National Grid USA will take steps to improve its ability to identify and address natural gas supply shortages after an independent monitor placed blame on the company for a six-month halt to gas hookups in downstate New York.

The utility operator announced on March 27 that it would create new global and U.S. executive roles to oversee risk and compliance and potentially increase resources in this part of its business. National Grid also pledged to offer more details on its long-term gas supply plan for parts of New York City and Long Island, though it disagreed with the independent monitor's conclusions about its responsibility for the 2019 moratorium.

New York State appointed an independent monitor to oversee parts of its $36 million settlement with National Grid over the utility's refusal to connect new gas customers from May to November 2019. The company said the moratorium was necessary because New York refused to permit a new pipeline, creating the risk of supply shortages and interruptions.

However, the independent monitor, Perkins Coie LLP partner Adam Schuman, said National Grid relied "heavily" on a controversial pipeline project — the Northeast Supply Enhancement project, or NESE — to address a looming supply shortage without considering alternatives.

"Had National Grid been better prepared and acted sooner, this situation might have been avoided," Schuman said in the March 13 report.

Schuman found National Grid's organizational structure hampers its ability to anticipate gas supply shortages and maintain contingency plans to avoid a moratorium. He recommended the company appoint a chief compliance officer to oversee these risks.

In its March 27 response, National Grid said it would appoint a global chief risk and compliance officer and a U.S. chief risk and compliance officer. Both will report to the group executive and the board of directors, and the U.S. officer will chair a new risk and compliance committee.

National Grid said a review of its risk and compliance structure, supported by outside adviser Ernst & Young, is underway. The company said it would increase resources for its risk and compliance teams based on its advisers' recommendations.

The company also agreed to clarify parts of its long-term plan to supply New York City and Long Island. Schuman said the Feb. 24 report lacked clarity on the feasibility, costs, risks and benefits connected to the supply options the company presented, including large gas infrastructure projects, energy efficiency programs and gas-to-electric conversion.

Schuman raised concerns about including NESE as an option, noting New York has twice denied the project a permit.

The report included an option to convert customers to electric heating and cooking, but according to Schuman, executives indicated they did not seriously consider that option until recently because they do not provide electric service in the territory, so conversion was not in their economic interest.

"As urged by Governor Cuomo, National Grid's outlook needs to evolve beyond focusing upon its business self-interest in order to serve the public interest," Schuman said.

In a separate March 23 filing, eight environmental groups argued National Grid's assumptions about energy efficiency and electrification options, as well as the NESE pipeline, fail to properly account for state and New York City climate change policy.

"The comparison of the costs of the NESE project versus non‐infrastructure solutions in the report is inadequate and misleading," the letter filed by the Natural Resources Defense Council said. "NESE would be obsolete in 30 years or likely much sooner — a significantly shorter time than its design life — and thus (if built) is destined to be a glaring example of a stranded asset."

The New York State Public Service Commission recently announced a review to align gas supply planning with state climate goals. The outcome could force all gas utilities operating in the state to build fewer pipelines and instead invest in energy efficiency and non-fossil fuel supply.

National Grid indicated it is awaiting the conclusion of that review before it addresses another recommendation from Schuman: conducting recurring independent reviews of its process for identifying gas shortages. In the interim, its demand modeling "undergoes extensive internal review and is subject to annual review by regulators," National Grid said.