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In landmark agreement, RG&E, NYSEG seek to cap natural gas use

Steve Orr
Rochester Democrat and Chronicle

In a first-of-its-kind agreement, Rochester Gas and Electric Corp. and New York State Electric and Gas Corp. have pledged to work toward zero growth in natural gas sales over the next three years and will cancel plans for two new pipelines and other new gas infrastructure.

Instead the utilities, which serve the Finger Lakes and Southern Tier regions, will push energy efficiency and environmentally friendly ways to heat and cool homes.

Financial incentives will be offered for highly efficient heat pumps that replace gas-burning furnaces, and funding will be set aside to encourage heat pump installation to benefit low- and moderate-income residents.

Work crews from Nothnagle Drilling resume drilling and pumps air into the hole as Geothermal energy system is installed at Evan Lowenstein's home on Arlington Street in Rochester.

The agreement is incorporated in a proposed rate-case settlement negotiated in private and filed publicly June 22 in a proceeding before the state Public Service Commission.

No regulated utility has ever agreed in a rate case to cap the growth in the use of natural gas, much of which is used for heating homes and businesses.

"We would like to see them go farther than they did, but it is significant in that this is one of the first times in New York state that a utility has even considered not growing their gas business," said Kristen Van Hooreweghe of the Rochester People’s Climate Coalition.

The coalition and several other environmental groups intervened in the rate proceedings in hopes of emerging with a settlement that would advance the goals of the state Climate Leadership and Protection Act.

The law, adopted last year, sets hard targets for reducing greenhouse gas emissions and transitioning to non-polluting sources of electricity.

"We had a coalition of environmental groups that were constantly, constantly, constantly bringing this up. We were saying ... that the writing is on the wall that this is coming. Better to start looking in that direction now rather than be caught on your heels," Van Hooreweghe said.

RG&E and NYSEG, which are owned by Spanish energy giant Iberdrola SA, were receptive to the idea, spokesman Michael Jamison said.

"The gas case that the parties agreed to is by far the most progressive gas case ever filed in New York and one of the most progressive in the nation. We’ve very proud of that," Jamison said. "It affirms the company’s commitment to helping the state achieve its greenhouse gas goals."

'Stop burning stuff'

Evan Lowenstein, who is the communications director for the climate coalition, decided not long ago to put his money where his mouth is. He and his family are in the final stages of having a geothermal heat pump installed in their home in the city's Neighborhood of the Arts.

Evan Lowenstein is having Geothermal energy installed in his Rochester home by Nothnagle Drilling.  He says it is worth the investment for the lifetime savings it will return.

"It’s the lowest maintenance, it’s the lowest operating cost. You’re paying more up front but it will pay back in savings probably in less than 10 years," Lowenstein said last week.

As he spoke, a crew maneuvered a drilling rig in his home's tiny backyard, which was, for the moment, nothing but bare soil.

"It’s all going to be worth it in the end," Lowenstein said. “It's (a) temporary disruption in return for a lifetime of clean energy."

Heat pumps work by cycling a refrigerant through closed loops between the condensation stage, where heat is absorbed, and the evaporation stage, where heat is given off.

Through this process, an interior space can be either cooled or heated. They run solely on electricity.

Work crews from Nothnagle Drilling  drilling holes as Geothermal energy system is installed at Evan Lowenstein's home on Arlington Street in Rochester.

"A heat pump is a technology that helps us move from direct burning of fossil fuels for heat, and that has a big environmental impact. The idea is to stop burning stuff and move to really efficient electric systems that can be powered with renewable energy," said Jessica Azulay of the Alliance for a Green Economy, a Syracuse-based group that also intervened in the rate case.

The simplest and most common type draw heat from the outside air. But these air-source heat pumps are less efficient and can struggle when air temperatures are too low, said A.J. Heiligman, owner of ACES Energy, a Honeoye Falls company.

ACES installs geothermal heat pumps, which take advantage of the fact that the Earth is a constant 50 to 55 degrees starting a few feet below the surface. They're far more efficient.

A geothermal system, which involves drilling or digging down into the earth to install refrigerant loops, is not cheap. The average residential system is about $20,000 once federal and state financial incentives are applied.

Heiligman's company has been installing geothermal heat pumps for a dozen years through the Rochester-Finger Lakes region, in businesses and in homes both large and small.

The expectation is the three-year RG&E/NYSEG agreement will drive more business to companies like ACES. The proposed settlement, which awaits public comment and approval by the commission, is expected to go into effect in the fall.

Addressing a major barrier

The companies have pledged to bring about building energy efficiency work and heat pump installations, and will consider installing pilot geothermal district systems that would serve a cluster of homes or businesses.

An example of a district system can be found off Atlantic Avenue, where Heiligman said his company has installed geothermal loops that serve a group of buildings housing Nosh and Old Pueblo Grill, a florist, a fitness center, art studios, residential apartments and other tenants.

The Rochester and Ithaca areas would be preferred locations for pilot projects. Van Hooreweghe thinks the former site of the Inner Loop in downtown would be an ideal spot.

Van Hooreweghe said the companies also have removed "gas is good" material from their website and their bill inserts.

"They’ll be eliminating all of their marketing around natural gas and doing much more promoting and educating about heat pumps," she said.

She is particularly pleased that RG&E will provide $750,000 to subsidize heat pumps in disadvantaged neighborhoods.

"We know the cost of heat pumps can be prohibitive. We really pushed hard (for that money) to help make that transition easier," said Van Hooreweghe, who works with a program to promote sustainable energy use in the city. "I think it helps to address a major barrier that we see in our community."

The agreement in no way limits the amount of natural gas any of the utilities' 576,000 customers can use. Increases in consumption by existing customers and arrival of new customers is inevitable.

Instead, the plan is that reductions in gas use through the adoption of heat pumps and other efficiencies will offset the growth that occurs with natural gas customers.

Jamison said the Iberdrola companies are proud of the agreement and are committed to the zero-growth goal. For their part, Azulay and Van Hooreweghe said the environmental groups will be doing everything they can to make sure the companies live up to their promises.

It is, Van Hooreweghe said, in the companies' best interest.

"What we’re really advocating for is beneficial electrification. These are customers they’re switching from their gas business to their electric business," she said. "We tried to frame this as a business opportunity, not a loss."

Contact watchdog reporter Steve Orr at sorr@democratandchronicle.com or at (585) 258-2386. Follow him on Twitter at @SOrr1. This coverage is only possible with support from our readers. If you don't already have a digital subscription, please sign up today.