National Grid on Monday agreed to lift a crippling moratorium on new gas hookups and pay a $36 million fine after negotiations with Gov. Andrew M. Cuomo through the weekend in a move that rescinds, for now, the governor’s threat to revoke the company’s state operating certificate, while also addressing short- and long-term supply constraints.
As part of the deal announced Monday morning, the state will also appoint a monitor paid for by National Grid to oversee its operations for two years, to review its compliance with the pact, which was finalized this morning.
The complex deal, reached within a two-week deadline imposed by the governor, commits the U.K.-based company to a series of "short-term supply mechanisms" to more than meet demand for existing and new customers for roughly the next two years. Those measures will allow National Grid to restore service to "any customers that it had refused and grant all pending applications," according to a joint statement by the company and the state.
At the same time, the $36 million penalty will "compensate customers adversely affected by the moratorium," including businesses whose projects have been stalled or relocated and home customers who were forced to turn to alternate heating methods, such as temporary propane hookups. Of the $36 million, the bulk — about $20 million — will go to climate initiatives such as renewables and to fund startups in the green energy field, an administration official said, while about $8 million will go to getting customers to reduce their gas use, and about $7 million to mitigate customer impacts. The $36 million will be paid by National Grid shareholders, not ratepayers, company spokeswoman Karen Young said.
Cuomo in a statement called the deal a "victory for customers," saying the company will present options to its long-term supply shortage to customers in Brooklyn, Queens and Long Island to let them choose the best way forward for their communities. The agreement calls for at least four public hearings on those options, including one each in Suffolk and Nassau.
"Today it was made clear that we will not allow any business — big or small — to extort New Yorkers in order to advance its own interests," Cuomo said.
National Grid over the next three months will review options including its originally planned new pipeline, renewable energy sources, and liquid natural gas facilities, among others, then present them to customers at public meetings, State Sen. Kevin S. Parker, chair of the Senate Committee on Energy and Telecom, said in a statement. Long-term options must be in place by the fall of 2021.
The agreement means nearly 4,000 businesses, homes and other potential customers who have been denied new natural gas service for months will be processed and provided service in coming weeks and months, just at the start of the winter heating season. Residential and small-business customers must be contacted within 30 days to start the process of providing service; larger customers within 45 days, the administration official said.
National Grid New York president John Bruckner said the company "worked hard" to devise the list of supply alternatives. "With this agreement, we will present options for long-term supply solutions that ensure our customers have the service they require and desire,” Bruckner said in a statement.
National Grid declared the systemwide moratorium in May, after the state Department of Environmental Conservation for the second time denied a water-quality permit sought by the company’s construction partner, the Williams Co., to set the pipeline under 24 miles of New York waterways. The DEC said the work would disturb toxic sediment and cause environmental impacts, but gave Williams until next year to reapply and address those concerns.
The administration official said the gas pipeline, which still requires "independent approval" by the DEC, should not be considered an inevitable option from the review. "We think it's one option," the official said. "We wanted to go back and present other options."
In an interview, Cuomo said companies such as National Grid have taken the concept of “too big to fail” to the state’s utility sector under the belief they would not have their franchise yanked, but took it to the “farthest extreme.”
“They gave us no choice” but to act, he said, after denying service and “leaving 3,000 people out in the cold,” while stopping local development with “no plan B to this pipeline.”
It’s a message Cuomo said will carry beyond National Grid.
“I think it sends an industrywide message to these utilities: This is an assertion of the people's power. This is how utilities have been operating for years and with this agreement, the people of New York are back in charge."
Cuomo in recent months had been unrelenting in his criticism of National Grid, accusing the company of holding businesses and homes hostage to its demand for the pipeline and then threatening to revoke its franchise to operate in the state. In more recent weeks, National Grid has taken a conciliatory tone, saying it is working with the state to find near- and long-term alternatives to the pipeline, which would increase gas supply to the region by 14 percent.
National Grid receives about 7,800 new applications for service each year, and since May it has rejected nearly 4,000.
Monday’s agreement eases pressure on National Grid that had extended beyond its stalled customer base. Moody’s Investor Service, the Wall Street rating agency, last week issued a notice saying Cuomo’s threat to revoke the company’s operating certificate was “credit negative for all investor-owned utilities in the state.” Moody’s said Cuomo’s “willingness … to intervene in utility regulation” created a “unpredictable operating environment for the companies,” including Con Ed and Rochester Gas & Electric.
But it wasn’t just Cuomo who’d set his sights on National Grid and the moratorium, which environmental groups have widely dismissed as a fiction created by the company to guarantee a fossil-fuel future in the face of a green-energy agenda. The state attorney general and the Public Service Commission have been investigating the data points and the impacts of the moratorium, including whether some were improperly denied service. The PSC and Cuomo previously ordered the company to restore service to more than 1,100 customers improperly denied gas.
Attorney General Letitia James said her scrutiny of National Grid continues. "We have received numerous complaints, which is why we will continue to closely monitor National Grid and service providers across the state to ensure New Yorkers are getting a fair shake," she said.
Cuomo earlier this month acknowledged the supply shortage exists, and sharply criticized National Grid and the PSC for not acting earlier and more effectively to address it.
While the pipeline has been years in the planning, National Grid has made its most public case for the supply line, which will bring 400 million cubic feet of gas per day to the downstate region, only since earlier this year.
The PSC, according to the administration official, has been "undergoing a soul searching on how it can do better" since Cuomo's letter. "This is a complicated problem. The solution is not an easy one," the official said.
Cuomo's agreement with National Grid includes:
- A $36m fine to cover customer losses, new programs.
- An independent monitor to review compliance for 2 years.
- An agreement to contact thousands of cut-off customers in 30 days to initiate gas hookups.
- Devise and implement short- and long-term fixes for the supply shortage.
- Hold at least four public hearings on long-term supply proposals.