PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

The Commission is considering the August 10, 2022 filing of the Joint Local Distribution Companies (LDCs) regarding non-pipeline alternative cost recovery procedures and an incentive mechanism.

Gas system planning.

To consider cost recovery procedures and an incentive mechanism for non-pipeline alternatives.

The Public Service Commission (Commission) is considering a proposal for non-pipeline alternative (NPA) incentive mechanism and cost recovery procedures filed by the Joint Local Distribution Companies (Joint LDCs) on August 10, 2022. The Joint LDCs are Central Hudson Gas & Electric Corporation; Consolidated Edison Company of New York, Inc.; Corning Natural Gas Corporation; Liberty Utilities (St. Lawrence Gas) Corp.; National Fuel Gas Distribution Corporation; New York State Electric & Gas Corporation; The Brooklyn Union Gas Company d/b/a National Grid NY; KeySpan Gas East Corporation d/b/a National Grid; Niagara Mohawk Power Corporation d/b/a National Grid; Orange & Rockland Utilities, Inc.; and Rochester Gas and Electric Corporation.

In its Order Adopting Gas System Planning Process (Gas Planning Order), issued in Case 20-G-0131 on May 12, 2022, the Commission required that the Joint LDCs file with the Secretary to the Commission, within 90 days of the date of this Order, jointly if possible, proposals for NPA incentive mechanism and cost recovery procedures (Filing). The Gas Planning Order directed the Joint LDCs to file a proposed level of shareholder incentives for NPAs, and a proposed procedure to recover costs of NPA programs.

The Filing presents the Company’s proposed NPA incentive mechanism and cost recovery procedures as directed in the Gas Planning Order. The Joint LDCs identify the existing NPA incentive mechanisms, which generally were developed and negotiated in individual rate cases. The Joint LDCs then propose a common framework for NPA incentives across the state which employs the societal-cost test in benefit-cost analyses (BCAs), includes an initial incentive mechanism by which shareholders would retain 30 percent of the net benefits. The JLDCs’ proposal includes a cost containment mechanism with a cap such that the incentive cannot exceed 50 percent of the net benefits and a floor of $0. The JLDCs’ proposal also includes a provision to address a situation in which an NPA project is not able to defer or eliminate the traditional project, and includes a provision for a change in NPA portfolio sizing needs for an active NPA project.

The Joint LDCs similarly identify the existing NPA cost recovery procedures, which generally were developed and negotiated in individual rate cases. The Joint LDCs then propose a common framework for NPA cost recovery procedures across the state in which the overall pre-tax rate of return on costs would be recovered as a regulatory asset, costs would be amortized over 20 years, the carrying charge on NPA projects (net of carrying charge on displaced capital projects) would be recovered through a Rate Adjustment mechanism, and unamortized costs would be incorporated into the utility’s base rates in a subsequent rate case. The Joint LDCs further clarify how deferred or displaced capital projects would be reflected in the Average Net Gas Plant-in-Service Balances target. Lastly, the Joint LDCs request that the Commission review and reconsider the directive in in the Gas Planning Order to use the pre-tax weighted-average cost of capital as the discount rate for use in BCAs.

The full text of the Filing and the full record of the proceeding may be reviewed online at the Department of Public Service web page: www.dps.ny.gov. The Commission may adopt, reject, or modify, in whole or in part, the action proposed and may resolve related matters.

John Pitucci, Public Service Commission, 3 Empire State Plaza, Albany, New York 12223-1350, (518) 486-2655, email: [email protected]

Michelle L. Phillips, Secretary, Public Service Commission, 3 Empire State Plaza, Albany, New York 12223-1350, (518) 474-6530, email: [email protected]

60 days after publication of this notice.