A coalition of environmental organizations wants the Public Service Commission (PSC) to use its upcoming Grid of the Future plan to lower electric delivery rates for customers who heat with electricity. I agree that utility rates should reflect the costs customers impose on the system. However, this petition is a narrowly targeted rate change designed to accelerate heat pump adoption, and it never asks the question that Governor Hochul’s new Energy Infrastructure Development Plan (EIDP) is supposed to answer: what electric system will serve all that new winter load reliably and affordably? This post explains the petition, how it fits with the EIDP, and why I think the order of operations is backwards.
I am convinced that implementation of the Climate Leadership & Community Protection Act (Climate Act) net-zero mandates will do more harm than good if the future electric system relies only on wind, solar, and energy storage because of reliability and affordability risks. I have followed the Climate Act since it was first proposed and have written extensively about New York’s net-zero transition. I have devoted a lot of time to the Climate Act because I believe the ambitions for a zero-emissions economy outstrip available technology. The opinions expressed in this article do not reflect the position of any of my previous employers or any other organization I have been associated with; these comments are mine alone. I acknowledge the use of Perplexity AI to research the material summarized in this article and prepare an initial draft.
Overview
The Climate Act established a New York “net-zero” target (85% reduction in greenhouse gas emissions and 100% carbon neutral by 2050) and requires a zero-emissions electric system by 2040. Electrifying building heat is central to the state’s strategy, which means the electric system must handle a large new winter heating load. That is why rate design for electric heat customers matters, and why it cannot be separated from the question of what resources will serve that load.
On October 6, a coalition of advocates held a press conference urging the PSC to reform electric rates before the Department of Public Service (DPS) releases its updated Grid of the Future plan. That plan is now due October 30, 2026, after the deadline was extended from June 30. The press conference publicized a May 5 petition filed by the Environmental Defense Fund, Alliance for a Green Economy, Building Decarbonization Coalition, Earthjustice, New Yorkers for Clean Power, Rewiring America, and Sierra Club hat argued that a special electric rate for heat pumps was appropriate.
In May, I published a guest post by Scott Endler that addressed an earlier iteration of the proposal from these organizations. He made a persuasive argument that carving out a special rate class for heat pumps is the wrong fix; a capacity‑based, technology‑neutral delivery charge tied to real‑time grid conditions would be fairer, more durable, and far more honest about who actually drives system costs. I think this issue needs to be addressed again.
What the petition asks for
The supporting filing includes letters from heating equipment and HVAC businesses, including Mitsubishi Electric and Daikin Northeast; a letter signed by 78 advocacy organizations; comments from the NYU Institute for Policy Integrity; and a letter from state legislators led by Senator Liz Krueger and Assemblymember Anna Kelles. The legislators’ letter explicitly ties the request to the state’s electrification goals.
At the press conference, advocates added two more ideas. New Yorkers for Clean Power claimed that virtual power plants (networks of household batteries, smart thermostats, and electric vehicles) could avoid almost $3 billion a year in grid costs, based on a Brattle Group study estimating 8.5 GW of flexible resources by 2040. The Solar and Storage Industries Institute promoted “flexible interconnection,” where solar projects connect without expensive upgrades in exchange for curtailing output when local lines are overloaded. In May I addressed this gimmick. In brief it has no value during extended periods of light winds, low solar availability, and snow-covered solar panels. It simply cannot provide necessary power to replace an existing peaking power plant during these periods. I do not think we cannot afford to invest in these “solutions” that do not work when needed most.The petition’s core claim is based on an analysis by the nonprofit Switchbox. It says that households that heat with heat pumps have an electric delivery cost of service only 2% higher than gas-heated households, but their delivery bills are 109% higher. The result, according to the petitioners, is that heat pump customers overpay about $855 per year and electric resistance customers about $873 per year. Statewide, the petition estimates overpayments of about $170 million for heat pump customers and $570 million for electric resistance customers, or about $740 million per year in total.
Their argument is straightforward. Residential delivery rates recover much of the fixed cost of poles and wires through a flat per-kilowatt-hour charge. Heat pump customers use a lot more electricity in the winter, when the system currently has spare capacity, so they pay more than the costs they cause. The petition asks the PSC to:
- Include a directive in the Grid of the Future plan to offer rate options for electric heating customers, followed by a technical workshop within 60 days;
- Direct utilities to implement cost-of-service-based delivery rates for electric heating customers by December 31, 2027; and
- Require customer outreach and public reporting of rate and participation data.
What the Petition Gets Right
I want to be fair about this. Cost causation is a sound ratemaking principle, and I have consistently argued that policies should be judged by the full costs customers actually pay. If a customer class is paying substantially more than the cost to serve it, that deserves examination. However, ratepayers deserve the full accounting for the future energy system not just cost estimates from organizations with vested interests.
The petition also makes a legitimate equity point. Electric resistance heat is common in older rental units, and those tenants usually have no ability to switch heating systems. If they are overpaying by hundreds of dollars a year, that is a real affordability problem regardless of anyone’s climate goals.
Where the petition falls short
It shifts costs; it does not reduce them
The delivery system costs the same no matter how rates are designed. The petition itself explains that when revenues from electric heat customers exceed their cost of service, the excess is returned to all ratepayers. Lowering rates for electric heat customers therefore means raising them for everyone else. If the $740 million estimate is right, that is the amount that would move onto the bills of gas-heated households and homes that use propane and fuel oil, many of whom are also struggling with affordability. The petition models “other customers on adjusted default rates” but does not commit to a revenue-neutrality test or show the bill impact on the customers who would pay more. Any honest description of this proposal has to say that someone else picks up the tab.
It assumes a winter grid that will not last
The whole overpayment argument depends on the grid being “generally less constrained” in winter. The petition does not discuss what happens when that is no longer true. The news coverage of the press conference itself notes that NYISO expects New York to become a winter-peaking system by the mid-2030s. Heat pump load is the main reason why.
In other words, if the discounted rates succeed in their purpose, they eliminate their own justification. Once winter becomes the peak, cost-based rates for electric heat customers would have to go up, not down. Any discounted rate approved now should include an automatic review tied to the seasonal peak so that customers are not promised savings that cannot be sustained.
It ignores supply and the dark doldrums
The petition addresses delivery rates only and says supply charges are a separate matter. From a reliability standpoint, though, supply is the hard part. As a meteorologist I know that the coldest periods are typically associated with high pressure, light winds, and short days with low sun angles, i.e., dark doldrums. During those conditions heat pump efficiency drops, backup resistance heat kicks in, wind and solar output can be minimal, and natural gas is in highest demand for both heating and power generation. Pushing more heating load onto the electric system without a plan for dependable generation during those periods moves risk from the gas system to the electric system. In my opinion, that increases risk because the gas system is less likely to be impacted by weather related outages.
Virtual power plants do not solve this problem. Shifting a thermostat setting or a battery charge by a few hours helps on a summer afternoon peak. It does not provide energy through a multi-day arctic outbreak. The $3 billion savings figure is a modeled estimate that depends on future customer participation, not a verified result.
The savings claims do include capital costs
The petition says that under its proposed seasonal rate, 72% of gas-heated households would save money by switching to heat pumps, compared with 27% under current rates. As far as I can tell, these are comparisons of annual energy bills. They do not appear to include the installed cost of heat pump equipment, ductwork, electrical service upgrades, or building envelope improvements, which are the major barriers for most homeowners. A rate discount that improves the bill comparison does not make the capital cost go away. It is also worth noting that several supporters of the petition sell the equipment that would benefit.
How this fits with Hochul’s EIDP
Governor Hochul announced the EIDP on September 22 as a state-led integrated planning process to identify the generation, transmission, storage, and distributed resources needed to serve growing load reliably while controlling costs. As I noted in my earlier post, the EIDP is a process, not a plan: an interim plan is due in 2027 and the first comprehensive plan by December 2029.
| Issue | Rate Petition | EIDP |
| Scope | Delivery rates for electric heat customers only | Integrated generation, transmission, storage, and distributed resources |
| Load growth | Designed to accelerate electrification load | Supposed to plan for that load |
| Winter peak | Assumes the winter grid has spare capacity | Must plan for a winter-peaking system |
| Supply and reliability | Not addressed | Central purpose, but firm-capacity needs not yet quantified |
| Timing | New rates in place by end of 2027 | Interim plan 2027, comprehensive plan December 2029 |
Both efforts fit under the Governor’s affordability-and-electrification messaging, but they pull in different directions. The EIDP is supposed to decide what system New York needs. The petition would lock in rates designed to increase winter demand on that system before the planning is done. That is the same problem I have raised about the Climate Act transition as a whole: New York keeps adopting policies to drive the transition before deciding what energy system it wants and confirming that it can be built and operated reliably.
Recommendations
If the PSC takes up this petition, I recommend the following conditions:
- Require revenue neutrality and full disclosure. Any new electric heat rate should come with a public estimate of the bill impact on every other customer class.
- Build in a sunset tied to the seasonal peak. Discounted winter delivery rates should be reviewed automatically as the system approaches winter peaking.
- Address electric resistance customers on their own merits. The equity case for low-income renters is stronger than the case for subsidizing new heat pump installations and should be considered separately.
- Tie electrification incentives to EIDP resource adequacy findings. The state should not use rate design to accelerate winter load growth until the EIDP identifies the dependable resources that will serve it during extended cold weather.
Conclusion
The petition does not address the issues Scott Endler raised last May.
I agree with the principle behind this petition: customers should pay rates that reflect the costs they cause. However, the petition applies that principle selectively, to a system condition that its own success will change, and only to delivery costs. It shifts hundreds of millions of dollars onto other ratepayers and says nothing about how the electric system will keep the heat on during the coldest days of the year. The Grid of the Future plan should not put rate incentives for electrification ahead of the Energy Infrastructure Development Plan’s job of determining what system New York actually needs. Once again, the state is being asked to accelerate the transition before it has a plan that shows it will work.
