Consolidated Edison (Con Edison) has ramped up its clean energy pledges in the past year, but the company nonetheless continues to invest in gas infrastructure.

The utility, which serves 3.4 million electric and 1.1 million gas customers in New York City and nearby Westchester County, vows to “rapidly reduce the use of fossil fuels.” Chairperson and CEO John McAvoy affirmed that pledge during Con Edison’s annual shareholder meeting last May. McAvoy also announced plans to triple investments in energy efficiency programs to more than $1.5 billion by 2025, and to incentivize heat pumps for customers in an effort to reduce their usage of natural gas — several measures that have been mandated by the New York Public Service Commission.

But despite the promising rhetoric, Con Edison continues to hold stakes in major gas pipelines and to support local and regional gas infrastructure expansion projects.

“Balancing These Interests”

Con Edison received approval from the PSC last year to spend $3 billion over the next three years to construct new gas pipelines in Queens and Manhattan, and to replace aging infrastructure in its service territory. The approval was part of a larger rate hike Con Edison requested that will increase both customers’ gas and electric bills.

In the meantime, the company is advancing regional gas projects. In a recent letter to the Federal Energy Regulatory Commission (FERC), Con Edison supported Kinder Morgan’s East 300 Upgrade Project, which will provide the utility with an additional 115,000 Dth/d of gas to serve Westchester County. If approved by FERC, Kinder Morgan will upgrade two existing compressor stations (one in Pennsylvania and one in New Jersey) along its Tennessee Gas Pipeline and construct a new compressor station in West Milford, New Jersey.

In its letter of support to FERC, Con Edison said that while it supports New York’s “ambitious” climate change laws and policies, “these clean energy laws and policies have not altered our responsibility to provide reliable service to natural gas customers.” The utility added that while it will work with policymakers to develop solutions to support “the transition to a low-emissions future,” it vows to “[honor] our legal obligation to provide service to customers seeking natural gas while also transitioning to renewable energy [which] requires the Company to balance these interests.”

The utility specifically referenced New York’s Climate Leadership and Community Protection Act (CLPA). The law, signed by Gov. Andrew Cuomo in July 2019, requires the state to generate 100 percent carbon-free electricity by 2040, and to reduce emissions by 85 percent from 1990 levels by 2050 while using offsets for the remaining 15 percent. Meeting the statutory mandates essentially requires eliminating the use of natural gas for heating and powering buildings. Con Edison said that while it supports these goals, the law “did not alter Con Edison’s obligation to serve those customers that request gas service.”

Con Edison further parsed the language in the CLPA, stating that beneficial electrification is “a consideration under the law” and “not a requirement.”

The utility added that “many of the details of how the [CLPA] will be implemented are unknown until the state adopts regulations to implement the law, which are not required to be completed until January 1, 2024.” It also argued that despite boosting such programs as energy efficiency, demand response, and “market solicitation for non-pipeline alternatives” like electrification of heating – requirements that were put in place by the PSC in Con Edison’s rate increase order last year- it still needs the East 300 Upgrade Project and an end to the temporary moratorium on gas hookups in Westchester County that the PSC placed there in 2019.

On the ground, the project is meeting resistance from local groups. Residents in West Milford, where Kinder Morgan looks to build a new compressor station, have banded together to oppose the project. The group Sustainable West Milford cited numerous concerns over safety, health, and the environment.

Major Pipelines Still in Play

Along with the company’s in-state gas expansions, Con Edison appears to be adamant about maintaining its investments in interstate gas pipelines.

In response to an analyst’s question about the utility’s stakes in major gas pipelines during a call last August, McAvoy said the company “certainly would” consider selling those assets. Analysts specifically questioned McAvoy over the utility’s investments in the Equitrans Midstream-led Mountain Valley Pipeline and Stagecoach Pipeline & Storage Co. LLC, Con Edison’s joint venture with Crestwood Equity Partners LP.

Con Edison is both a partner in the 300-mile Mountain Valley Pipeline venture and one of the project’s customers. In 2016, the utility signed a 20-year contract for service on the pipeline, which will transport fracked gas from West Virginia to Virginia, interconnecting with other pipelines that transport gas to New York. The Stagecoach Pipeline venture is a 185-mile network of pipelines that spans from Pennsylvania to New York.

“That was the view 5 to 7 years ago, and that’s when we invested in the Mountain Valley pipeline and in Stagecoach Gas Services,” McAvoy replied in August. “That view has largely changed. And natural gas, while it can provide emissions reductions, is no longer really … a big part of the longer-term view of the transition to the clean energy economy.”

Six months later, Con Edison has not sold those investments, and it may have missed the opportunity to do so and receive much value in return. The Mountain Valley Pipeline has stalled due to legal battles and ongoing opposition from landowners and environmental activists. The latest rebuke came two weeks ago from FERC – now chaired by Democrat Commissioner Richard Glick – when the Commission failed to approve Mountain Valley Pipeline’s request for expedited construction on its first 77 miles.

All these delays are ballooning the project’s costs. The most recent projections of the pipeline’s price tag have risen to almost $6 billion from an initial estimate of $3.7 billion. NextEra, the other utility with a stake in the project, reported last week an impairment charge of $1.2 billion on the pipeline, forcing the company to report its first net loss since at least 2010.

Compensation Disincentives

One possible contributing reason for the company’s continued investments in fossil fuel expansions is that its executive compensation structures are not explicitly tied to emission reductions.

A recent analysis of utility executive compensation by the Energy and Policy Institute found that Con Edison’s executive compensation policies include renewable energy growth as components of broader goals, but do not reward executives for reducing greenhouse gas emissions.

McAvoy earned over $15 million in total compensation in 2019.

The scrutiny over Con Edison’s gas investments is intensifying. The company, along with the state’s other gas utilities, will face greater pressure through the PSC’s ongoing gas planning proceeding, which the commission initiated last year in an effort to examine alternatives to the buildout of new infrastructure and to support the state’s climate goals.

Posted by Itai Vardi