As temperatures fell below freezing in New York City last month, boilers in building basements kept residents warm, but these systems often depend on natural gas, a major contributor to greenhouse gas emissions.
The majority of the city’s emissions originate from buildings, with residential properties primarily burning natural gas for heating and cooking.
New York City has implemented local laws targeting a reduction in fossil fuel reliance, aiming for substantial decreases in natural gas usage by 2050. While these regulations advance environmental goals, they present financial challenges for local utilities and their remaining gas customers.
Pipeline construction and maintenance costs are incorporated into consumer gas bills through delivery charges, and New York utilities are replacing many old pipes to mitigate leaks. These infrastructure investments, made for half-century lifespans, clash with climate goals that push for electrification of heating and cooking systems. As more homes transition off gas, utility costs spread across fewer ratepayers, potentially increasing bills.
This dynamic could drive more households toward electrification, risking a “death spiral” for utilities and their customers.
How Gas Utilities Work
The Future of Heat Initiative reveals that delivery charges comprise 75% of total gas costs in New York, a significant increase from two decades ago. Capital investments, including profits and financing, account for 45% of these charges, with pipe replacement as a major component.
“If you try to reduce your gas usage by turning down your thermostat, you realize your bills aren’t going down very much because of all these delivery charges,” said Jamie Van Nostrand, policy director for the Future of Heat Initiative.
For example, National Grid received state approval for a 19.4% increase in average residential rates in certain New York City areas, partly to fund energy efficiency programs and replace aging gas pipes.
Replacing gas mains in dense urban areas like NYC is cost-intensive. Digging up streets and replacing a mile of pipe costs roughly $10 million, according to National Grid.
Advocates argue that installing electric heat pumps and induction stoves may be more cost-effective than continuing to maintain gas infrastructure.
State documents indicate National Grid must engage with developing non-pipe alternatives, such as heat pumps and geothermal energy networks.
National Grid has made substantial efforts to repair and replace leak-prone pipes, reducing emissions from leaks by over 35% since 2008.
A Looming Upheaval
New York City’s Local Law 97 imposes stricter limits on emissions from large buildings, necessitating a shift away from gas for heating by 2040. Another law mandates electrification in new constructions.
The state’s Climate Act requires a substantial reduction in fossil natural gas use, impacting gas utilities’ business models. When utilities build new gas mains, they recover costs from ratepayers, with profits based on the asset’s value.
Utilities like Con Edison and National Grid are investing heavily in replacing leak-prone pipes. Con Edison plans to replace 240 miles of such pipes over the next three years with a $445.4 million investment in 2026, while National Grid replaced 220 miles last year.
The rising costs and mandated reductions in gas usage could significantly raise bills for remaining gas users. This situation is particularly concerning for low-income communities, which may struggle to afford heat pump and electric stove installation costs despite potential long-term savings. High utility costs already burden many Con Edison customers, with 414,000 customers overdue on payments in December.
Without “proactive management,” energy costs could reach unacceptably high levels, according to the state’s energy plan, which suggests new cost-recovery practices to mitigate risks.
National Grid’s spokesperson said the state’s energy plan recognizes the enduring role of the gas network while anticipating reduced gas usage due to efficiency improvements and heat pump adoption. Meeting the state’s zero-emission electricity goal by 2040 could further decrease gas demand.
Utilities face the challenge of adapting to a changing energy landscape. Con Edison is electrifying areas near gas mains, and National Grid offers incentives for switching to non-gas alternatives, but the pace of change remains slow.
Both utilities consider potential decreases in natural gas demand. Changes in heating preferences and climate-driven reductions in cold days could impact natural gas demand, even without widespread electrification.
The future of New York’s gas infrastructure is uncertain, especially as Gov. Kathy Hochul expressed doubts about meeting climate goals. Van Nostrand warns that prolonged reliance on the current system could worsen financial impacts.
Original Story at insideclimatenews.org