The New York Public Service Commission has authorized Consolidated Edison Co. of New York, Inc. (Con Edison), a combined electric and natural gas utility company, to immediately begin implementation of a $223 million initiative aimed at reducing demand for natural gas in the utility’s supply-constrained areas of its gas distribution system.

The solutions focus on reducing demand through energy efficiency measures for its gas customers and supporting beneficial electrification through the deployment of heat pump technology for electric consumers. The commission found that these measures will reduce future gas demand that would have otherwise resulted from the ongoing practice by consumers of converting fuel oil customers to natural gas. It denied, however, a proposal put forward by the company to incentivize shareholders to add supply enhancements such as compressed or liquefied natural gas supply sources. At the same time the commission noted that the company is not prohibited from pursuing such projects without shareholder incentives as it has done in the recent past.

In approving most aspects of the proposal and ordering immediate implementation the commission stated that the issue of increased gas demand and the need for innovative solutions to meet customer needs in Con Edison’s service territory has taken special urgency. It pointed out that on January 17, 2019, Con Edison announced that due to a recent trend of increasing natural gas demand, beginning March 15, 2019, it would not accept new applications for natural gas service in the majority of its Westchester County natural gas service territory in order to maintain reliability for existing customers and offer service to critical facilities. According to the commission, Con Edison is experiencing significant growth in demand for natural gas due to several factors, including local governments’ phase-out of high-emitting fuel oil, economic growth, and the relatively low current price of natural gas. It also noted that Con Edison does not control pipeline capacity upstream of its distribution system, and upstream capacity also faces substantial constraints.

The utility had also suggested that the commission consider whether circumstances may exist, such as supply-constrained areas, in which it may be appropriate for heat pump installations to be supported by gas rate-payers. The commission responded that the issue should be further deliberated in the context of the rate proceeding taking account of the benefit to electric and gas ratepayers in determining if a sharing of costs is appropriate. Addressing the suggestion by the company that the commission approve shareholder incentives for system improvements, the commission found that the supply-side measures proposed by the company represent a conventional approach to temporary supply shortages and do not warrant any additional financial incentive. It explained that when building or investing in necessary infrastructure and supply enhancements, the company is exercising its responsibility to maintain reliable service, and costs for those measures will be recovered conventionally under the company’s rate plan or through its Gas Adjustment Clause mechanism. The demand-side measures proposed by the company, in contrast, represent non-traditional solutions for which incentives are warranted. Energy efficiency and heat pump programs generally are eligible for recovery under special mechanisms which will include shared savings approaches. Re Consolidated Edison Co. of New York, Inc., Case 17-G-0606, Feb. 7, 2019 (N.Y.P.S.C.).

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