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Growth of New York gas utilities puts customers at risk

New York gas utilities continue to spend billions of dollars on gas infrastructure. Unless the legislature and regulators step in and manage the energy transition more actively, utility bills will soar and the state will blow past climate targets, a new report warns.

Housing projects at downtown Manhattan, New York City (Photo credit: Adobe Stock/Jose Luis Stephens)

New York gas utilities continue to invest in the growth of the gas system, putting customers at risk as the shift towards electrification picks up pace, according to a new report published on Thursday.

In 2019, New York passed a landmark climate law, requiring the state to slash greenhouse gas emissions by 40 percent from 1990 levels by 2030, and 85 percent by 2050. Roughly a quarter of the state’s emissions comes from residential and commercial buildings, mainly from burning gas for heating and cooking. Complying with the state’s climate targets means drastically reducing and eventually eliminating the delivery of that methane gas to those buildings.

However, over the past ten years, utilities in the state of New York have spent more than $15 billion on gas infrastructure, much of it to replace thousands of miles of pipes. Roughly $5 billion of that total has come since the 2019 climate law was enacted, according to a new report from the Building Decarbonization Coalition, a group of NGOs and corporate members promoting building electrification.

The utilities’ decisions to continue to pour huge sums of customer money into more gas infrastructure when state law requires a shift away from fossil fuels will result in ballooning gas bills for those that remain on the system, the report found. The Public Service Commission (PSC), the state utilities’ regulator, needs to step in and manage the energy transition “before the economics of the state’s gas networks unravel.”

“This report is a wakeup call. Gas utilities are spending billions in customer money for a system they may not want or need,” Lisa Dix, the New York Director of the Building Decarbonization Coalition, said in a statement. “Rather than continue to burden New Yorkers with expanding costs paid by fewer customers, state leaders can save residents billions of dollars in wasted infrastructure by kick-starting a managed transition to clean energy.”

As a result of both climate policy and increasing consumer preference for electric heat pumps and appliances, the future of the gas utility business model is now very much in doubt. Decarbonizing buildings requires swapping out millions of gas furnaces and gas appliances for electric alternatives. Ultimately, that means the customer base for traditional gas utilities will need to shrink.

A flood of federal incentives passed into law last year will also push more people towards electrification.

Fewer gas customers will be left with a growing set of costs. Without a change of course, the monthly cost for gas customers in New York could reach $8,000 per household by 2050, based on current utility spend trends, the report found. More investment in the gas system will translate to higher financial burdens on existing customers while also making it increasingly difficult for the state to achieve emissions reductions.

The report comes as the state legislature considers a ban on gas connections in newly constructed buildings, beginning in 2025, and a phaseout of the sale of gas appliances beginning in 2030. A separate piece of legislation under consideration would eliminate $200 million in subsidies that promote the ongoing growth of the gas utility system, while also giving more power to the PSC to preside over electrification efforts. New York utilities are aggressively opposing these pieces of legislation.

“Left unmanaged, declining gas consumption and gas ratepayers will concentrate growing system costs among a dwindling pool of gas ratepayers,” the report warned. More customers will “avoid paying for increasingly expensive gas, creating a self-reinforcing negative feedback loop for gas utilities, and placing a crushing financial burden on those left on the network, especially low-income New Yorkers.”

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