The New York Public Service Commission on Thursday approved construction of a scaled-back version of Consolidated Edison’s (NYSE:ED) proposed Clean Energy Hub in Brooklyn.

Con Ed originally proposed the hub in April 2022 (20-E-0197) as a $1 billion landing point for 6 GW of electricity generated by the wind farms New York wants to build off its coast.

In December 2022, the utility supplemented that proposal with a smaller alternative that it framed as a step needed by mid-2028 to maintain reliability in the area amid rapid electrification of buildings and transportation. The cost was significantly lower, at $810 million: $773 million for the hub itself, and $37 million to prepare the facility to serve as a make-ready point of interconnection for 1.5 GW of offshore wind power.

The PSC unanimously approved the supplement Thursday as necessary to maintain electric reliability.

The commission also rejected the original hub plan — which was still alive — because there was no evidence offered to show that routing 6 GW of power to the hub is feasible. There was demonstrated interest from developers in doing so but no indication it is physically possible.

The proposal was attractive because of the scarcity of real estate to build such a facility in New York City. Con Ed proposed to build it on a site occupied by an office building and three retired gas turbine generation units, adjacent to its Farragut substation.

But objections were raised during the public comment period. Many questioned the feasibility of running multiple HVDC cables beneath the East River to reach the hub. Others said the hub was not the product of a competitive solicitation process, such as NYISO’s Public Policy Transmission Planning process, and therefore might not result in the lowest price tag, or the price tag least likely to change.

But the PSC unanimously approved the scaled-down version of the hub proposal, agreeing that it is the only potential solution to the projected needs in the area as the city and state press forward with their clean energy transition.

The PSC denied New York City’s request to delay a decision to await further analysis, saying the proposal is time-sensitive. It also rejected the city’s contention that the hub would not be cost-effective and would not promote resilience.

The hub is only the first of several 345-kV substations that will be needed in the city, the PSC countered. Installed generation capacity statewide is expected to double from 43 GW in 2019 to 90 GW in 2040, with much of the load growth in New York City. The commission determined that the cost of building the hub will be borne by Con Ed ratepayers, as it is designed for purposes of reliability of service to them.

If the hub’s benefits expand beyond Con Ed territory into the larger realm of the state’s climate protection goals, such as through offshore wind, the utility can petition for an alternative cost-recovery mechanism to spread the costs beyond its rate base, the commission said, but it said it is skeptical at this point that it would agree to such a change.

Commissioner John Howard focused on the costs involved, and noted that Con Ed has estimated it will need to spend $60 billion to prepare its service area for the energy transition.

He applauded the inclusion of the word “skepticism” in the order and suggested also that the city should not be allowed to reap a property tax windfall from all the infrastructure that will be needed in the next few decades.

A Department of Public Service staff member estimated the smaller $810 million hub would have a $48 million annual property tax bill.

PSC Chair Rory Christian said Thursday that New York state’s energy landscape is in a period of fundamental change and that infrastructure investments must keep pace with proactive planning.

“Priority has shifted to ensuring increased levels of renewable, clean sources are integrated into the grid while polluting sources are being phased out,” he said. “To make sure the system continues to serve customers with the level of reliability that our modern economy demands, we know that additions and modifications to the utilities’ transmission and delivery infrastructure will be needed, as well as equitable methods for recovering the costs of such additions.”