Pipeline photo courtesy of Al Braden
In Part II of the blog, we got a flavor for utilities’ vision of climate planning for the buildings sector. This brings us back to the New York Public Service Commission’s recent orders in the gas and climate planning proceedings.
The fox guarding the henhouse
There are a number of very positive features of the Commission’s orders. For example, before utilities can receive approval for a new capital investment in their gas distribution systems, the Commission is requiring a “no infrastructure option” be evaluated with a sensitivity that assumes new gas assets must be depreciated by 2050. If implemented faithfully, this would require utilities to demonstrate that their capital investments in the gas distribution system make sense even in a world where the system is largely retired by 2050.
In the climate planning docket, the Commission is also requiring utilities to file annual GHG Emissions Inventory Reports and to evaluate the emissions impacts of all investments—a requirement that Sierra Club had previously pushed for—which will provide emissions data that are critical for evaluating whether utilities are achieving the requisite emission reductions over time and enable a transparent evaluation of the cost-efficacy of proposed emission reduction measures. The Commission also signaled that it would be requiring more widespread implementation of policies and measures that Sierra Club and its allies have been pushing for in gas utility rate cases including discontinuation of utility activities associated with gas expansion, elimination of oil-to-gas conversion programs and gas marketing efforts, implementation of heat pump programs, building efficiency upgrades, district heating projects, demand response programs, and prioritization of non-gas non-pipe alternatives.
At the same time, however, the planning processes laid out in the Commission’s orders appear to place the utilities squarely at the helm. In the gas planning proceeding, while the Commission espoused the hope that the long-term planning process would be “collaborative,” the Commission declined to provide stakeholders with the ability to engage in formal “discovery”—the structured process in adjudicated dockets for parties to request information from other parties, which includes legal mechanisms for compelling the release of information. In addition, other than flagging additional stakeholder meetings would be held, it is unclear what happens if there are differences between the proposed solutions put forward by the utilities and those recommended by stakeholders. The Order budgets only 25 days to resolve any differences between the utility vision and those of stakeholders. If the experience in Massachusetts with some of the same utilities is any indication, nearly a year of regular meetings facilitated by a consultant was not nearly enough time to resolve differences, and the final utility plans there largely reflected the utility position.
And even to the extent there are opportunities for interested stakeholders to engage and influence utility plans, eleven utility long-term gas system plans will be filed in a staggered manner with plans coming in on seven different dates over a 25-month period creating an enormous burden on stakeholders to engage in multiple stakeholder processes simultaneously.
In addition, in the climate planning docket, the Commission directed the utilities—not Department of Public Service Staff or an independent consultant—to develop a proposal for a GHG Emissions Reduction Pathways Study. This study is critical, as it would include a coordinated long-term gas sector decarbonization pathway analysis through 2050, a coordinated near-term plan to address achievement of the state’s 2030 climate targets, and individual long-term utility decarbonization plans to achieve each utility’s share of statewide decarbonization targets through 2050. Although interested stakeholders would have an opportunity to comment on a draft of the Study Proposal and attend a scoping meeting, responsibility for the Study Proposal would remain firmly in the hands of the utilities.
The Sierra Club appreciates what the Commission is trying to accomplish through its gas planning and climate planning orders. However, based on what the New York utilities have filed to date, putting them in charge of the process foreordains the outcome (spoiler: it’s all gas).
So where do we go from here?
While no process will be perfect, we encourage the Commission to consider a few additional safeguards in the climate and gas planning processes:
- Require maximum transparency, including revealing all underlying assumptions and data sources. Allow for formal discovery from the utilities so parties can obtain relief from the Commission if the utilities stonewall;
- To make engagement tractable for stakeholders, address issues that are common to all utilities in a single planning process and minimize how many issues are resolved in the context of utility-specific plans;
- For the 3-year plans, empower the independent consultant to make recommendations and require Commission approval of plans;
- For the climate planning docket, engage an independent consultant to develop the study proposal rather than relying on the utilities;
In all planning analyses, require full and fair evaluation of electrification and clearly identify avoidable costs from widespread electrification (e.g., leak-prone pipe replacement costs) so alternatives visions for the future of the gas system can be fairly evaluated.
Closing Thoughts
Two points warrant emphasis. First, gas utilities are businesses and, while they are obligated to provide safe and reliable service, their ultimate allegiance is to their shareholders. Not only do these shareholders stand to gain enormously by continuing to invest in utilities’ pipeline distribution systems, but because utilities’ prior investments are repaid by their customers over decades, transitioning away from these investments before they are fully depreciated creates a risk that utilities may never be able to fully recover their costs. Thus, for the utilities and their shareholders, a lot is riding on convincing the Commission that these investments continue to be used and useful. Since the system’s current fuel—fossil methane—is a climate disaster, the utilities need some plausible alternative fuels they can pipe to customers. Unfortunately, the alternative fuels—primarily hydrogen and “renewable natural gas”—are fraught with environmental, cost and feasibility problems, and cannot compete with electric heat pumps in most contexts. However, do not expect utilities to turn away from these false solutions lightly.
Second, change is not always easy. Transforming the way we heat our buildings and moving away from our current heavy dependence on fossil fuels in buildings with require real change. But change is not always bad. The Climate Action Council’s Just Transition Working Group recently released a Jobs Study looking at how compliance with New York’s climate law will affect employment. It found that decarbonizing buildings will result in the building sector having the greatest job growth in the coming decades, with the net addition of more than 200,000 jobs by 2040 under an accelerated transition from fossil fuel scenario. Thus, with the requisite vision, climate planning for the building sector can be an engine for job growth in the state. We hope the Commission seizes this opportunity.