Will Rate Cases Cause National Grid to Finally Grow A Pair?
Roger Caiazza sees a glimmer of hope. National Grid, which previously caved to Cuomo's natural gas demagoguery, may be forced to take a stand and warn New Yorkers of an unfolding energy disaster.
Guest Post by Roger Caiazza of Pragmatic Environmentalist of New York.
Syracuse Post Standard reporter Tim Knauss recently wrote two articles that expose the disconnect between the executives in the electric industry and their customers. The Climate Leadership & Community Protection Act (Climate Act) will cost enormous amounts of money at the same time it increases reliability risks. The politicians supporting it and the leadership of the utility companies all have not admitted just how much it will cost ratepayers. This post uses National Grid’s “Net-Zero Overhaul” as an example.
I have followed the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 400 articles about New York’s net-zero transition. The opinions expressed in this post do not reflect the position of any of my previous employers or any other organization I have been associated with, these comments are mine alone.
Overview
The Climate Act established a New York “Net Zero” target (85% reduction in GHG emissions and 15% offset of emissions) by 2050. It includes an interim 2030 reduction target of a 40% reduction by 2030 and a requirement that all electricity generated be “zero-emissions” by 2040. The Climate Action Council (CAC) was responsible for preparing the Scoping Plan that outlined how to “achieve the State’s bold clean energy and climate agenda.” In brief, that plan is to electrify everything possible using zero-emissions electricity.
The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies. That material was used to develop the Draft Scoping Plan outline of strategies. After a year-long review, the Scoping Plan was finalized at the end of 2022. In 2023 the Scoping Plan recommendations were supposed to be implemented through regulation, PSC orders, and legislation. That process is falling behind as the enormity of the challenge becomes clearer.
National Grid Net Zero Overhaul
I live in Upstate New York and National Grid is my electric utility. National Grid is the electricity system operator for Great Britain. In 2000 National Grid started purchasing utilities in the United States and now is “an electricity, natural gas, and clean energy delivery company serving more than 20 million people through our networks in New York and Massachusetts.” They tout plans for National Grid for “a smarter, stronger, cleaner energy future — transforming our networks with more reliable and resilient energy solutions to meet state climate goals and reduce greenhouse gas emissions.”
Someday, I may return to this topic and focus on the “more reliable and resilient solutions” claim. For the time being I will content myself with just saying this is codswallop. I don’t think it will ever be possible for New York to meet its state climate goals as presently outlined without a catastrophic blackout because the energy storage and dispatchable emissions free resources necessary to meet the worst-case low wind and solar resource drought are impractical. Utility executives know that this is an issue but play along with the plans for their own self-interest not the interests of their customers.
This article will address the proposed plan for the “cleaner energy future”. In particular, Nation Grid recently announced plans for a £60bn Net Zero overhaul of National Grid. That total is for all the National Grid companies. The US National Grid press release included the following quote:
Group CEO of National Grid John Pettigrew said: “Today’s announcement is a clear illustration that National Grid is committed to playing our part in achieving the ambitious decarbonization targets that New York and Massachusetts governments have set. The increased investment we’re announcing today follows positive engagement with our regulators in these states, reflecting a willingness to upgrade electricity networks to provide long term affordable energy to all, and reduce emissions across our gas networks.”
Tim Knauss did an article about the New York portion of the investment plan. He described the New York component of the plan:
The $16 billion plan represents a 60% increase over what National Grid has spent during the past five years. It includes a $4 billion project under way to improve 1,000 miles of transmission lines, which National Grid calls the “Upstate Upgrade.” Other projects have not yet been identified.
Knauss also quoted spokesperson Jared Paventi: ““Will there be an impact for the customer? Yes, but I believe that it’s going to be negligible based on the time period that we’ll be recovering those costs,” Paventi said.” While the quote suggests that this is his personal opinion, I have no doubts that is the story he was charged to say.
Rate Case Proposal
The press release for the upcoming New York rate case gives the highlights:
Critical investments to ensure the reliability and safe operation of the company’s energy delivery system that serves 2.3 million upstate New York residential and business customers.
Enhanced system resiliency and reliability measures to manage and reduce the impact of frequent and severe weather and enable continued strong storm response.
Integrated energy planning to consider interactions between gas, electric and customer energy systems to achieve long-term climate goals in a safe and affordable way.
Infrastructure investments to support economic development, connect clean energy, and enhance security.
Targeted programs and dedicated teams to better serve residential, commercial and industrial customers.
Enhanced energy affordability programs and services, and programs to enable clean energy and energy efficiency benefits for disadvantaged communities.
Tim Knauss also wrote an article on this announcement. He wrote:
In 2020 National Grid asked for a $142 million increase in annual electric and gas delivery revenues. This year, the utility is asking for $673 million. If the Public Service Commission goes along, that would raise National Grid’s electric delivery revenues by 20% and its gas revenues by 28%. A typical household would pay $440 a year more for electricity and gas.
National Grid describes the reasons for the increase as a catchup from the last rate case when “the company and regulators put a top priority on holding down an increase” and “Inflation and supply-chain constraints have raised the cost of transformers, poles, cables and other equipment.”
Knauss writes that they also admit that: “the power grid requires significant new investments to make way for more electric vehicles, electric-heat buildings, and other elements of New York’s planned transition away from fossil fuels.” I doubt that the attribution of costs to these reasons will be readily available.
Discussion
The impetus for this article was spokesperson Jared Paventi’s claim that the costs for the investments will be “negligible”. Knauss provides the data that suggests otherwise. He points out that “In an order issued last year to approve $4.4 billion in new transmission lines planned by several utilities, the state Public Service Commission estimated the work could increase residential bills by about $3.50 a month, decreasing over time.”
The New York Net Zero Overhaul estimate is $16 billion. That will cause residential bills to increase an additional $12.73 per month. I don’t call that negligible and that is only a small portion of the total increases proposed in the rate case.
The other thing that caught my eye was the comment by Group CEO of National Grid John Pettigrew that the New Zero Overhaul announcement “follows positive engagement with our regulators in these states”. Cynic that I am, this sounds like the executives got an audience with the Hochul Administration and promised to follow their script for Climate Act implementation right before the rate case was released.
Maybe it is just a coincidence, but it smells like a backroom deal to me that has corporate and political interests at its heart with the welfare of the ratepayers ignored. Hochul recently nominated three environmental ideologues to the Public Service Commission. I have no doubts where their biases lie and believe that any costs for the great net-zero transition will be approved by those three.
Conclusion
I do not think that there is any question that electric utilities have determined that implementation of net-zero transition plans will be risky and costly for their customers. However, I believe they have also determined that implementation is in their financial best interest.
Similarly, the regulatory agencies certainly have technical experts who understand the risks but the political appointees in charge ignore their counsel because their handlers are catering to a specific constituency. This does not portend well for everybody else.
There is a glimmer of hope. It is only a matter of time until the cost blowback begins on these rate cases. On June 5, 2024 Hochul indefinitely paused implementation of the New York City congestion pricing plan.
The rate cases will cause the costs of energy to increase for more people and the Climate Act is a big part of the increase. Hochul said, “it’s not the right time” for congestion pricing as “New Yorkers face a cost-of-living crisis”. Hopefully this will be draft language for a walk back on the aspirational Climate Act implementation plan when the true costs become clear.
#Grid #Electric #NationalGrid #NewYork #Electrification #ClimateAct #Hochul
Utilities don’t have customers. They have ratepayers. The only customer is the regulator.