The Williams NESE gas pipeline is not better the second time around

National Grid, a gas utility, contends downstate New Yorkers (New York City and Long Island) should pay for construction of a new interstate pipeline. The proposed Northeast Supply Enhancement Project (NESE) gas pipeline would ship fracked natural gas from Pennsylvania to Downstate New York for combustion in homes, businesses, and Long Island power plants. The Institute for Energy Economics and Financial Analysis (IEEFA) has examined the project and concludes the pipeline is unnecessary.

• Ratepayers would be on the hook for NESE’s construction costs and for the return-on-equity (ROE)—the profit federal regulation allows for such a capital expenditure. National Grid reports the pipeline would cost an estimated $1.064 billion, but the rate of construction inflation suggests the estimate should be $1.25 billion, and other factors may raise costs. National Grid already expects to pay nearly two and a half times more (2028 present value) over 15 years under a negotiated agreement, presumably to cover construction and operation plus the ROE. The utility’s long-term gas strategy does not disclose what would happen if construction costs rise. 
• Ratepayers would also be on the hook for the cost of new infrastructure National Grid would build to manage the NESE gas, and the ROE authorized for the utility’s profit by New York’s Public Service Commission (PSC).
• The NESE pipeline would not provide direct permanent jobs in New York—only in New Jersey—according to project documents. Only about 9% of the direct construction jobs would be located in New York. And much of the work in New York would involve installing underwater piping across the harbor, which requires specialized skills.
• The profits from NESE would largely go out of state. Consumer bill payments to National Grid would support the utility’s payments to the developer, Williams Company, headquartered in Tulsa, Oklahoma. In contrast, under the non-pipeline approach set out in National Grid’s current plan, ratepayer money primarily funds local installation and maintenance of locally-sited renewable energy or local energy efficiency services.
• National Grid asserts the NESE would reduce electricity prices statewide in winter by abating congestion at gas gathering points, but this claim does not appear well-justified by available data. Even if easing gas system congestion did reduce New York’s electricity prices, the effects may be short-lived given New York policies designed to lower natural gas demand. Also, if investments in gas infrastructure divert capital from comparatively cheap renewable energy, consumers could see higher long-run electricity prices. Regardless, consumers in Downstate New York would reap only a fraction of any statewide electricity price benefit, while bearing all of NESE’s substantial cost. 
• The NESE’s adverse impacts are not necessary. National Grid is not facing an urgent, pending, unmet demand. The PSC’s consultant observes if existing trends continue, a supply-demand gap would not likely occur before 2041/42. Additionally, more flexible non-pipeline methods exist to manage and reduce peak demand. And as new demand arises, it encounters a market in which customer choice for space heating, water heating, and cooking is not limited to gas combustion. 
• Although National Grid argues the pipeline would support new data centers, ratepayers should not bear that burden, and data centers raise a plethora of economic and environmental concerns.

Strategic planning for energy efficiency and demand management to meet peak demand in Downstate New York is reasonable, but capital construction of major new gas infrastructure is not.