As LIPA cuts its natural gas bill, Grid says new pipeline still needed

LIPA, Long Island’s largest natural gas user, has cut its usage by two-thirds in the past decade — to the tune of $400 million — even as supplier National Grid has been making a case that soaring overall demand for gas requires a new pipeline.

National Grid downplayed the 65.5 percent decline in the yearly natural gas usage by the Long Island Power Authority over that time, saying its largest customer's lower bill is unrelated to the need for the Northeast Supply Enhancement project, which, if approved, would increase local capacity by about 14 percent.

"Even if LIPA used zero natural gas, NESE is still required to serve the increased customer demand for new and expanded natural gas service and to support economic growth," National Grid spokeswoman Karen Young said, adding local demand for natural gas is projected to increase by more than 10 percent over the next 10 years." 

National Grid has declared a moratorium on new gas hookups across Long Island until New York State regulators, who have twice rejected it, approve the project. Meanwhile, the state is investigating National Grid’s claim of a local shortage, which some environmental critics charge is based on false forecasts to tie the region to a fossil-fuel future. Local developers and even some doing home renovations have been caught in the crossfire, as National Grid refuses to commit to firm service for any new customers. 

LIPA's annual gas bill, which totaled $612.6 million in 2010, is budgeted to drop to $211.1 million this year, from $294 million last year. It’s projected to drop even further, to $204.7 million, next year. The gas is used to power more than a dozen small and large power plants across the region, including those owned by National Grid.

Young noted that LIPA's lower gas bill “is a function of both the gas commodity cost and usage.”

But even when measured by volume, LIPA's gas purchases, which are handled by PSEG's sister, PSEG Energy Resources & Trading, have been declining steadily since 2013, when the utility purchased 81.4 trillion BTUs to run the local power plants, gas that flows through the National Grid transmission system. By 2017, the figure had dropped to 47.9 trillion BTUs. In 2010 it was 76.3 trillion BTUs.

Lower usage of the plants translates to a lower gas bill, as LIPA turns to other sources for energy, including off-island power cables, a more efficient gas-fired plant in Yaphank and renewables such as solar. Power use overall on Long Island is also on the decline after years of increase, and will continue that way for the next two decades, PSEG has projected. A LIPA official cited changes in the weather, lower use of local plants, lower gas costs and other factors as the reasons for the decline. 

National Grid said the drop in LIPA’s gas use has no impact on the local shortages.

That’s because LIPA’s contract for gas is on an “interruptible,” not “firm,” basis, meaning that LIPA’s supply line is not guaranteed during the high-demand winter months, National Grid said.

“Power plants typically switch to their alternate fuel on the coldest days due to cost and/or capacity constraints that make interruptible gas unavailable,” Young said in response to Newsday questions. The proposed pipeline would provide supply for new or expanded requests for “firm” service.

“Since LIPA does not have firm capacity they can and will be interrupted as needed to maintain supply integrity to our firm gas customers and play no role” in the need for the $1 billion pipeline, Young said.

Richard Berkley, executive director of the Public Utility Law Project, a watchdog group in Albany, said that while gas prices have seen marked declines in the past decade, National Grid's projections for greater usage show the utility isn't fully on board with state directives. 

By cutting its gas bill and overall usage, "LIPA is doing what all utilities and large energy users in the state have been incentivized to do since 2014, to conserve energy," Berkley said. "To the extent National Grid is saying that they didn’t plan for that, it’s a problem because they’re required to plan for it. It’s part of the state’s efficiency goals." 

National Grid argues otherwise, noting that part of the growth is conversion of old, oil-burning heating systems that are still widely in use on Long Island to cleaner, natural gas-fired systems. 

Critics of the Northeast Supply Enhancement project argue that National Grid is vastly overstating the need for the pipeline. Last month, amid reports the company is improperly cutting off customers including those who temporarily suspended service to renovate homes, Gov. Andrew M. Cuomo said the state has stepped up its probe of the company’s claims and would revoke its franchise if it’s improperly refusing service.

On Thursday, the Daily News reported state Attorney General Letitia James had launched a separate inquiry into the moratorium, but her office didn't return a call seeking comment.

Young on Friday said National Grid has been "working closely with the Department of Public Service staff and its consultants to support the [Public Service] Commission's investigations of gas supply constraints in downstate New York and will continue to cooperate with any further inquiries while we await the results of that study." 

New York State’s Department of Environmental Conservation has twice rejected the project on environmental grounds, but a third review is pending. New Jersey has also rejected it.

LIPA has made the case for the past decade that considerably lower usage of National Grid’s baseload power plants is a chief reason the plants are no longer as valuable as they used to be and should have their tax assessment drastically lowered. The matter remains before a state Supreme Court judge, with a verdict expected by year end or early next year.

It's not just LIPA's natural gas bill that's on the decline. Its fuel oil bill, which stood at $83.9 million in 2010, fell to $29.3 million in 2017.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.