Developers Reportedly Adapting to Natural Gas Moratorium in Lower Westchester County
John Jordan | May 2019
WHITE PLAINS—The development community in Westchester County is being forced to adapt to a new norm—a moratorium on new natural gas connection hookups imposed by utility Con Edison on March 15. Thus far, there have been no reports of developers walking away from their projects in the county due to the imposition of the moratorium.
To the contrary, it appears that commercial developers building mostly large-scale mixed-use multifamily projects in the county are coping with the ever-evolving energy supply issue as government agencies and the utility industry come up with alternatives, new technology and additional funding to provide viable energy options and financing going forward.
However, business leaders are concerned that the natural gas moratorium over time could prove costly if proper measures are not taken to ensure project sponsors have the ability to tap into sufficient natural gas supplies or other viable energy sources.
At an energy conference staged by the Business Council of Westchester on May 10, energy industry officials, including Con Edison President Tim Cawley, business leaders and county government officials convened to discuss the impacts of the moratorium on new development projects in the affected areas of mostly lower Westchester County and detail programs developers, businesses and residents of Westchester can employ to offset the costs of utilizing alternative energy sources and new equipment as either their primary or backup energy systems.
Westchester County Executive George Latimer opened the “Running on Empty: Transition to a New Energy Landscape” conference at the Crowne Plaza hotel in White Plains by noting that he is confident that county government and the business community can work together to find solutions to the natural gas shortage issue so that it will not have a dramatic impact on the county’s economy in the years to come.
“We are struggling through a change that we are living through now,” Latimer said. “And that change is how are we going to provide energy for the things that we need in this society?”
He noted that in addition to the natural gas moratorium, the county and the region are facing the impending closure of Indian Point in 2021 and 2022.
Latimer told the more than 100 attendees at the conference that the future of how energy will be supplied to Westchester residents and business will be “in one part a discussion of science and the second part of the discussion will be political science.” The county executive related that while politically many are pushing for greener and cleaner technologies to be employed, such as geothermal and renewables, some of these energy sources have not matured or come at a higher cost.
Con Edison’s Cawley said that the imposition of the gas moratorium in March was due to the need of balancing gas supply with gas demand. He noted that market forces and a desire by many to convert from oil to natural gas helped contribute to a 30% increase in its natural gas business since 2011. That large spike in demand was not offset by new supply as he noted that the last natural gas pipeline to go into service was in 2013 to supply sections of Manhattan.
“I think we are at a stage where developers are exploring all opportunities, geothermal being one of them, partial geothermal (being another) and I think there is one residential tower that is going to use geothermal and supplement it with less use of natural gas…” Cawley said.
Cawley noted that the utility was flooded with natural gas connection requests from property owners after it announced in January its intent to impose the moratorium two months later.
While the utility expected “an aggressive ramp up in applications,” Cawley noted that in the eight-week span from the announcement to the start of the moratorium, the utility received what would normally be 15 months of natural gas connection applications from Westchester County customers.
Previously, a Con Edison spokesman told Real Estate In-Depth that during that eight-week period, the utility received more than 1,300 applications from properties for natural gas. For those applicants that are granted natural gas connection permits, they have two years from that date to have their projects ready to accept natural gas.
Cawley acknowledged the criticism leveled by developers and others in the business community over the short time period between January and March, but added, “So, while you needed to demonstrate your plans to connect to the natural gas system on a firm basis in eight weeks, we are going to continue business as we have for the next two years connecting those customers who have applications in on a ready to accept natural gas (basis). So, it was not as if we turned the valve (off) after 57 days,” he said.
Cawley detailed a number of steps the utility has taken as part of its Smart Solutions program that was approved recently by the New York State Public Service Commission. Those steps include providing incentives for energy efficiency measures; building renewable energy facilities and natural gas storage facilities in Westchester County, advancing efforts to reduce energy usage via the employment of heat pumps and geothermal technologies and expanding the compression capacity of existing pipelines to the region to increase the supply of natural gas.
Con Edison reported on April 24 it had reached an agreement with Tennessee Gas Pipeline to increase capacity in its existing natural gas pipeline that connects to Con Edison’s distribution system to Westchester County.
The deal, if approved, would upgrade and enhance the capability of the existing pipeline to transport additional natural gas for Con Edison and provide the incremental capacity to enable Con Edison to lift the moratorium. The utility said the new natural gas capacity from the Tennessee Gas Pipeline could be in service by November 2023.
On May 9, the utility announced it had reached a similar agreement with Iroquois Gas Transmission System, L.P. an existing natural gas pipeline, to develop and permit incremental natural gas capacity to the Bronx and parts of Manhattan and Queens.
Under the agreement, Iroquois Gas Transmission System, L.P. would provide increased natural gas capacity to Con Edison’s distribution system that serves New York City by upgrading compression facilities on the Iroquois system. These upgrades will enhance Iroquois’ capability to transport much needed natural gas supplies to Con Edison customers. Subject to the necessary permits and approvals, the incremental capacity could be placed in service by November 2023.
Cawley said that the combination of its Smart Solutions program and the existing pipeline expansion projects could allow the natural gas connection moratorium in sections of Westchester County to be lifted by Thanksgiving 2023.
A critical ruling could be coming down any day by New York State over whether to grant permits for the $1-billion Northeast Supply Enhancement Project that would supply natural gas to sections of Nassau County. Utility National Grid has threatened to impose a natural gas connection moratorium if that pipeline is not approved and has suggested it will not have enough power to supply the new development planned at Belmont Racetrack that will include a new stadium for the New York Islanders, according to a report in Newsday.
If this project is rejected, it could send a signal to utilities and developers that New York State is not interested in advancing any natural gas pipeline projects.
A major part of the energy conference involved presentations by the New York State Energy Research and Development Authority and Con Edison regarding various energy programs residents, businesses and developers can utilize to reduce natural gas usage, pay for new energy-saving technologies, etc.
Michael Reed, NYSERDA Team Leader, Advanced Efficiency Solutions, gave a presentation on the $250-million Clean Energy Action Plan that offers a myriad of grant programs for energy reduction initiatives.
For a full list of NYSERDA programs under the Clean Energy Action plan go to https://www.nyserda.ny.gov/All-Programs/Programs/Clean-Energy-Action-Plan.
The Clean Energy Action Plan provides relief for businesses and residents affected by a utility company gas moratorium. Through the plan, the state will help lower energy costs for consumers, promote economic development and provide additional resources for community awareness and support.
As part of the plan, NYSERDA is offering increased incentives for programs to help communities, businesses, and individuals access reliable clean energy alternatives to natural gas.
The Clean Energy Action Plan applies to Con Edison customers in Southern Westchester County and NYSEG customers in the town of Lansing, NY. To be eligible to participate in NYSERDA’s programs, an applicant must currently pay into the System Benefits Charge.
In addition to NYSERDA programs, the New York Power Authority and Con Edison will provide additional financing services to its customers as well.
The funding breakdown is as follows: $165 million in grants from the Con Edison Smart Solutions package that the Public Service Commission recently directed Con Edison to deploy toward heat pumps and increasing gas efficiency for residential, multifamily and commercial and industrial customers. Other program components include an additional $53 million in clean energy incentives and investments that NYSERDA will provide to Westchester customers; $28 million of which will be used for grants for new customers, including low-to-moderate residential developments waitlisted by Con Edison for natural gas to use alternative heating and cooling systems and adopt energy efficient solutions. The remaining $25 million in NYSERDA funding will be used to provide grants to improve energy efficiency in Westchester and reduce overall and peak energy demand from existing customers in the region to free up capacity.
An additional $32 million in low-cost NYPA financing will be earmarked for its Westchester customers to retrofit heating systems with clean energy alternatives.
John Ravitz, executive vice president and chief operating officer of the Business Council of Westchester, said that the major development projects in Yonkers, New Rochelle, White Plains and other sections of lower and mid-Westchester must be supported and allowed to begin construction.
Noting the high stakes at play, he said that all forms of energy must be studied carefully, including renewables, “to see what works and what doesn’t work, what will take time and what impact it will have on the communities…”
He said, “We have to have honest conversations about will renewables get us to where we want to be? Will renewables be able to allow us to have the development we seek that will create the jobs that will bring in the revenue to municipalities?”
Ravitz added that the Business Council, which has formed a task force to address the natural gas moratorium issue, believes that to solve the energy shortage problem, in addition to advancing renewable energy the expansion of natural gas pipelines to the county must also be considered.
The energy conference also featured a discussion with New York State Senator Kevin Parker, chairman of the Senate Committee on Energy and Telecommunications, and presentations by Robison Oil and Paraco Gas Corporation.