Gov. Andrew M. Cuomo on Tuesday wielded the nuclear option against National Grid as arctic cold blasted a region still under a natural gas moratorium, threatening to revoke the U.K. company's operating license downstate if it fails to fix its looming supply problem.
Cuomo in an interview invoked National Grid's 2014 loss of the contract to operate the Long Island electric grid in suggesting he was prepared to do the same for the natural gas system.
"It can be done — I've done it," he said. "I know the risk, I know the heartburn. Been there, done that."
Cuomo said the transition from National Grid to PSEG Long Island was "smooth … There was no disruption."
Cuomo, in a letter to National Grid's U.K.-based chief executive, John Pettigrew, and its New York president, John Bruckner, Tuesday gave the company 14 days' notice of his intent to revoke the downstate gas franchise, citing their “mishandling of the gas supply system” on Long Island and New York City. Cuomo ordered National Grid to respond with "any considerations I have overlooked, or present meaningful and immediate remedial actions you would propose, within 14 days" to avoid this action.
But even as Cuomo brandishes the nuclear option, he may have prodded National Grid to redouble efforts to come up with a full range of short- and long-term solutions for the supply issue that has stalled dozens of big development projects, and thousands of oil-to-gas conversions and new residential hookups.
"We continue to work with New York State on short-term and long-term solutions to the natural gas supply constraints facing the region," National Grid spokeswoman Karen Young said.
Cuomo, in the interview, suggested companies would line up to take over National Grid's gas business, which consists of 1.8 million customers, including 600,000 on Long Island.
"This would be one of the most lucrative franchises in the country," he said. "Any utility would bid on this contract."
PSEG could be a candidate, Cuomo noted, saying, "Yes, but there would be many companies that would vie for the franchise. These franchises don't often come up. You saw how aggressive PSEG was to take over the Long Island electric system and how seamless that was."
PSEG, whose sister company PSE & G operates both the gas and electric system in New Jersey, declined to comment. A Public Service Commission spokesman didn't respond to a request for information about how revoking National Grid's license would work.
Cuomo said there was “no doubt National Grid failed to provide ‘adequate and reliable’ service,” citing the company’s admission to the Public Service Commission that “more could have been done to communicate with customers” about looming supply issues in the region.
Earlier Tuesday, National Grid said it was "in receipt of the letter from Governor Cuomo and will review and respond accordingly within the time frame outlined in the letter. We continue to work with all parties on these critical natural gas supply issues on behalf of all our customers in downstate New York.”
Since May, National Grid said it has received, and denied, more than 3,700 requests for gas service from existing and new customers across all customer segments, "representing 20,000 commercial, residential and multifamily units."
New York State has twice denied National Grid contractor Williams Co. a needed water-quality permit to install a new gas pipeline under New York Harbor to increase the local supply by about 14 percent. New Jersey also has denied the permit. The company has reapplied for the permits, which remain under review.
Cuomo took issue with National Grid's banking on the pipeline for supply before enacting the moratorium, noting the plan needed multiple state approvals and faced the threat of lawsuits from environmental groups that oppose it. "Your only plan was this pipeline that nobody's approved," he said. Even if it had been approved this year, he said, to meet the supply constraints of this winter "it would have been the fastest construction job in history … and you know building a pipeline is a politically radioactive issue."
Short of revoking National Grid's franchise, Cuomo said, "I think there are solutions that [National Grid] was either blind to or didn't want to utilize." He mentioned trucked-in gas or a liquid natural gas facility, "barges on the Long Island Sound with natural gas."
"It's not true when they say it's the pipeline or nothing," he said. "It's true that there's a long-term supply issue. They like the pipeline best. I get it. But don't say there aren't options."
State Senate Minority Leader John Flanagan (R-Northport) took issue with Cuomo's list of alternatives and his threat to revoke National Grid's license. "Whether National Grid or any other company serves downstate, the laws of supply and demand still exist," Flanagan said in a statement, adding, "We no longer have time for this political theater."
National Grid began to sound the alarm on supply issues earlier this year, issuing a moratorium on new service for commercial customers and proposed development projects, and threatening to do the same for residential customers if the $1 billion pipeline, called the Northeast Supply Enhancement project, wasn’t approved by the states in May.
The moratorium has rippled through the regional economy, stalling oil-to-gas conversions and new service for restaurants, big developments such as the Ronkonkoma Hub, and new home construction. Last month, the PSC ordered National Grid to provide service to more than 1,000 customers who it said were improperly denied gas.
National Grid officials, in interviews earlier this year, acknowledged there “was no plan B” when it came to the pipeline.
Cuomo's decision to threaten to revoke National Grid's charter, telegraphed in news interviews and a letter to the PSC last month, spread like wildfire Tuesday morning, leaving public officials and business leaders wondering what was next. For starters, some wondered which entity could quickly take it over, depending on how the process moved forward. One expert, who estimated the value of the downstate gas system at more than $2 billion, said the case could be tied up in courts "for years."
Kevin Law, a former LIPA chief executive and now president of the Long Island Association, noted that Cuomo's threat to revoke National Grid's charter is "unchartered waters and creates a lot of uncertainty." He said the group "encourages the parties to sit down and work this out expeditiously."
Jeff Greenfield, vice president of the Lynbrook Chamber of Commerce and vice chairman of the Nassau Planning Commission, broached the notion that LIPA, which owns the Long Island electric system, could take on the gas operations. LIPA's predecessor, the Long Island Lighting Co., operated both the gas and electric system.
"Let LIPA run it," said Greenfield, a former LIPA trustee. "I'm gratified the governor is taking action against a utility that lost its mandate to serve the public ratepayers. I’m only disappointed that it took so long."
A LIPA spokesman declined to comment.
Environmental activist groups that oppose the pipeline applauded the governor's move.
“Governor Cuomo is listening to the people and showing necessary climate leadership by standing up to National Grid’s disastrous moratorium scare tactics," the group, Stop the Williams Pipeline Coalition, said Tuesday.
With John Valenti