Sticker shock awaits New Yorkers' utility bills to fund renewables

Hans Pennink/AP Photo

ALBANY, N.Y. — New York is eager to move away from fossil fuels. Customers, though, will feel the switch in their wallets.

The state has largely funded the recent investments in clean energy, electric vehicle chargers, heat pumps and new transmission lines incrementally through piecemeal decisions by the quasi-independent Public Service Commission, which regulates utilities.

But larger bills for the aggressive transition are increasingly coming due, and it has the potential for sticker shock for ratepayers — a byproduct of the tremendous complexity of shifting from from fossil fuels to heat and power homes and businesses.

Some of the costs are already impacting utility bills, but more are set to hit in the coming years as projects come online.


"Financing them exclusively through rates, particularly on residential, is the least progressive mechanism for financing anything. We make no judgment whether you have the money to pay or you don't have the money to pay," John Howard, a commissioner on the Public Service Commission, said at last month’s meeting.

While lawmakers' concerns are growing over the impact on consumers, they have few levers to shift course on the already-approved costs.

A wholesale transition of the state’s energy system is not optional: It is mandated under a sweeping 2019 law requiring 70 percent renewable electricity by 2030 and an emissions free grid by 2040, alongside overall reductions in planet-warming gasses. So it requires a wholesale electrification of the state’s economy if New York is to meet the statutory targets.

The nation-leading initiative won’t come cheap, even though the changeover represents just a small fraction of the state’s economy. Total costs are a small percentage — less than 1 percent in 2030 and 1.3 percent in 2050 — of the state’s total economic output, according to the state’s analysis. Incorporating the value of avoided emissions along with health benefits shows an overall benefit from the shift, the analysis shows.

Paying for renewables

How much people’s bills will rise over the next decade is still a guessing game. Policymakers have declined to outline in detail the costs of the shift on utility bills or individual households, arguing such evaluations will come as individual policies are considered.

It’s clear that the near-term impact of the state’s policies is upward pressure on utility bills as consumers already are grappling with soaring energy prices and inflation.

“It is not that I am personally against the need to decarbonize our system rapidly and efficiently. It's just the way we're paying for it,” Howard said.

The most recent example is a decision last month by the PSC approving an estimated $4.4 billion in costs to be paid statewide for transmission upgrades by utilities. The costs may ultimately be higher or lower and won’t be fully felt until they’re completed.

Because of the way the costs are allocated, upstate customers will see larger percentage increases. That has raised concerns for Assembly Energy Committee Chair Didi Barrett, (D-Columbia County), who urged PSC chair Rory Christian to reconsider.

“Providing clean, renewable energy is of the utmost importance to achieving our climate goals. That said, disproportionately increasing utility rates for Upstate New Yorkers to subsidize the cost of expanding transmission lines that move energy downstate is certainly not in alignment with our ‘community protection’ commitment,” Barrett wrote in the letter March 1.

Barrett notes that the electricity mix upstate is mostly emissions free while the downstate grid is dominated by fossil fuels.

“Why is the cost of transmitting energy produced in Upstate New York being borne on Upstate ratepayers, rather than those actually consuming the energy?” Barrett asked.

Christian in a letter responding to Barrett said the transmission upgrades were being made in response to the Legislature’s mandates and that without a statewide allocation, the costs would have been borne solely by the upstate utility customers where the projects are located. He said the commission did not have any “taxing authority, bonding authority, or other vehicles to pay for significant infrastructure investments.”

A question of cost

Gov. Kathy Hochul recently defended the planned hike in electricity bills. She said ultimately costs for energy would drop as more renewables come online.

“This is long term going to result in people having lower utility bills, lower utility bills that are better for the environment, better for the next generation,” Hochul told reporters in Buffalo. “But transitions are complicated. They're tough. And that's what we're trying to work through right now.”

Lower total household energy bills are expected in advanced economies under a net-zero emissions scenario, according to the International Energy Agency. Households would also be more insulated from spikes in gas and oil prices, seeing lower bills in such a situation — like the high prices following Russia’s invasion of Ukraine — compared to a less aggressive decarbonization effort.

The recently approved transmission upgrades are needed to ensure new renewables receiving state contracts (those costs are also passed on to ratepayers) can deliver electricity to the grid and ultimately ensure it can flow to where it’s needed, mainly downstate.

The commission decided that costs should be spread statewide based on the amount of power used by utilities and ultimately their customers. Because the damage from climate change affects everyone, the costs of reducing emissions should be shared, the thinking goes.

Because upstate customer electricity bills are lower than from Con Edison and other downstate utilities, the state’s method of allocating costs is going to be more keenly felt by those customers.

On a percentage basis, the estimated hit to bills in 2030 for NYSEG residential customers is 4.4 percent and for Con Edison customers it’s 2.2 percent.

Big industrial users of energy will see steeper hits: more than 10 percent for NYSEG compared to less than 4 percent in Con Edison’s territory, according to the DPS staff analysis.

That’s only one piece of the state’s efforts to meet its climate goals, and higher gas and electric bills aren’t anything new.

What's next for ratepayers

Ratepayers have already paid about $3 billion to keep the upstate nuclear power plants online since 2017 and are poised to also support new onshore wind and solar projects once they are completed. Offshore wind contract costs will also be divvied up statewide.

A 2020 analysis of those programs found that bill impacts for onshore renewable subsidies would be 0.5 percent and offshore wind would be 1.1 percent over the lifetime of the projects.

The costs were outweighed by the benefits of reducing carbon emissions, according to the state analysis. That didn’t incorporate the health benefits of reducing co-pollutants that contribute to higher asthma rates and premature deaths.

Two transmission lines to deliver electricity from upstate renewables and Canadian hydropower to New York City were estimated to potentially increase bills for National Grid customers either 3.7 percent or 8.8 percent in 2028, depending on a key decision about revenues earned by one of the lines at the state’s independent grid operator.

But that impact is expected to be lowered by New York City government and private buildings purchasing some of the electricity from the lines to comply with local emissions reduction rules instead of all the costs getting allocated statewide.

A portion of the potentially multi-billion transmission projects to integrate offshore wind plugging in on Long Island will also be shared statewide. Upstate ratepayers will see higher percentage impacts from those costs, as well.

Other costs that are hitting utility bills over the coming years include, according to decisions by the Public Service Commission:

  • $700 million to subsidize electric vehicle chargers

  • $454 million for heat pump subsidies

  • $1 billion to subsidize small-scale solar projects and more.

Some of the costs of utility investments to support the state’s climate law are difficult to parse out, because they are included in rate hike proposals from utilities. That includes utility investments in electric vehicle chargers, storage projects, transmission upgrades to integrate renewables and other programs.
The state is trying to provide some help and ensure low-income customers aren’t hit too hard.

The Public Service Commission has a stated goal of keeping utility bills at 6 percent or less of household income and has approved programs to eliminate unpaid bills accrued during the pandemic. Hochul also proposed $200 million in additional utility bill assistance for state households with income below the median, but ineligible for other programs.

Regulators appear to be moving toward better accounting over the expenses that will be passed on to consumers.

The Public Service Commission last year kicked off a proceeding to more closely track annual spending to support the state’s climate law. The Department of Public Service staff is required to make an annual presentation about costs and benefits of spending related to the climate law over the previous year. Nonetheless, it is not required to evaluate the future impacts of all the approved programs on utility bills.

Supporters of the state’s climate efforts point out that additional investments would need to be made in New York’s aging electricity grid anyway. The transition to cleaner energy sources and investments in energy efficiency will ultimately have benefits for residents, they said.

In particular, there are benefits to reducing co-pollutants in disadvantaged communities that are disproportionately impacted by these emissions and suffer harmful health effects, said Chris Casey, a senior attorney for the Natural Resources Defense Council.

“State policies that are spurring New York's clean energy transition are essentially addressing externalities of the energy system that have devastating impacts on human health and environment and that have really tangible costs for New Yorkers, but costs that have not been reflected in the cost of utility service,” Casey said.

“Energy prices should become significantly more predictable and stable in the future under the clean energy transition, which will make managing costs a whole lot easier for New Yorkers and businesses alike.”