas Innovation program, and the Non-Pipeline RFI be deferred as a regulatory asset (for non-traditional solutions), accrue interest at the Company’s weighted average cost of capital as set forth in its most recent gas rate case, and be recovered over a ten-year schedule through the existing surcharge mechanism, the Monthly Rate Adjustment (“MRA”), until the Company’s next gas rate filing. At that time, the Company would seek cost recovery for unamortized expenses by rolling those expenses into base rates [“You’ll pay; thank Andrew Cuomo.”]

As discussed above, given the current challenges regarding pipeline construction in the region, pipeline developers may be unwilling to sign a precedent agreement without some level of cost sharing with shippers if after the pipeline begins incurring significant development costs, the pipeline developer is unable to secure state or local permits needed to proceed to construction, or Con Edison is able to secure (and then exercises) an option to cancel the precedent agreement if the Program is successful in eliminating or reducing the need for new pipeline capacity. [“We don’t know if we can make this damned thing work anymore given the damage Andrew Cuomo has already done.”]

ConEd has made a powerful case against Governor Corruptocrat, don’t you think?

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The post The Price of Cuomo’s Pipeline Political Correctness: “No Gas for You” appeared first on Natural Gas Now.

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