National Grid NYC gas customers face three years of rate hikes

 

New York City and Long Island residents who buy natural gas from National Grid face a whopper of a price hike. Consumer advocates say the increase that kicked in January 1 threatens the affordability of gas service to National Grid’s poor and elderly customers.

Public Service Commission regulators in December OK’d what they admit is a “significant” rate boost for National Grid’s 1.2 million gas customers in Brooklyn, Queens and Staten Island and 567,00 customers on Long Island.

Even the commission admits this hike is tough to swallow. “[R]ate shock is an obvious concern,” the commission wrote in its December 16 order. Pay attention when the commission’s bureaucrats veer away from their usual dry, technical language and use words like “rate shock” to describe the possible outcome of their decisions.

National Grid NYC gas billsThe graph at the right, based on information from National Grid, shows how the rate increase will affect New York City residents. It includes what National Grid charges you to deliver the gas to your home as well as the cost of the gas itself. According to these numbers, your bill will rise 9.4 percent in 2017, 9.2 percent in 2018, and 10 percent in 2019.

 

The graph at the left looks at similar data for the Rockaways and Long Island. According to these numbers, bills will jump 5.5 percent in 2017, 4.9 percent in 2018 and 5.2 percent in 2019.

Of course, exactly how much you end up paying depends on the price of natural gas. The state regulates what National Grid charges to keep up its system of gas pipes, meters, and other equipment. The price of the gas itself is not regulated, and fluctuates according to market conditions. Natural gas prices remain near historic lows. Government forecasters say heating bills will rise this winter, but still in line with average costs over the last five years.

An interesting point: National Grid’s Rockaways and Long Island customers in 2016 paid gas bills that were about 13.5 percent higher than National Grid customers in the city. By 2019, the company’s Long Island and New York City customers will pay more equal rates.

Another interesting point: a state government source tells NYP&L that even with this increase, National Grid customers in the city and on Long Island will pay less for gas than their neighbors in Con Edison territory.

Also, this source notes, even with the rate hike, lower natural gas prices mean National Grid customers will pay less than they did a decade ago. In 2007, a typical National Grid  gas customer in the city or Long Island paid about $1,680 for gas each year. Under the rate hike, the same customers will pay $1,280 in the city, and $1,406 on Long Island.

Cheap natural gas masks the real size of this rate hike. The Public Utility Law Project and AARP, which argued against the hike, subtracted out the cost of the gas itself and looked at the resulting numbers. By that calculation, National Grid’s take from its New York City customers will rise about 50 percent over the next three years. In 2017, the first year of the rate hike, National Grid will get an extra $272.1 million from its New York City customers, and an extra $112 million from its Long Island customers. The rate hikes in 2018 and 2019 will add to that total.

National Grid says the rate hike will help it spend $3 billion in the coming years improving its gas lines and other infrastructure in New York City and Long Island. That expenditure is in line with a Public Service Commission push to improve gas safety. The state says it wants crack down on companies that fail to fix leaky gas pipelines and other infrastructure.

A tiny part of the rate hike will pay to clean up some of the environmental mess along the Gowanus Canal in Brooklyn and Newtown Creek on the Brooklyn-Queens border for which National Grid is responsible. Some media reports wrongly said the cleanup is a big driver of the rate hike. But in fact, National Grid says, the cleanup will add about 36 cents per month to customers’ bills.

Nonetheless, National Grid’s customers ought to pay attention to this issue. They will pay all of National Grid’s share of the cleanup costs; none of this cost will be borne by the company’s shareholders. Consumer advocates feel the commission set a poor precedent by not requiring the company to pay at least some of the cleanup costs.

Also, it remains unclear how much the cleanup will cost, and how many years it will take. All anyone knows for sure is that the cost will be in the tens of millions of dollars.

Are the new rates fair? National Grid thinks so — it calls the state’s decision “fair and reasonable.”

James Denn, a spokesman for the Public Service Commission, offered this statement about the increase:

This three-year rate plan for National Grid will improve customer service and pipeline safety, fund environmental projects and increase financial assistance to low-income customers. These are the first delivery rate increases in nearly 10 years and since Superstorm Sandy. To be clear, customers’ overall bill will still be less than what an average residential customer was paying 10 years ago.

Another view: “How can you call this anything but rate shock?” asks Richard Berkley of the Public Utility Law Project, which advocates for low-income utility customers. For years, Berkley said, utility companies in the state have won small increases that over time add up to big increases. “Even if they are two percent, two percent, and two percent, they add up to real money. People have to pay them.”

Utility customers in their 40s and older suffer from high utility costs, AARP say in a recent news release:

Nearly six in 10 Generation Xers and Baby Boomers in New York City – and 70 percent on Long Island – say the cost of utilities is having a serious impact on their financial condition, a recent AARP NewYork/Siena College Research Institute survey found.

Con Ed customers are next up on the state’s rate-hike agenda. Expect state regulators to boost Con Ed’s residential gas and electricity prices later in January.

You might want to read this news story about the National Grid rate hike in the New York Post.

 

About Bill Sanderson

I'm a New York-based journalist, and a former reporter at the Concord Monitor in New Hampshire, the Bergen Record in New Jersey, and the New York Post. My work has appeared in The Wall Street Journal, MarketWatch.com and Politico New York. Twitter: @wpsanderson.
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