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On August 9, 2018, the New York Public Service Commission approved a petition by Consolidated Edison Company of New York, Inc. (Con Edison) for a $5 million, three-year natural gas demand response (DR) pilot program, among the first uses of DR for natural gas. Demand response programs help manage utility usage during periods of peak demand.

According to Con Edison, firm natural gas demand on its peak-day has increased by more than 30% between 2011 and 2017 and is expected to grow by an additional 23% over the next 20 years. This increase is driven by a preference for natural gas in new construction and switching from heating oil to natural gas in existing facilities. The transition resulted from a 2011 mandate to reduce use of heavy heating oil in New York City and the decline in natural gas prices since 2011.

In its pilot program, Con Edison proposed two methods of natural gas DR that closely match its existing electric DR programs. For residential and small commercial customers, it proposed using direct load control to adjust customers’ thermostats during peak natural gas demand days, with financial incentives for participation offered for up to 1,000 customers through 2021. For industrial, large commercial, and multi-family residential customers with centralized boilers, Con Edison proposed to achieve demand reductions via financial incentives alone when peak demand days are forecast. The company aims to enroll 500 new customers each year of this portion of the pilot program. Overall, Con Edison anticipates that it can meet approximately 1% of its anticipated shortfall in firm pipeline capacity with this pilot program.

Con Edison has firm pipeline transport contracts that enabled the company to meet 83% of its peak-day demand in winter 2017-18. To meet the rest of its peak-day natural gas demand, Con Edison purchases delivered services (also known as peaking contracts) from other companies. Unlike firm transport contracts, which generally have renewal rights, delivered services are not guaranteed to be available in any given year, especially if competing natural gas use elsewhere continues to increase.

Con Edison estimates that by the winter of 2023-24, its firm pipeline contracts will meet only 78% of its peak-day demand absent any new pipeline capacity. However, no remaining firm pipeline capacity is currently available into New York City or Westchester County, and recent attempts to add pipeline capacity have stalled as a result of regulatory challenges. Con Edison is now planning alternative measures, including DR, to help ensure all its customers are served on the coldest days of the year.

Although DR has become fairly common in the electricity sectorover the past 10 to 15 years, programs to reduce natural gas demand have only recently been adopted. In early 2017, SoCalGas pilotedthe Seasonal Savings program, which used direct load control to adjust about 50,000 residential thermostats according to a household’s schedule and preferences to reduce short-term peak demand. In the winter of 2017-18, 16 National Grid customers in New York City and Long Island participated in a DR program aimed at commercial and industrial customers, where large heaters or machinery run on natural gas were turned on and off to manage peak demand days.

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