Hochul, NYS Legislature deciding who will pay for climate change transition

ALBANY — Now that New York State has committed to ending more than a century of dependence on fossil fuels to avoid more damage from climate change, the thorniest question is: Who’s going to pay the bulk of the annual $2 billion bill?

Gov. Kathy Hochul and legislative leaders are tackling the issue of whether ratepayers, taxpayers, energy companies or a combination of all of them will pay for the multibillion-dollar transition from fossil fuels to reliance on renewable sources such as wind, solar, hydro, biomass and geothermal energy.

Under a 2019 state law called the Climate Leadership and Community Protection Act, utilities and energy companies will have to convert to renewable energies to continue to operate in New York State. The law requires New York to get 70% of its energy from renewable sources by 2030 and to reduce greenhouse gas emissions by 85% by 2050.

Decisions about how to pay for it are expected to directly impact state residents, public health, energy companies and jobs for decades, prompting comparisons with the tumult of the Industrial Revolution, which ushered in the fossil fuel economy in the 19th century.

Two legislative bills at the center of the discussion seek to have energy companies that sold and transmitted fossil fuels to absorb most or all of the capital and other costs required to transition to renewable energy. The proposals are part of closed-door negotiations for the state budget, which has been delayed until Thursday.

The bill with the most public and legislative support is the New York Home Energy Affordable Transition Act. Under the bill, commonly called the Heat Act, ratepayers and energy companies would share some of the cost. The state also could provide tax credits and other benefits to subsidize utility bills. 

The proposal would hold down total annual increases in utility bills during the transition to renewable energy so that energy bills were no more than 6% of household income. That cap could most benefit lower- and moderate-income households that already pay a large share of income to utilities. But critics argue the provision could add hundreds or thousands of dollars to the annual utility bills for middle-class and wealthier families that already pay some of the highest energy bills in the nation.

The other bill, the Climate Change Superfund Act, would require energy companies to pay for storm damage and resiliency measures, not ratepayers or taxpayers.

“It will cost more as we change the way we do things, but ultimately it will save our planet not only now, but for generations to come,” Sen. Andrea Stewart-Cousins (D-Yonkers), the majority leader, said in a recent news conference. Because of expected pushback by oil and gas producers, she said she and other backers of the state's climate change law must explain that even with short-term pain, a renewable energy economy will be less expensive for New Yorkers.

“It is always very, very hard to get people to change what we do,” Stewart-Cousins said.

That was clear during a contentious and partisan debate recently in which the Senate passed a new version of the Heat Act.

“It’s going to cost us trillions of dollars to eliminate our natural gas,” Sen. Mario Mattera (R-St. James) said. “What are we doing for our middle class? How are they going to go and pay for something like that?” asked Mattera, a former plumbers union leader.

The politically powerful New York State AFL-CIO, a federation of 3,000 unions statewide, also opposes the bill as a threat to members’ jobs. AFL-CIO President Mario Cilento said union jobs must be protected “to maintain the reliability and resiliency of the energy grid” and eventually retrained for a renewable energy economy.

Senate Finance Committee chair Liz Krueger (D-Manhattan) argued the renewable energy industry is creating jobs, and that the cost of renewables continues to decline as more customers come onboard, while oil and gas prices rise. Krueger's argument mirrors findings in recent academic studies by The National Academies of Sciences, Engineering and Medicine and Oxford University. 

 She said critics who want to slow the transition are wrong.

“Saying it’s too early is a little bit like closing your eyes and hoping everything you know about climate change isn’t happening,” Krueger said. “We have to move forward. We can pretend we don’t need to do these things but we do.”

The Heat Act 

would also lower utility bills by requiring companies to provide tax credits and discounts for customers who take steps toward energy efficiency, such as operating appliances at night and buying electric vehicles.

The bill also notes energy companies will be able to afford some of the cost because utilities will save about $200 million a year by no longer having to hook up new construction to natural gas lines under a 43-year-old state regulation called the 100-foot rule.

The Heat Act calls for ending the 100-foot rule. The law stems from the days when New York sought to encourage greater use of natural gas to move away from dirtier coal and oil energy sources. Ending that provision would eliminate the companies’ cost, which has been passed on to ratepayers.

Hochul’s budget proposal includes most provisions of the Heat Act, but not the 6% cap on ratepayers’ costs. Instead, Hochul proposes to rely on the state’s energy sector regulator, the Public Service Commission, to provide incentives for expansion of renewable energy and to issue regulations to limit costs passed on to ratepayers. Hochul also proposes more tax incentives to encourage New Yorkers to use renewable energy at home and work.

The Senate’s Republican minority last week stated at a news conference that the Heat Act’s 6% cap on utility bill increases protects lower- and moderate-income households “while hard working middle-class families bear the burden.” 

Rate increases would have to be approved by the state Public Service Commission with a mission to minimize rate increases during the transition to renewable sources of power.

Under the Climate Change Superfund Act, the cost of transitioning to a renewable energy economy couldn’t be passed along to consumers because the assessment would be on huge, international oil and gas companies as a cost of doing business in New York. The bill is patterned after 1980s federal and state pollution laws that make polluters pay for industrial cleanup.

The bill’s sponsors say it would pay the full cost of climate change construction and resiliency projects to gird places such as Long Island against extreme storms triggered by climate change. They say forcing companies to pay for current and future climate change costs will save families about $400 a year.

Critics of the bill, however, question whether companies would find a way to pass costs along to ratepayers. 

“Governor Hochul is now faced with a budget choice: Keep New York taxpayers on the hook for mushrooming climate costs or shift some to Big Oil,” said Blair Horner, of the New York Public Interest Research Group.

“I think at the end of the day there can be a way to protect the ratepayers from the cost of this,” said Assemb. Michaelle C. Solages (D-Elmont), the deputy majority leader. “As a state legislature, we are looking at how we can ease the energy burden on ratepayers and put the burden on these big polluters, who have known that climate change has been created by the use of fossil fuels.”

Independent researchers are finding the cost estimates of the transition, however, may be outdated and misleading.

Converting to a clean and renewable energy is much cheaper than “business as usual,” according to a report by The National Academies of Sciences, Engineering and Medicine. The study said the cost of building and operating wind and solar energy technology continues to drop.

“The transition to net zero requires spending less than what we’ve spent on energy in the past 30 years,” said Stephen Pacala, a Princeton University professor emeritus involved in the report.

Another widely cited, peer-reviewed economic study by Oxford University found moving to a renewable energy economy faster saves more money than a slow transition, and the transition will spur the economy. The lead author of the Oxford study, Rupert Way, told Newsday many of the high estimates of the transition’s costs are outdated because of innovation, rapid deployment of renewable energy projects, strong market competition and the all-time low cost of more efficient batteries to store energy.

Way said the reports of high transition costs also neglect to include the savings from reduced maintenance and operation of fossil fuel-fired plants, eliminating the higher cost of oil and gas, and the damage of continued growth in carbon emissions from reliance on fossil fuels.

“A rapid transition to net zero easily wins on a cost-benefit analysis,” Way said. “There’s no reason to think that costs to ratepayers … (or) taxpayers have to go up. With sensible rate design and policies, rates can stay level or potentially decrease.”

Editor's Note: An earlier version of this story incorrectly described a proposal to hold down total annual increases in utility bills. The legislation would cap energy bills at no more than 6% of household income.

By Michael Gormley

michael.gormley@newsday.com@GormleyAlbany

Michael Gormley has worked for Newsday since 2013, covering state government, politics and issues. He has covered Albany since 2001.