The Fossil Fuel Investments Driving Up ConEd Energy Bills

ConEd wants to jack up electric bills by 10 percent, and gas by 15 percent. Here’s what that would pay for.

Colin Kinniburgh   ·   July 6, 2022
ConEds Astoria yard, with its white-domed LNG plant visible in the background. ConEd plans to invest $65 million into the plant in the next three years, at ratepayers expense. | Colin Kinniburgh/New York Focus

In February of 1973, a tank storing liquefied natural gas (LNG) exploded on Staten Island, killing 40 workers who had been cleaning it. It was one of the worst industrial accidents in New York City’s history and prompted the state to ban new LNG facilities. Yet two chugged on: one maintained by National Grid in Brooklyn, and the other by Con Edison in Astoria, Queens.

Almost fifty years later, both are still operating, with no plans of shutting down any time soon. ConEd, like National Grid, is instead seeking approval from state regulators to spend millions upgrading its LNG plant. The $65 million in proposed upgrades are just one in a long list of investments ConEd plans to make in its electric and gas systems by 2025, with regular utility customers footing the bill.

If state regulators sign off on ConEd’s proposal, customers would be on the hook for a total $1.4 billion in spending next year, split between the utility’s electric operations ($1 billion) and gas ($400 million). That would mean a 10 percent jump in electric bills, and a 15 percent jump for gas, starting in January. Those hikes—the steepest in at least fifteen years, if approved—would likely be followed by more in 2024 and 2025.

The utility presents the spending as a win-win for customers. The proposed investments will improve service and make the grid more resilient in severe weather, spokesperson Allan Drury told New York Focus—while also supporting the state’s climate goals, since some of the funds would go toward clean energy projects.

But ConEd also plans to sink hundreds of millions into its existing fossil fuel systems—investments that New York City officials and environmental advocates say would run counter to state climate law, which requires the power sector to transition to 100 percent clean energy by 2040.

This morning, nearly 50 New York City and state lawmakers, led by Senator Robert Jackson of Harlem and Assemblymember Zohran Mamdani of Queens, echoed that concern in a letter to Governor Kathy Hochul and the Public Service Commission (PSC), which oversees utility rates. The lawmakers are asking the state to reject the rate hikes outright, while pressing ConEd to invest more in the transition to renewables.

“Con Edison seeks to continue investing in fossil fuel infrastructure, short-sightedly hoping to push these costs onto customers who are held hostage by the Company’s monopoly power,” they wrote.

The proposed rate hikes would add to a backlog of utility debt, which steadilymounted during the pandemic and jumped again when Russia’s war on Ukraine sent global energy prices through the roof. As of May, nearly 1.3 million New York households were at least two months behind on their gas and electricity bills, owing a collective $1.9 billion—the highest level of utility debt on record, according to filings compiled by the Public Utility Law Project (PULP).

ConEd accounts for 43 percent of that debt, with some 385,000 households owing an average of more than $2,000 each. Hundreds of thousands more are forgoing other expenses to keep up with their bills: according to New York City officials, at least half a million households are energy burdened (meaning they spend more than 6 percent of their income on electricity and gas), and that number could rise to 625,000 if Con Ed’s rate hikes are approved.

‘Business as usual’

Throughout the proceedings, ConEd has pressed the case that its chief responsibility—and that of the PSC—is to ensure “safe and reliable service at just and reasonable rates.” The fossil fuel investments it plans to make, it says, will above all ensure that New Yorkers can count on their electricity and gas whenever they need it, even as increasingly extreme weather bears down.

New York City officials have countered that ConEd’s network has already shown itself insufficiently resilient in the face of climate impacts—especially in disadvantaged communities—and that the company should not be rewarded financially just for meeting its legal obligations, which include reliability.

ConEd also argues that upgrades to fossil fuel infrastructure can reduce emissions. The utility’s biggest proposed investment on the gas side is replacing “leak-prone” pipes, which it says will reduce methane emissions, at a cost of more than $400 million per year.

But experts have singled out this massive investment as misguided. Researchers at the consulting firm Synapse Energy Economics testified in May that “an approach based on building retrofits, electrification, and pipeline retirement could reduce emissions at a cost per ton that is 77 percent less expensive” than replacing gas mains. New York City has also questioned the pipeline spending, disputing ConEd’s promises of emissions cuts and warning that the utility’s gas plan amounts to “business as usual.”

“While rebuilding an aging gas system may reduce leakage or fugitive emissions on the margin, it also risks extending our reliance on carbon-intensive infrastructure and creating stranded assets,” said three city officials in testimony to the PSC. “In our view, the Company’s emphasis on this strategy is not consistent with the State’s policy vision and the imperative to address climate change as quickly as possible.”

ConEd’s proposed gas projects also include expanding several pipelines in the Bronx and Queens, which critics worry will ultimately increase the amount of fracked gas being pumped into New York City. (Drury, the spokesperson, told New York Focus that about 80 percent of the company’s gas comes from the Marcellus Shale, where gas is extracted through fracking.)

And ConEd is expecting to spend about $75 million a year connecting new customers to gas under the state’s 100-foot rule, which requires utilities to cover the cost of hooking up a new building, provided it is within 100 feet of an existing main.

“That new addition [of gas] will just be socialized and paid by all users, versus if someone wants to electrify, they have to pay for that out of pocket,” said Meagan Burton, senior attorney with Earthjustice.

A bill to overturn the 100-foot rule is pending in the legislature but did not pass this session, despite a push from climate groups. ConEd has already asked the PSC in its filings to limit gas incentives for its customers to the extent allowed by law. Advocates want to see the utility go further, drawing on a model established in another recent rate case, in which National Grid is proposing to offer customers a substantial electrification incentive—ranging from $6,000 for Long Island customers to nearly $14,000 in New York City—before connecting them to gas.

More broadly, ConEd says its proposed spending represents an “unprecedented” down payment on greening its operations while maintaining safe and reliable service.

Climate advocates largely agree that ConEd is ahead of many other utilities in shifting away from fossil fuels. Jessica Azulay, program director of Alliance for a Green Economy, points to the utility’s $77 million proposal for a building electrification “make-ready” program, an incentive to help building owners upgrade electrical systems to prepare for greater loads once heating systems are converted to electric.

ConEd is also eyeing three new transmission projects it says are needed to meet the state’s climate targets. And it is proposing to start producing its own solar power, adding 100 megawatts’ worth of solar projects every year for the next decade.

Still, Burton says these green investments are “a drop in the bucket” compared to what ConEd is spending to keep fossil fuel systems in place.

Climate advocates are mostly contesting the proposals on the gas side of the ledger, meaning the gas that is pumped straight into people’s homes through their boilers and gas stoves. But some of the electric investments have also raised alarm bells.

Among them are $71 million in proposed upgrades to the East River power plant, one of the highest-polluting power plants in the state. That includes $20 million to convert backup generators to a cleaner fuel oil—the only kind that will still be legal in New York by 2025.

But climate advocates say the East River upgrades will only extend the life of a power plant that must be shut down in less than twenty years if the state is to meet its target of 100 percent clean power by 2040. Like many of ConEd’s plans, they stress, it will also leave disadvantaged communities shouldering a disproportionate burden of pollution, contrary to the state’s climate law.

ConEd says it is just following the law by switching the East River plant to a cleaner fuel oil, and that its spending plans will slash emissions system-wide. “The clean energy investments would prevent the emission of approximately 2.4 million metric tons of carbon dioxide, equivalent to taking more than 500,000 cars off the road for a year,” Drury said.

ConEd may be overstating its promises of emissions reductions. Staff at the Department of Public Service (which houses the PSC) said in a May 20 filing that the utility’s emissions calculations do not follow the methodology required by the state’s climate law. They also asked for more evidence that ConEd’s planned investments won’t continue to disproportionately burden disadvantaged communities.

ConEd has tread a fine line in its response, arguing on the one hand that its proposals do respect the climate law, and on the other that rate cases aren’t the right forum for settling climate issues.

Lee Ziesche, an organizer with the anti-fracking group Sane Energy Project, says this puts things backwards, since rate cases effectively decide utilities’ budgets and what they will actually do in the coming years.

Moreover, Ziesche said, ConEd is taking advantage of the gray area afforded by the state’s slow implementation of its climate plan. Three years after New York passed its climate law, the plan to deliver on it is still being finalized, and no major funding has passed to meet its binding targets. Other initiatives that would allow the state to get a head start on meeting those targets—such as a ban on gas in new construction—have also stalled. Ziesche said this has allowed utilities to keep “kicking the can down the road.”

“The only card they have left to play at this point is delay,” she said.

Whether climate friendly or not, all of ConEd’s proposed investments have one thing in common: they are lucrative for shareholders. Utilities in New York aren’t allowed to profit off the energy they sell; instead, they are guaranteed a certain return on capital spending. ConEd currently makes an 8.8 percent return on its investments, and is asking the PSC to increase that to 10 percent.

Among those opposing that push is retail giant Walmart, which has sided with Sane Energy Project, PULP, New York City, and others in rejecting ConEd’s proposed profit bump, warning that retailers could pass on increased electricity costs to consumers.

The utility argues that it needs to increase returns to balance its credit and keep up with inflation. Its investors took home $1.35 billion in profits last year, according to earnings reports.

‘Gas is dangerous’

There is no question that the transition off fossil fuels will require massive investment. For a growing number of lawmakers, that is just one more reason to leave shareholder profits out of the equation and allow the state to build clean energy projects itself.

“They are extracting profit at the expense of my constituents, both at the expense of their pockets, but also their lungs,” said Mamdani, the Astoria assemblymember and a prominent backer of public power. Even before ConEd proposed to hike rates, he said, the utility accounted for a quarter of calls to his office from concerned constituents, alongside issues like housing and transit.

Advocates also note that unaffordable utility bills have a direct impact on health, for instance by leading low-income New Yorkers to forgo air conditioning and risk heatstroke. WE ACT for Environmental Justice, an advocacy group, is asking that ConEd reverse course entirely: slash its gas spending, direct 40 percent of its investments toward disadvantaged communities, and lower rates. That sort of change is unlikely, though the closed-door negotiations that ultimately decide rate cases almost always force some compromise. ConEd has already pared down its proposed hikes and said, for example, that it is willing to consider phasing out more gas pipes than originally proposed.

Advocates will seek to press the utility further over the coming months as the rate case enters settlement—a confidential process that begins today and will likely continue through the end of the year.

For Azulay, of Alliance for a Green Economy, the huge investments ConEd wants to pass on to ratepayers to keep its gas system alive are just another sign of the unsustainable cost of fossil fuels.

“The gas system, even if we’re not trying to build it out, or expand it, or even replace it, still has a huge cost, because gas is dangerous,” she said. “Putting that money into things that don’t need as much maintenance—that is a longer-term affordability play that we really need to be considering.”

Colin Kinniburgh is a reporter at New York Focus, covering the state’s climate and environmental politics. Over a decade in media, he has worked in print, television, audio, and online news, and participated in fellowship programs at CUNY’s Graduate School of Journalism and… more
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