Con Ed Imposes Natural Gas Moratorium That Could Jeopardize Westchester’s New Development Market

John Jordan | January 2019

WHITE PLAINS—Westchester County political and business leaders are scrambling to gauge the potential economic impact of a moratorium on new natural gas connections for a majority of the county by utility Con Edison. Some fear the moratorium, to begin March 15, could all but halt several billion dollars’ worth of new development projects in the pipeline.

With thousands of new multifamily units in the development pipeline in major cities such as White Plains, New Rochelle, Yonkers, Mount Vernon and elsewhere in the affected areas of the county, the moratorium could at the very least delay and perhaps kill new development projects that have yet to break ground in the county. The impending moratorium would cover all of southern and central Westchester County, including its major cities—Yonkers, Mount Vernon, New Rochelle and White Plains and the Village of Port Chester. (Click here for larger view of map.)

The City of Peekskill, which also has a number of redevelopment projects under construction and in the pipeline, is not subject to the natural gas connection moratorium.

Con Edison released a statement on Friday, Jan. 18 blaming the heightened demand on new business and construction projects for imposing the moratorium.

“The demand for natural gas in our service area has been experiencing significant growth primarily due to the construction of new buildings, the opening of new businesses, and conversions from oil to cleaner-burning natural gas in existing buildings,” Con Edison stated. “But all of this new demand for gas is reaching the limits of the current supplies to our service area.”

The utility further stated, “As a result, and to maintain reliable service to our existing natural gas customers on the coldest days, we will no longer be accepting applications for natural gas connections from new customers in most of our Westchester County service area beginning March 15, 2019. There are some areas in the northernmost sections of the county where we have more capacity and may still be able to accept new customers. Existing customers are not affected by the moratorium.”

The moratorium applies to new residential, commercial and industrial customer gas service connections; incremental gas load on existing residential, and commercial and industrial customer gas accounts, unless it meets one of the exceptions, and new gas usage for heating, hot water, laundry and cooking.

Those exempted from the moratorium include certain small business customers in the food/beverage industry; customers in the northernmost sections of Westchester County; areas served by a less-constrained gas transmission pipeline and customers with planned renovations who already have natural gas.

The national recession that began in late 2007 put the brakes on the last development boom in Westchester County, including $3 billion worth of redevelopment projects in Downtown Yonkers and the city’s waterfront.

The City of Yonkers now has a host of major projects in the works and on the drawing boards once again for the Downtown and waterfront districts. Yonkers Mayor Mike Spano said in a statement in response to the Con Edison natural gas hookup moratorium, “The building boom in Yonkers seriously could be affected for as long as this moratorium lasts. Developers are already telling us they can’t build more housing or commercial buildings until this is resolved. Con Ed and the Public Service Commission need to implement an immediate plan to solve this.”

New Rochelle Mayor Noam Bramson said, “This obviously has serious potential implication for our entire region. We are consulting with government and utility officials in order to better understand options and constructive paths forward. It is essential that solutions emerge.”

New York State Assemblywoman Amy Paulin told the Journal News in a published report that the moratorium could “devastate” local development.

HGAR Chief Executive Officer Richard Haggerty said the gas connection moratorium impacts both the commercial development and the residential real estate markets in most of Westchester County.

“I don’t believe you can overstate the negative impact this moratorium will have on local development projects in the affected areas,” Haggerty said. “We also need to gauge the impact this will have on property owners and prospective purchasers who assume that the option of converting from oil to gas is always available, as this moratorium will certainly affect such conversions going forward.”

He continued, “Given the urgency of this matter, we will work with our industry partners, as well as our state and local elected officials, to start an immediate dialogue to try and arrive at some solutions.”

The Business Council of Westchester said that Con Ed’s announcement should serve as a “wake-up call for all who are focused on the economic present and future of Westchester and the entire metropolitan area.”

The BCW stated that it hopes to help establish and lead a task force to come up with short- and long-term solutions to the natural gas supply shortage problem in Westchester.

“While there is plenty of blame to go around for letting the situation reach a crisis, at this point the Business Council strongly believes that the focus must immediately turn to evaluating what steps can be taken in the shortest term possible to assure adequate natural gas is made available, the BCW stated. “Anything short of this will quite literally cripple the development and redevelopment efforts that have finally taken hold, most notably in the downtowns of our major urban centers, and that is not a viable option.”

In its statement, the business organization noted that while Con Edison’s announcement came as a surprise, it really shouldn’t have, noting that the supply crisis has been in the making for years with attempts to add natural gas capacity either rejected or muted by calls for new alternative energy sources in their place.

“We will propose formation of a task force that we would agree to lead that will be comprised of representatives of each of the sectors, the BCW stated. “The task force’s charge will be to explore and make specific recommendations on how best to address the gas supply shortage so that economic growth is not brought to a virtual standstill. We pledge to provide regular updates on next steps. There is no time to waste.”

Con Edison on its website stated that the demand for natural gas, fueled largely by customers switching from home heating oil to natural gas, “is outpacing its availability due to pipeline constraints in a portion of our service area.”

“We made every effort to explore alternatives to avoid a moratorium on new natural gas connections. While we are advancing new solutions—including substantial reductions in usage by existing customers and deploying compressed or renewable natural gas—we have not identified enough alternatives at this time to meet growing natural gas demand,” Con Edison stated. “We will continue to investigate pipeline projects that could meet New York’s requirements.”

There is no set timeframe for the moratorium’s duration. Con Edison on its website stated that it would “remain in effect until sufficient supply is available to meet new demand.” The additional supply could be obtained through additional non-pipeline alternatives, or a pipeline project that meets federal and local requirements.

While Con Ed noted that nationwide, natural gas supplies are plentiful, it noted on its website that transporting natural gas to its service area “is restricted by the lack of adequate pipelines to serve growing demand. The last new pipeline to our service territory went into service in 2013.”

James Denn, a spokesman for the New York State Public Service Commission, in a prepared statement, said, “Con Edison’s temporary moratorium is the result of a significant recent spike in demand for gas.  The company did not propose a pipeline to meet or address growing demand.  Existing customers are not affected by the moratorium, and new customers have several alternative heating options. To help prospective customers meet their energy needs in light of these market dynamics, PSC will be monitoring Con Edison’s engagement with customers to explore options to reduce their energy needs or meet their needs through non-natural gas energy sources.”

He added, “The commission is committed to ensuring that consumers have access to affordable, clean and reliable energy sources.  We will push all utilities to address changing market dynamics, while achieving our clean energy objectives and advancing economic growth.”

NYSERDA is supporting a Clean Heating and Cooling campaign in Westchester, which will provide assistance to consumers who are interested in switching to heat pumps to heat/cool their homes and businesses.

The PSC has already ordered utilities, including Con Edison, to increase energy efficiency and create demand-response programs to lower gas demand and save consumers money, and these programs are up and running. Meanwhile, NYSERDA and Con Edison are launching a jointly branded consumer awareness program to drive consumers to heat pumps in targeted areas, state officials noted.

In addition, under the Public Service Commission’s recent efficiency order, plans are underway to convert more than 80,000 homes across New York State, including Westchester County, to heat pumps by 2025.

John Jordan
Editor, Real Estate In-Depth