[co-author: Mack Ramsden, Summer Associate]

On July 5, 2022, Governor Kathy Hochul signed into law the Utility Thermal Energy Network and Jobs Act (the “Act”), a bill which amends New York State’s Public Service Law to authorize the State’s utilities to own and operate thermal energy networks, and which charges the State’s Public Service Commission (“PSC”) with initiating proceedings to support and regulate thermal energy network deployment.

Until now, New York State utilities interested in developing thermal energy networks have been frustrated by legal and regulatory barriers. Unlike traditional heating and cooling systems, which operate within a single building, thermal energy networks (also known as “community thermal systems” or “district energy systems”) provide heating and cooling services to multiple buildings by circulating water through a single shared pipe loop. Further, they can be designed to leverage multiple sources of heat, including geothermal energy and waste heat produced by electrical generation. These attributes make thermal energy networks potentially less expensive and less energy-intensive to operate than traditional siloed systems; if deployed at sufficient scale, thermal energy networks could decarbonize buildings and neighborhoods across the State while adding as little load as possible to the electric grid.

Accordingly, the Act tasks the PSC with aggressively promoting the development of thermal energy networks across New York State. The PSC is required to:

• Direct utilities to commence thermal energy network pilot programs in every utility territory in the State;
• Develop a regulatory structure to scale up thermal energy network deployment, coordinate the activities of utilities and other market and public actors, and protect consumers;
• Formulate labor policies that ensure the development and maintenance of a highly-skilled, well-paid thermal energy network workforce, including by applying or incorporating existing state labor policies and programs;
• Exempt small-scale, non-utility-owned thermal energy networks from PSC regulation; and
• Create fair market access rules for utility-owned thermal energy networks to accept low-emissions thermal energy produced by third parties, and otherwise facilitate market competition that benefits consumers and supports State emissions-reduction goals.

The PSC must initiate appropriate proceedings by October 2022 and promulgate regulations by July 2024, although the Commission could proceed much more quickly.

The Act has been applauded by decarbonization advocates, community and labor organizations, and leaders in the climate and clean-energy industries. John Moore, international representative for the United Association of Pipe Workers, emphasized provisions of the Act aimed at workforce training and fair wages. “It is critical [that] workers in the fossil fuel industry are not left behind,” Moore said. Jay Egg, who serves on the board of directors of Geothermal Rising, praised the Act as “perhaps the first of its kind in the U.S.” Shaun Steward, CEO of Newlab, said that the Act “will help make our buildings more efficient, lower costs for utility ratepayers, and set New York on a course for decarbonization.”