Good morning and welcome to the Monday edition of the New York & New Jersey Energy newsletter. We’ll take a look at the week ahead and look back on what you may have missed last week.

Driving the day

CAP AND INVEST DIVIDE — POLITICO’s Marie J. French: A proposal to place an economywide cap on greenhouse gas emissions in New York is becoming a potential sticking point in budget negotiations as the overtime clock continues. Gov. Kathy Hochul has indicated that legislative sign-off for a rebate from the proposed cap-and-trade scheme, dubbed “cap and invest” is a major priority. But Assembly leadership has maintained it has no interest in getting it done in the budget.

“It is a complicated policy that does not belong in the budget,” said Assemblymember Deborah Glick (D-Manhattan), who chairs the Environmental Conservation Committee, on Thursday. “They have said all along they can actually do this without legislative authority or permission except when it comes to rebates, so it’s all very confusing.” The state’s climate law requires action to reduce emissions 40 percent below 1990 levels by 2030 and 85 percent by 2050, with the remainder offset. A climate plan approved in December by a panel set up to chart the path forward backs a cap-and-trade mechanism as a way to achieve those mandates by raising revenue to invest in clean energy projects and gradually reducing the amount of pollution allowed.

Getting lawmakers to agree on a measure that could be perceived as raising energy costs could prove difficult outside the context of the budget, where deals can be struck and votes gained on the basis of the entire package. Assembly negotiators have gone further and indicated they oppose any legislation on “cap and invest” even later in session, according to one official familiar with budget negotiations who requested anonymity to discuss the ongoing private talks. Spokespeople for Assembly Speaker Carl Heastie did not respond to a request for comment.

NEW YORK CITY GRID WOES: The state’s independent grid operator expects to find reliability issues in New York City in the coming years in an upcoming short-term assessment of the capability of the system to meet demand under expected conditions. The latest assessment released by the New York Independent System Operator on Friday included the findings, which were also foreshadowed in last quarter’s evaluation and previously. The next assessment expected in July will likely identify a reliability need starting in summer 2025, primarily driven by the retirement of peakers in New York City in response to state regulations to reduce harmful pollutants from the older power plants.

Post-pandemic growth in demand for electricity, including some driven by electrification of buildings and transportation, is also a driver of the shortfall. The assessment says the deficiency in the city will range between 120 and 350 MW in 2025. Once a reliability need is identified, the NYISO will solicit market solutions, which could include transmission projects — or keeping some of the fossil fuel peaker plants set to retire online so they’re available to meet demand.

The reliability of the electric system in New York City after 2025 rests in large part on the transmission line to bring Canadian hydropower into the city being completed on schedule in 2026. “Without the CHPE project in service by 2026 and other offsetting changes or solutions, the reliability margins continue to be less than 100 MW until 2028, at which time the New York City grid as otherwise planned could not provide reliable service for the forecasted system conditions,” the NYISO’s assessment states. — Marie J. French

NJ TRANSIT’S LOOMING BUDGET HOLE GROWS: New Jersey Transit is forecasting a $917 million budget hole two years from now.

The hole, equal to 30 percent of the agency’s projected spending needs, is like many others expected to widen or open for public transit agencies across the country struggling with decreased ridership during the pandemic. This time last year, when the agency released its last budget forecast, the 2026 gap was expected to be $549 million. Since then, Gov. Phil Murphy has continued to freeze the agency’s fares, thanks in part to an infusion of pandemic aid money from the federal government and his own budget maneuvers.

At some point soon, though, the state is going to have to either increase fares, cut services or find some other source of taxes or fees to prop up the agency — or some combination of all three. Without action before then, the 2026 budget would be up for discussion in spring and summer 2025, during the final months of Murphy’s second and last term and in the middle of the campaigns to replace him. New Jersey Transit’s board is expected to talk about the budget and the budget forecast at a board meeting this week. – Ry Rivard

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Here’s what we’re watching this week:

MONDAY

— The New Jersey Department of Environmental Protection is expected to formally publish the final version of its long-awaited environmental justice rule.

— The New York State Office of General Services and Department of Environmental Conservation demonstrate a new wedge-wire screening system at OGS’s Riverfront Pump Station, 1:30 p.m., OGS Riverfront Pumping Station, 1 Quay Street, Albany.

WEDNESDAY

— New Jersey Transit’s board meets, 6 p.m.

THURSDAY

— The New York Public Service Commission meets, with transmission and EV charging items on the agenda, 10:30 a.m.

Around New York

— Holtec is delaying plans to discharge radioactive water from the Indian Point decommissioning into the Hudson River.

— The federal government is proposing stringent restrictions on ethylene oxide at medical device sterilization plants across the country, including one in Kingsbury.

— Suffolk County leads the state in pesticide use.

— A shellfish harvest permitting plan by DEC is drawing criticism in Oyster Bay Harbor. Oyster restoration efforts in the state are showing progress.

— RELEASE: NYSERDA’s Clean Energy Fund is providing money for new insurance policies and products for climate technology.

Around New Jersey

— New Jersey’s environmental agency penalized itself for harming wildlife habitat.

— High temperatures brought ozone warnings.

— A look at the state’s use of lawsuits to seek compensation for environmental damages.

What you may have missed

FLOOD FUND PLAN STALLS — POLITICO’s Ry Rivard: A bill stalled in the New Jersey Senate could cost the state millions for flood protection projects. The bill, which has passed the Assembly but hasn’t gotten a floor vote in the Senate, would allow the state to apply for a slice of $500 million FEMA has thanks to the federal STORM Act. The act, signed by former President Donald Trump and funded during the Biden administration, created a new pot of money to pay for projects that reduce the risk of natural disaster. But New Jersey law isn’t yet set up to handle such money, which is why contractors and labor unions are nervously eyeing the Senate, where a bill to allow the state to handle the money has stalled.

ICYMI: ONE WORD: TREES — POLITICO’s Dustin Racioppi: Members of the Biden administration visited Newark on Wednesday to focus on a lesser-known piece of the Inflation Reduction Act: Trees.

MAYOR PETE COMES (ALMOST) TO ALBANY: With a backdrop of the light blue Castleton-on-Hudson bridge stretching a mile over the Hudson River, Gov. Kathy Hochul and U.S. Transportation Secretary Pete Buttigieg announced federal funding to repair the 65-year-old bridge. The Thruway Authority project will get $21 million in federal funds from the Bipartisan Infrastructure Law and begin in 2024. Other repairs to the bridge are already underway.

What about congestion pricing? Buttigieg dodged a question about the federal review of congestion pricing. “We’re talking about something that is really new in terms of scope and scale relative to processing environmental reviews on something that we maybe do hundreds of in a year, like a bridge project,” Buttigieg said at the event south of Albany at Schodack Island State Park. “Certainly the Federal Highway Administration is working hard on that process … certainly one that’s getting a lot of good attention and resources to make sure that process is followed.”

State transit leaders had initially estimated they would secure a determination from the Federal Highway Administration by the end of 2022. Since then, the MTA has pushed back its projected start date in monthly filings, now targeting the second quarter of 2024. So far, the delay hasn’t affected the agency’s ability to deliver capital projects, the public transit authority has said. — Danielle Muoio Dunn and Marie J. French

HOCHUL’s CLIMATE FUMBLE — POLITICO’s Marie J. French: Gov. Kathy Hochul’s botched attempt to rewrite the state’s landmark climate law during secretive budget negotiations outraged her sometimes allies in the environmental movement — and handed the cudgel of higher gas prices to opponents of New York’s efforts to slash emissions. Hochul inserted a proposal in budget talks that would have weakened the actions needed to achieve the state’s emissions reduction limits enshrined in law. Her effort, first reported by POLITICO, received immediate blowback from environmental groups and Democratic lawmakers who have made tackling the climate crisis a top priority.

At first, the governor deployed her top energy and environmental officials to defend the urgency of the proposed change. It was needed to avoid having implementation of the climate law prove too costly for consumers, they said. But that effort lasted less than three days before they met with the governor and then were sent to face reporters and announce that the change was no longer a top priority in budget negotiations. “New Yorkers experienced budgetary whiplash,” said New York Public Interest Research Group’s legislative director Blair Horner.

TOP MURPHY CLIMATE ADVISOR DEPARTS: Jane Cohen, the first head of Gov. Phil Murphy’s office of climate action and the green economy, has left the governor’s office. Cohen was a key advisor on the state’s environmental goals, which are or are among the most ambitious of any governor’s in the country.

Cohen has an eclectic background, including stints at Human Rights Watch, the international nonprofit, and Isles, a community development and environmental organization, based in Trenton. For now, she’s at Seton Hall University as the visiting chair in the practice of post-conflict diplomacy. Murphy has not named a replacement. Her vacancy comes at a crucial time for the governor’s office as many of the goals set by the governor are running up against the ticking clock of Murphy’s second and final term.

Ed Potosnak, the head of the New Jersey League of Conservation Voters and a supporter of the governor’s climate goals, praised Cohen’s work. “I think her leadership was tremendous and the impacts of her work will be felt for generations to come,” he said.

Bailey Lawrence, a spokesperson for Murphy, said Cohen was a “highly valued member of the Governor’s Office who significantly built up the Administration’s energy and environment portfolio. She has departed the Governor’s Office to work outside of State government.” — Ry Rivard

ICYMI: GRANHOLM AT RAVENSWOOD — POLITICO’s Danielle Muoio Dunn: A push to transform the city’s largest fossil fuel power plant into a renewable energy hub has earned the attention of the Biden administration, which hopes it will soon serve as a national symbol of green energy adoption. Secretary of Energy Jennifer Granholm on Tuesday toured the turbine room of Ravenswood Generating Station in Queens, which will kick into action in a few days to meet expected demand from the higher temperatures in the forecast. Currently, those turbines are fueled by gas and sometimes fuel oil. But the plant operator wants to shut them down in favor of batteries, offshore wind and renewable energy from upstate.

BPU MEETS DOWN TO FOUR: The New Jersey Board of Public Utilities met Wednesday with just four of its five seats filled, following Commissioner Bob Gordon’s retirement. Nominees to replace him and Commissioner Dianne Solomon are stalled in the state Senate. Board President Joseph Fiordaliso suggested they might be stalled for a while. “It’ll be the four of us for a while,” he said during Wednesday’s meeting. “And, as things have been going along, it may be four of us for a long time.”

— Also: Abraham Silverman left the BPU, where he was general counsel, to take a job at Columbia University’s Center on Global Energy as a managing director looking at non-technical barriers to the clean energy transition. In a LinkedIn post, Silverman explained what that meant: “So, what’s a Non-Technical Barrier? Well, I’m glad you asked! In part, I’m hoping to hear from all of you! What is stopping us from getting infrastructure deployed? Better markets? Siting? Permitting? Did anyone mention interconnection?!?” — Ry Rivard

GAS BILL MATH: Gov. Kathy Hochul’s administration hasn’t done the best job explaining the math behind their push to change New York’s climate law.

So there’s been some confusion, with some reporting that the administration is forecasting an 80 percent jump in natural gas prices under a proposed cap-and-trade system. That would be a huge swing, but the figures pointed to by the governor’s office actually show that the increase in annual residential gas bills would be 80 percent higher under New York’s climate law accounting than a more widely used international method. The added cost for natural gas bills would be an additional $595 annually under the state’s law compared to $330 under the international method — nearly an 80 percent premium.

To get a feel for what the actual increase in an annual gas bill would be, you’d need to compare the increase pointed to by the governor’s office to the current typical gas bill. Keep in mind that gas prices are subject to big monthly and yearly swings based on weather and global commodity prices. Take Long Island National Grid residential gas customers, who would pay about $1,800 on their total bill including delivery costs to maintain the gas system and commodity costs for the fuel in 2022 for 1,000 ccf of gas. The increase would be about 18 percent using the international method. — Marie J. French

CLIMATE BUDGET FIGHT: Some Democratic lawmakers and environmental advocates want Gov. Kathy Hochul to consider alternatives to rewriting the state’s landmark climate law to tackle the costs of climate action. Hochul has backed down on her push to change the way New York calculates its emissions progress, which would enable New York to keep burning more fossil fuels for longer.

“If Governor Hochul is concerned about the burden of the CLCPA on working New Yorkers, the Legislature has a number of multiple common sense bills that will cap utility costs, make polluters pay and stop the expensive public subsidies for the gas system,” said Assemblymember Emily Gallagher (D-Brooklyn), who sponsors a measure to ban fossil fuels in new buildings. As Hochul presses for lawmakers to endorse a cap-and-trade mechanism to limit emissions and raise revenue for climate action and a rebate to cushion likely hikes in energy costs for consumers, one alternative or add-on pushed by several Democratic lawmakers is a Superfund-style measure targeting oil and gas companies. The Climate Superfund measure would charge large fossil fuel companies for global historic emissions, raising about $75 billion over 25 years. — Marie J. French

LONG-AWAITED EJ RULE EXPECTED SOON: The Department of Environmental Protection is expected to release a long-awaited and first-of-its-kind environmental justice rule restricting industrial expansion or construction in “overburdened communities.” The rule is expected to be the cornerstone of the state’s landmark environmental justice law signed nearly three years ago, but is also expected to set off years of litigation and possible attempts to lobby lawmakers to make changes to the underlying law.

The New Jersey Business and Industry Association told its members that it expects a formal rule will be published in the state register on April 21. The state put out a 150-page draft rule last summer requiring companies to consider how eight different kinds of industrial facilities might further pollute what the state calls overburdened environmental justice communities — those with many people of color, low-income households or residents who don’t speak fluent English. The delay between then and the release of the final rule was taken to be both a sign of the rule’s complex and controversial nature, as well as staffing issues at DEP. — Ry Rivard

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