KeySpan converts Riverdale Park to gas

Gloucester Daily Times, February 28, 2004 By Richard Gaines, staff writer

KeySpan Energy -- the region's largest natural gas company -- has invested $500,000 to convert 160 units of low-income housing in Riverdale Park from old, inefficient oil heating systems to the most modern equipment for its competing fuel.

The initiative was spurred by KeySpan's partner, Gloucester-based Action Energy, which has a $600,000-a-year contract from KeySpan to help the state's low-income population reduce their energy bills -- whether they buy from the publicly traded natural gas giant or from the small businesses that sell home heating oil.

Oil, which is unregulated, currently is less expensive than gas, whose price is set by the state.

The Gloucester Housing Authority properties are home to more than 500 people.

Its director, Bill Dugan, praised the program, saying it "allows us to improve the quality of life for our residents."

Nick Stavropoulos, KeySpan's president of energy delivery, said his company "is proud to support the mission of the Gloucester Housing Authority."

The conversion also serves KeySpan's interests by expanding its customer base of 2.7 million homes in New York City, Long Island and New England.

Based on the current cost of natural gas, said Elliot Jacobson, the director of Action Energy, a subsidiary of Action Inc., the $6 billion company would recoup its investment from the newly installed Gloucester units in little more than two years. "It's a good deal for KeySpan," Jacobson said.

Jacobson said the average three-person home -- like those in Riverdale Park -- costs about $1,500 a year to heat with natural gas.

At current prices, two years of revenues from its new Gloucester customers would produce about $480,000. The state-of-the-art gas heating equipment installed in Riverdale Park is projected to last for more than 20 years.

Action Energy has been paid $600,000 a year by KeySpan, under a contract first approved in 1997 and renewed in 2002 through 2007.

The funds given to Action Energy by KeySpan are generated from the payments of its customers; the $600,000 a year also defrays Action Energy's salaries and administrative costs.

To win a rate hike in 1997, KeySpan agreed to underwrite low-income energy-effeciency programs initiated by Action Energy and its cohort nonprofit citizen advocacy groups, such as Action for Boston Community Development.

Carmen Fields, a spokesperson for KeySpan in Boston, noted the company spends "upward" of $12 million a year on energy efficiency and weatherization.

"Energy efficiency is considered a big deal for KeySpan," she said. "It's like creating another natural resource."

Jacobson said Action Energy and its advocacy partners spend most of the $600,000 a year within the KeySpan market helping low-income persons weatherize their homes and apartments and reduce inefficiencies in their heating systems.

"Gas is not the only choice," said Jacobson. "We'll fix the oil system. We do very little in gas conversions." He emphasized that the strategic solutions implemented or recommended by Action Energy and its cohorts are not influenced by the contract grant from KeySpan.

The needs of the homes in Riverdale Park made the conversion to gas obvious, said Jacobson. Dugan, the housing authority's director, agreed.

"We had been trying to get state grants for gas," said Dugan. "We had old, oil-fired furnaces, which required more service. Residents bought their own oil and paid for service. There were lots of overtime bills. There are lower maintenance costs with gas."

While earning praise for its investment in the low-income housing off Washington Street, KeySpan has been criticized for the quality of its work and degree of cooperation with the city in the Little River sewer project, which recently required a $600,000 loan to cover cost overruns in the $9.8 million project now nearing completion.

In presentations to a City Council committee, chief city engineer David Knowlton has cited KeySpan for "poor" work in laying gas lines under Essex Avenue which had been excavated to allow the construction of the new sewer lines. Mass Electric and KeySpan took advantage of the open street to upgrade their conduits.

The city had obtained agreements with the utilities to split three ways the cost of repaving the street. Knowlton has described Mass Electric easier to deal with.

"Keyspan did such a poor job" with its trenches, said Knowlton, that the budged cost of the repaving was too low, forcing the city to seek authorization to borrow $600,000 to finish the job. The bond sale, approved by the City Council earlier this month, will pay for much larger cost overruns than those involving KeySpan.

Knowlton estimated that the city would ask Mass. Electric and KeySpan to increase their contributions to the road work by $25,000. He explained that Mass. Electric is required by ordinance to obtain city permits for the road work that allow the writing of enforceable commitments, but KeySpan is not subject to the same permitting "and just get to open the road" outside formal regulation.

On Feb. 17, Knowlton told the council's Budget and Finance Committee the anomaly was making it "more difficult to bring (KeySpan) to the table. They've balked at their commitment. We expect Mass. Electric to come to the table. KeySpan will be a problem."

Fields said that while she was not aware of KeySpan's specific role in the Little River Sewer Project, she said the company "takes its obligations seriously. We have a long, amicable relationship with the city. We'll work to resolve the differences."