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Blog DecarbNation – Issue 2
DecarbNation – Issue 2

DecarbNation – Issue 2

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The Future of Gas: A Summary of Regulatory Proceedings on the Methane Gas System

Nine states and Washington D.C. currently have gas system planning proceedings underway. These regulatory processes, typically initiated by enabling legislation, are central to determining the “future of gas” and include the evaluation of: decommissioning gas infrastructure and replacing it with targeted electrification; adjusting rates to reflect the shortened life of assets; recalculating subsidies that currently support the expansion of the gas system; integrating gas and electric planning processes; and the social, economic, and environmental impacts of this process on affected workers and communities. 

View a summary of these proceedings here.

Table of Contents

Introduction

The Shifting Mandate

Costs, Risks, and Phaseouts

Summary of Gas Planning Proceedings

Overview of Proceedings by State

Types of Proceedings

Inciting Incidents

Proceeding Scope

Resource Gaps and Needs

Lessons Learned

State by State Analysis

California

Oregon

Washington

Nevada

Colorado

Minnesota

Massachusetts

Washington D.C.

Rhode Island

New York

Conclusion

Recommended Reading

Acknowledgments

Introduction

The Shifting Mandate

The first federal regulatory agency in the U.S. was established in 1887 through the Interstate Commerce Act to manage the sprawling, transnational infrastructure of the railroad. The railroads, which at that time were unregulated, privately owned, natural monopolies, required oversight, expertise, and transparency that legislatures themselves could not provide. The Interstate Commerce Commission thus became the model for future regulatory agencies. These agencies were created to be independent auditors with the specialized knowledge necessary to determine and implement regulations that balanced the demands of private companies and the interests of the public good. And so for more than a century, regulatory agencies, which devise rules and frameworks concerning everything from the environment and civil rights to consumer protections and health and safety, have continued to operate, relatively undisturbed, according to their narrowly defined mandate to make decisions by balancing particular costs and risks. That is, until now.
 
Climate change has changed everything. No longer can costs and risks be calculated according to business-as-usual expectations of an asset’s “used and useful” life; nor can we disregard the risk of inaction and how long-standing metrics for evaluating costs will become not only obsolete but harmful under the worsening conditions of environmental crisis. In light of this new reality, the mandate of Public Utility Commissions (in some states called the Public Services Commission) and their approach to regulating utilities, particularly the emissions produced by their fuel and infrastructure, must change. Rather than replace our aging gas infrastructure with expensive assets that will continue to produce the very emissions we need to eliminate, we need to consider new pathways, alternatives, and goals for planning a resilient future. Fortunately, legislatures have slowly but surely begun to recognize these conditions (thanks in large part to the advocacy of the climate movement), and in the past two decades we have seen the rise of laws and executive actions dictating greenhouse gas emission reduction goals across the nation (currently, 25 states and D.C. have a GHG reduction target on the books).
 
However these GHG goals, as Gundlach and Stein write in a 2020 article on utility regulation, “fail to excavate the foundations of existing, countervailing laws that are likely to impede to some degree the realization of the new legislation’s basic objective” (pg. 211). In short, new tensions arise when a state mandates emission reduction while the regulatory bodies that oversee integral parts of that emission generation–such as gas and electric utilities–continue evaluating these systems according to outdated metrics. The friction between these new goals and these outdated regulatory principles has led to rupture in the regulatory landscape. And this rupture is precisely where the decarbonization movement has the potential to intervene through electrification and an equitable transition of communities from the gas system to the grid. Greenhouse gas reduction goals alone are not enough to mitigate climate change; and as these new investigations into the future of gas are demonstrating, the most cost-effective and equitable pathway to meeting these GHG goals is electrification, including fossil-free pipeline alternatives (i.e. thermal energy networks).
Thermal Energy Networks diagram by Egg Geo, LLC

Thermal Energy Networks diagram by Egg Geo, LLC

What we are witnessing today in the energy landscape is the slow yet certain tectonic shift of a century-old directive as legislation forces regulators to expand their mandate and transform their foundational principles of evaluation. Because utilities are complex, highly coordinated systems that involve expensive, long-lived assets, many states conduct Integrated Resource Planning (IRP), which requires utilities to present transparent plans for their services several years in advance. However, this type of planning doesn’t happen everywhere and where it does, it’s commonly only required of electric utilities to account for the stability of the grid; rarely is the gas system integrated. However, as we know, what happens on the gas system affects the electrical grid and vice versa; in addition, bringing the gas system into compliance with climate laws means we must also ensure the reliability of the electric grid and account for the emissions shared between the two systems. 

Advocates engaging in these gas transition planning proceedings, then, are pushing toward this broader understanding of integration. In affirming a holistic approach to the whole energy system–pipes and wires–we can not only ensure that we are accounting for what happens when reliance on one fuel decreases and another increases, but that customers are not stranded on a declining gas system with skyrocketing rates without an adequate plan to transition off of it. This integrated approach, while perhaps obvious for those of us accustomed to systems thinking, is a departure from the historically narrow mandate of Public Utility Commissions (PUCs). 

Costs, Risks, and Phaseouts

Rather than simply deciding if a utility has a justified economic case for raising their rates, PUCs around the US are now discussing the long-term, planet-wide implications of approving a new gas pipeline or allowing gas utilities to subsidize new infrastructure with ratepayer money. As a natural extension of these conversations, Commissions are beginning to consider what a future without methane gas might look like and reconsider what role they may play in determining this future.

Gas system transition planning, the general term we will use in this blog for regulatory proceedings that treat in some way the future of the methane gas system, calls into question the return on investment for gas infrastructure. For any utility to justify passing capital costs on to customers (in the form of rates), they must prove that the asset for which they are seeking a return on their investment is both “used and useful.” As the Environmental Defense Fund explains in their 2019 report on stranded asset risks in California, an asset that cannot be proven to be both used and useful “would be excluded from a utility’s rate base, meaning the utility could no longer recover the costs of the asset from its customers or earn the associated rate of return” (pg. 11). Rate cases, in which a utility requests an increase in revenue due to projected costs, thus offer an opportunity to question whether new pipelines can be considered “used and useful” when this infrastructure is working against a state’s climate goals. 

Even when proceedings treat gas system planning and rate cases separately, these deliberations offer an opportunity to question the underlying assumptions that have propelled the expansion of the gas system to date. With regard to asset depreciation, for example, we see states like New York asking utilities for accelerated depreciation timelines for gas infrastructure, as paying out fossil fuel assets beyond 2050–the same year as the state’s net-zero commitment–would effectively constitute encouraging emissions with one hand while restricting them with the other. Similarly, line extension allowances (LEAs), in which existing ratepayers essentially subsidize gas hookups for new customers, begin to look outdated and unjustifiable. As RMI argues in a paper concerning the practice of ratepayer subsidized LEAs: “Gas line extensions, as they exist today, are no longer supported by a sound economic justification and are ripe for reform, both to protect customers from financial risk and to support climate and public health goals” (pg. 6).

Perhaps not surprisingly, the business-as-usual assumption of the gas system’s continual growth is running up against physical and political barriers. Phaseouts–of internal combustion engines, line extension allowances, fossil fuel appliances–are becoming an increasingly common tactic at the state level for creating a future with fewer fossil fuels. Phaseouts are a central principle of “degrowth” by a more moderate name. However a phaseout isn’t merely a law or regulation dictating when something must end—it’s a process, and one that can easily backfire if not properly managed. As Holly Jean Buck writes in Ending Fossil Fuels, “Phaseout is not just one problem–it’s several kinds of problems at the same time. We have to be able to see and address all these dimensions, because treating it through one lens will fail” (pg. 74). This is why whenever we talk about gas system transition planning, we are also talking about “the flipside”: geographically targeted electrification. (You can read more about the policies and principles behind targeted electrification and gas system pruning in the aptly named Flipside Report (2021) prepared by Common Spark Consulting for the Building Decarbonization Coalition.) 

Targeted Electrification. Source: California Energy Commission

Targeted Electrification. Source: California Energy Commission

Until recently, however, gas system planning has not incorporated the principles of degrowth. Rather, gas utilities continue to claim that ever-increasing demand necessitates the endless expansion of the gas system, even as research shows that these systems always tend toward growth, regardless of the presence or lack of demand, and almost never self-prune. As a new study on legacy utility costs explains, “Utilities add pipelines but rarely remove them, even when the customer base from which to recover costs is shrinking” (pg. 1049). Because utilities fail to course correct when demand calls for degrowth, a state-regulated phaseout plan is necessary to keep utilities accountable to customers and to keep the gas system aligned with greenhouse gas emission goals. However, if this phaseout is not strategically, geographically targeted (i.e. zonal electrification), it risks imperiling those who “are already financially vulnerable and energy-burdened” (Flipside Report pg. 11). The so-called “death spiral” of the gas system, in which decreased demand results in increased costs spread over fewer rate payers, will end up harming these communities if not properly managed. As the Greenlining Institute writes: “Strategic, targeted, and sufficient investment in helping Environmental and Social Justice communities electrify will help ensure that the communities that need the benefits the most are not left behind or displaced from their homes” (pg. 17). 

Phaseout, degrowth, pruning, and integrated long-term planning all represent an existential threat for gas utilities, especially those that do not also offer electric services. This is why we see gas-only utilities advocating for “decarbonization” plans that rely heavily on RNG and hydrogen rather than fossil-free, non-pipeline alternatives and electrification. However, as we will see evidenced by some of the ongoing gas proceedings, there are proposed workarounds, counter arguments, and potential compromises that may in time help transform gas-only utilities from adversaries to allies. Such a transformation will require utilities (and utility commissions) to reconceive of their own mandates–delivering heat instead of gas, for example. While difficult, headway made in some states toward this end show promise for charting a truly decarbonized future for gas utilities and their workers. The stakes, costs, and risks of action and inaction are not only changing but accelerating, and these historically mundane regulatory proceedings are now a key site where these radical transformations can take root.  

Summary of Gas System Planning Proceedings

Overview of Proceedings by State

According to internal analysis by RMI, 28% of people in the U.S. live in an area with a future of gas proceeding underway: California, Oregon, Washington, Nevada, Colorado, Minnesota, Massachusetts, Washington DC, Rhode Island, and New York. This means that nearly a third of the population will be impacted by regulations that not only shape the future of gas but the future of the environment, their health, and their safety. And yet, the average person may not even be aware that these proceedings exist, let alone how to engage in what can often be an opaque, bureaucratic process. This is why one of the patterns we are seeing emerge across successful proceedings is transparent and broad stakeholder engagement coupled with outreach to grassroots and community based organizations. With proceedings set to shape such a significant part of the population’s future, it is essential that as many people as possible have a chance to weigh in on the future of gas in their state. 

Several other patterns emerge when we look at the gas proceedings currently underway or recently concluded. Here are a few facts and observations based on the ten gas system transition proceedings taking place across nine states and the District of Columbia. 

Types of Proceedings

These proceedings range from “rulemaking” proceedings to “investigatory” or “investigatory with scenario analysis” proceedings. Rulemaking proceedings include in their scope a decision to be made by the Commission whereas investigatory proceedings may simply consist of a fact finding mission that is then held or passed on to the legislature. A scenario analysis involves a deeper dive into fact finding by requiring modeling or planning of the utilities involved in the proceeding. 

Inciting Incidents

The most common inciting incidents that led to the opening of a gas system transition proceeding include: 

  • Inciting legislation (such as GHG emission reduction targets or legislation directing an investigation)
  • Commission self-directed initiation of a proceeding
  • A state Attorney General files a petition with the PUC to open a proceeding
  • A related proceeding, such as a utility’s rate case, can lead to the initiation of a gas planning proceeding
  • In addition, the existence of gas leaks, explosions, or other accidents in recent memory can shape commission and the public’s broader awareness and sense of urgency in addressing the future of gas infrastructure.

The most powerful inciting cause appears to be the combination of two or more of the above factors, with a recent gas-related disaster coupled with directive legislation more often leading to a proceeding.  

Proceeding Scope

The central concerns of many of these proceedings include: 

  • How to align utility planning with climate goals;
  • How to equitably finance existing gas assets; 
  • How to halt the expansion of the gas system; 
  • How to transition away from the gas system while maintaining safe, reliable and affordable energy access; and
  • How to provide a just transition for gas workers.

Resource Gaps and Needs

Several states identified similar resource gaps and needs as they engaged in these proceedings. These include:

  • A stronger mandate for the PUC to take action on climate.
  • Studies on the true cost of decarbonizing the gas system (including the long term benefits of doing so); technical analysis of non-pipeline alternatives; and reports on workforce impacts and economic impacts of decarbonization. 
  • Increased PUC staff capacity and subject matter expertise specific to climate issues
  • Support for community-based organizations to engage more heavily in current and future proceedings
  • Additional legal expertise / capacity to support engagement in proceedings (a single firm, EarthJustice, currently provides the bulk of support in this area)

Lessons Learned

The following lessons offer insight into how other states might engage in gas system transition proceeding: 

  • Accessible Public Process: Gas planning proceedings can and should serve as a venue for diverse stakeholder groups to voice their concerns and find points of alignment (ie labor, environmental justice organizations, and ratepayer advocates). While regulatory proceedings are by nature public processes, they can be crafted in such a way to better enable access by foregrounding stakeholder outreach, workshops, and comment periods.  
  • Scope and Coordination: Whether one large proceeding or several small ones, there are always opportunities to broaden the scope to capture more climate impacts and goals while still avoiding scope creep. For example, Clean Heat Standards and Future of Gas proceedings should be coordinated and aligned as they work better in concert. This may require enabling legislation.
  • Educational Comments: Comments and engagement in proceedings are not only a vital part of the regulatory process but they also help build the record for similar issues going forward. Unlike comments received by the legislature, most regulatory agencies are required to summarize and respond to comments when explaining their decisions, so educational comments can help educate the PUCs and other stakeholders and potentially shift their understanding of what’s “normal” when planning for a sustainable future without methane gas.
  • Actionable Proceedings: Ensure at the outset that the scope of proceeding is actionable with clear timelines attached. With investigatory proceedings there can be a flurry of action at the outset followed by long periods of silence.
  • Transparent Oversight: Commission oversight of the modeling and analysis performed by the gas utilities is essential. In other words, it’s not recommended that gas utilities be the direct clients of the consultants doing the modeling for the investigation.
  • Balance Expertise with Broad Input: Ensure there are smaller, targeted technical sessions with experts in addition to broad-reaching stakeholder meetings as these will ensure there is space for debate over complex issues.
  • Politics Matter: Even though regulatory agencies are independent bodies, political pressures, transitions, and changes affect how proceedings unfold and what issues take priority.
  • Strategize for the Whole System Approach: Gas proceedings can help take a fight from a specific rate case and make it applicable to all future rate cases. By importing questions of stranded assets and ratepayer subsidies from rate cases to gas proceedings, these issues can be debated more “philosophically” and in a less hostile environment where the utilities’ profits are not currently at stake. The conclusions and record from these debates can then be used to shape future rate cases and potentially affect how utilities justify their bids to expand the gas system.
  • Make Decarbonization Inevitable: Ensure that there is parity between state climate goals and the outcomes of the proceeding. For example, investing in new gas infrastructure beyond the date that a state has set for a net-zero carbon economy reveals the incongruence between policies and demonstrates the need for decarbonization as a central part of gas system planning.

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State by State Analysis

Below is a glimpse into the gas system proceedings for California, Oregon, Washington, Nevada, Colorado, Minnesota, Massachusetts, Washington DC, Rhode Island, and New York. Included are some of the lessons learned thus far, many of which are portable to ongoing or future regulatory proceedings elsewhere. Also identified are some of the resource and capacity needs experienced during the proceeding as well as the contact information of someone who is currently involved. The hope is that additional stakeholders (ideally with capacity and resources) can find ways to get involved, building better state-level engagement and a stronger national network of gas system planning efforts. 

California

Current Status: 

  • Active
  • Docket #: R2001007
  • Recent Actions: Track 2 proceeding beginning; Decision on Gas Infrastructure General Order issued

The California Public Utility Commission (CPUC) opened a proceeding to “Establish Policies, Processes, and Rules to Ensure Safe and Reliable Gas Systems in California and perform Long-Term Gas System Planning” in January 2020. This proceeding was launched in the context of local governments working to limit gas expansion and an anticipation of the impacts on gas demand in the future. In addition to California’s increasingly stringent greenhouse gas emission reduction goals, this proceeding was informed by a deadly history of gas line explosions and leaks in California. The two that feature most prominently in recent memory include the San Bruno pipeline explosion in 2010 and the Aliso Canyon gas storage leak in 2015. Both tragedies, in addition to many other issues with California’s aging gas infrastructure, bring to light the dangers of complacency and delay in addressing the future of gas in California. 

California’s gas planning proceeding seeks to determine how best to manage the current and anticipated decline in gas demand, which has been initiated by both market forces and policy decisions. In openly addressing potential retirement dates for gas infrastructure, phaseouts for gas-powered equipment, and the financial implications of stranded assets, the proceeding represents the most comprehensive regulatory process currently underway to envision and enact a managed transition off of the gas system. 

Currently, California is a little over halfway through its proceeding, which was divided into two tracks. Track 1 began in July 2020 and addressed gas system reliability standards and coordination between gas utilities and gas-fired generators. The proposed decision for this track was issued in May 2022 with a decision issued in July 2022. The decision determined that, with regard to reliability standards, Pacific Gas and Electric, the state’s largest retailer of both natural gas and electricity, must add to its demand forecast reports the inclusion of 1-in-10 year cold day standards. Regarding electric generators, the Commission declined to adopt any specific measures to ensure gas supply security for the electric system or to reduce electricity price exposure to gas price volatility. 

Track 2, which will develop and implement a long-term planning strategy for California’s transition away from gas-fueled technologies, includes a series of workshops on scoping document questions addressing equity, rate design, gas revenues, targeted gas retirements, safety, and workforce issues. Within this track, the CPUC recently issued a decision to adopt a gas infrastructure general order, which will require gas utilities to:

“file an application for a certificate of public convenience and necessity (CPCN) prior to commencing construction on any gas infrastructure that meets either of these criteria: the project cost exceeds $75 million; or, (1) project is located within 1,000 feet of a “sensitive receptor” (including housing, educational institutions or health care facilities) and (2) operation of the completed project by the gas corporation requires a permit from the relevant local air quality district for an increase in levels of (a) a toxic air contaminant or (b) a criteria air pollutant, if the area is listed as a serious, severe, or extreme non-attainment area for that pollutant” (Decision, pg. 2). 

This decision changes the process for evaluating new gas infrastructure projects, which will now require a California Environmental Quality Act (CEQA) review and enable multiple opportunities for affected stakeholders to weigh in on the project and how it may affect their community. 

Track 2 will continue to address long-term gas planning issues and policies in light of expected decrease of demand over the next twenty-five years. The proceeding will continue to unfold over the next year or two. 

What’s Next:

  • Continuation of Track 2 

What’s Needed:

  • Clear directive for the state agencies to conduct gas planning work 

Lessons Learned: 

  • There’s still a lot of progress yet to be made in the proceeding, but so far the broad coalition intervening in it (labor, environmental justice, NGOs, and ratepayer advocates) indicates that many diverse stakeholder groups could find points of alignment on gas planning in other states as well.

Contact: Kiki Velez, NRDC, kvelez@nrdc.org to offer support in the above areas.

 

Oregon

Current Status: 

  • Active
  • Docket #: UM 2178
  • Recent Actions: Draft report released in April 2022; awaiting final report

The “Natural Gas Fact-finding Investigation” (UM 2178) was opened by the Oregon Public Utilities Commission (OPUC) in 2021 after Governor Brown’s Executive Order 20-04 which, in establishing significant GHG reduction goals for Oregon, directed OPUC and other state agencies to identify and prioritize actions to meet these goals. In response, OPUC opened the proceeding to solicit natural gas utilities in Oregon to create decarbonization plans. While this proceeding did not begin as a gas transition conversation, it has been dramatically expanded into what is essentially now a “Future of Gas” proceeding. 

Oregon is unique in that its electric and gas utilities are separate: there are no dual-fuel utilities. This means that gas utilities (some of which are quite notorious in their resistance to climate change action) view decarbonization as an existential threat. When the answer to “how do we reach state GHG goals” is “targeted pruning and wind-down of the gas system,” these utilities will do everything in their power to fight this pathway to their perceived demise. Thus, one of the major issues in this proceeding from the start was asking, and expecting, gas-only utilities to come up with meaningful “decarbonization plans.” As expected, the plans they did present relied heavily on RNG, Hydrogen, gas heat pumps, increased spending on energy efficiency, and essentially any action that ensured that they could continue to grow, rather than reduce, their pipeline infrastructure and customer base.

Multiple stakeholder groups responded to the gas utilities “decarbonization strategies” by asking for the scope of the investigation to also include downsizing the gas system, various electrification pathways and scenarios, greater stakeholder engagement, and greater transparency throughout the process. They supported this request with the following arguments: 

  • Projections of cost and availability of RNG/Synthetic Gas/Hydrogen are unrealistic
  • Gas heat pump technologies are only modestly more efficient and unlikely to be adopted at scale
  • Electrification is lower-cost/the most effective method to decarbonize buildings
  • Continued growth of gas customers is unlikely to happen
  • Need protections/transition support for LMI, Rural, BIPOC communities

Following this engagement, OPUC released a draft report  in April 2022 that did not adequately account for the need to transition off of gas and did not offer meaningful recommendations concerning the regulation of gas utilities in the short- and long-term. Sierra Club Senior Campaign Representative Dylan Plummer argued that the Commission report must instead:

“include recommendations to limit subsidies for fossil fuels by eliminating incentives for the expansion of gas infrastructure through the rapid phase-out of gas line extension allowances; Expand programs to support a just clean energy transition with robust weatherization, energy efficiency, and affordability programs that support all Oregonians in a transition off gas, with a priority for low-income and environmental justice communities; and Invest in solutions we know will help in this transition – not risky investments that double down on gas infrastructure and risk leaving customers footing the bill.”

Several other stakeholder groups commented along similar lines and are now awaiting a response from OPUC regarding to what extent these recommendations have been included in the soon-to-be released final report. 

In the meantime, a recent decision regarding Northwest Natural’s rate case indicates that the OPUC is weighing the social cost of methane and carbon against the gas utility’s desires for continued expansion. The proceeding, UG 435, was opened in December 2021 when NW Natural requested a rate increase of 9.94%. The intended use of this increased revenue included gas system expansion, political lobbying, and promotional advertising. However, as advocates revealed throughout the proceeding, this lobbying was often directed toward the obfuscation of climate action in local governments while the “advertising” included “the printing and distribution of activity books targeted at school-age children that painted methane gas in a positive light.” After considering the many comments offered by advocates, the OPUC reduced the allowable amount for NW Natural’s rate hike, thus decreasing potential revenue available for gas line subsidies, advertising, and lobbying. 

What’s next:

  • Final Report for Gas Proceeding
  • Public Comments on Northwest Natural’s Integrated Resource Planning (IRP)
  • Eliminating Line Extension Allowances (LEAs), which were recently reduced for NW Natural in a November 2022 rate case

What’s needed:

  • Overall capacity and resources to support small but powerful coalition of advocates
  • Support for community-based organizations to engage more heavily in current and future proceedings
  • Organizers and on-the-ground staff to train and engage community members
  • Technical analysis and more Oregon-specific data sets on gas systems and non-pipeline alternatives
  • Legal Support

Lessons Learned:

  • Several types of gas planning, integrated resource planning, or rate case proceedings relate to gas transition plans, and if combined and/or coordinated can be early placeholders for future of gas and climate action conversations.
  • Comments and engagement can help educate PUCs by bringing to their attention the decarbonization and planning pathways being used by other states while helping to build the record for future proceedings. 

Contact: Greer Ryan, Climate Solutions, greer.ryan@climatesolutions.org to offer support in any of the above areas. 

 

Washington

Current Status: 

  • Active
  • Docket #: U 210553 
  • Recent Actions: Comments on scope and stakeholder engagement plan

The Energy Decarbonization Pathways proceedings was opened in 2021 by the Washington Utilities and Transportation Commission (WUTC) as a result of a budget proviso passed through the 2021-23 Omnibus Operating Appropriations Act. The stated goal of the proceeding is to “examine feasible and practical pathways for investor-owned electric and natural gas utilities to contribute their share to greenhouse gas emissions reductions as described in [Revised Code of Washington] RCW 70A.45.020 [state law]” (Senate Bill 5092, Sec. 143(4)). While the proceeding addresses both electric and gas utilities’ emissions and capacity to meet demand, there is an identified need to focus on gas infrastructure and how further investment in its expansion is at odds with the state’s climate goals, such as the Climate Commitment Act , which sets a target to reduce statewide emissions 45% below 1990 levels by 2030 and 95% by 2050.

One benefit of funding the proceeding through an appropriations act is that the studies undertaken as part of the investigation are not owned by the utilities. In other words, the utilities asked to create plans for decarbonization are not the direct clients of the consultants generating the models and reports, which allows the Commission to have more oversight and the process to have more transparency as a whole. Furthermore, like many state agencies, budget shortages at WUTC meant that the Commission was unlikely to launch this proceeding on its own accord, so appropriate funding gave them the resources necessary to undergo an investigation. 

The proceeding’s scope addresses 1) pathways for gas utilities to decarbonize 2) impacts on increased electrification and the capacity of electric utilities to deliver services and procure power 3) the impact of electrification on transmission and distribution infrastructure 4) the costs and benefits of electrification 5) impacts on low-income customers 6) additional regulatory changes needed to decarbonize gas services in a cost-effective manner. In comments on this initial scope, advocates offered further avenues of exploration, including the full decommissioning of the gas system; impacts of gas on air pollution and other public safety concerns; evaluation of electrification-friendly rates; pilot programs for low-income communities; the removal of subsidies for gas lines and gas appliances; and the inclusion of subsidies for electric appliances. The challenges are embedded throughout the system and more attention is needed on the many complex health, equity, and regulatory issues that are necessarily entangled with the future of gas. 

The intended outcome of this proceeding, then, is to produce a record of materials and recommendations that the legislature can then use to further its decarbonization policies. Ideally, it will also lead to some much needed updates for regulatory frameworks (such as requiring that gas utilities have gas decarbonization plans) and serve as the foundation for future proceedings regarding rate cases and line extension allowances. While Washington significantly reduced the allowed ratepayer subsidies for new gas lines in the service areas of two major utilities (Puget Sound Energy and Avista), a regulatory change would ensure consistency across the state and help further reduce and phase out all subsidies for line extensions across all gas utilities. In addition, advocates have recommended that the Commission use this opportunity to conceive of how to better integrate gas and electric utility systems as a whole,” as “holistically integrating gas and electric IRPs would facilitate comparing the cost-effectiveness of electrification programs versus other decarbonization strategies to reduce greenhouse gasses and ensure customers are protected” (Aug. 13, 2021 Comment on behalf of NW Energy Coalition et al.).

Currently, there are many more technical and stakeholder engagements scheduled while stakeholders await the result of the initial modeling studies. 

What’s Next:

  • More technical advisory meetings and the evaluation of the modeling for decarbonization pathways for gas utilities. Meetings have been delayed, so the timeline is uncertain and extended.
  • In the long run: hopefully some productive and powerful policy recommendations for the legislature to act upon.

What’s Needed:

  • Increased staffing capacity at the state level. This is important for launching proceedings and will be important for effective implementation of IRA funds.
  • More technical capacity to respond quickly and cogently when the modeling and analysis comes out.

Lessons Learned:

  • Money makes things happen! If a Commission is short-staffed or overwhelmed, they are unlikely to open an “extra” proceeding of their own accord. Funding allocated through the legislature can enable the Commission to acquire some resources to launch a gas system transition planning docket, but ensuring adequate staff capacity is critical. 
  • Genuine and thorough stakeholder engagement is important, especially when dealing with people from opposing positions. Furthermore, the consultant facilitating these meetings needs to be viewed as neutral and receptive to feedback (or able to answer why feedback wasn’t incorporated) to ensure the process is as transparent as possible.
  • While there are benefits to having an open technical advisory group (TAG), this can make the sessions and recommendations less productive than a selective TAG. 

Contact: Kelly Hall, Climate Solutions, kelly.hall@climatesolutions.org to offer support in any of the above areas.

 

Nevada

Current Status: 

  • Technically active but dormant in 2022
  • Docket #: 21-05002
  • Recent Actions: None since January 2022

The Public Utilities Commission of Nevada (PUCN) opened the “Investigation Regarding Long-Term Planning For Natural Gas Utility Service In Nevada” (# 21-05002) in 2021. While there was no binding legislation to initiate the proceeding, Nevada’s Climate Action Plan, which offers a 2050 net-zero or near-zero target for the state and articulates the “transition from residential and commercial use of gas,” provided some momentum for the proceeding’s initiation. 

The docket is intended to serve as a foundation for future regulation by investigating the utility and decarbonization landscape and addressing how gas system planning would affect various communities and policies. The PUCN thus offered a very detailed procedural order that posed the precise questions they wanted answered by gas utilities Southwest Gas and NV Energy, advocates, and other affected stakeholders. For example, they wanted an inventory of how and where natural gas was used in Nevada and the associated greenhouse gas emissions; an exploration of how decarbonization would affect the electric power grid; and further information on cost, planning, and mitigation measures.

Several community groups, advocates, and industry stakeholders weighed in on these questions, though it remains to be seen what the PUCN will do with this information. Some productive recommendations offered by advocates to the PUCN touched on the need to view gas utilities within the broader context of the state’s energy economy. Indeed, a concerted effort is needed across sectors to reach the state’s 2050 climate goals, as it would be counterproductive to cut emissions in the gas system only to increase them elsewhere. This “economy-wide decarbonization modeling….helps policymakers understand the tradeoffs between different emissions reduction strategies” and incorporates demand and supply-side modeling (10/22/21 Comments by NRDC et al.).

On the other side of the table, comments by Southwest Gas cite a “philosophical difference” between utilities and “advocacy groups” on “how best to approach reducing GHG emissions and, perhaps, the purpose of this docket” (11/12/21 Comments by Southwest Gas, pg. 6). They state that: “they [the Advocacy Groups] view this docket as an opportunity to declare Nevada’s energy policy–something which neither the Legislature nor the Governor have done–and to begin discussing the challenges associated with implementing that policy” (pg. 7). Southwest Gas, on the other hand, contends that the docket should approach GHG emissions with total technological neutrality, evaluating all possible pathways and fuels that might contribute to the 2050 “near-zero” emissions goals. 

While the relationship between fossil fuels and greenhouse gas emissions is certainly more than a matter of “philosophical difference,” the stance exhibited here by Southwest Gas demonstrates the tactics of a utility faced with an existential crisis. In other words, they are operating with the assumption that to concede that their fuel is incompatible with the state’s climate goals can only spell their own demise. Just because an industry exists now does not mean it should continue to exist or that it must; however, there are also opportunities for gas utilities to explore their place in a decarbonized future, one that isn’t dependent on “alternative fuels.” For example, as New York has shown, enabling gas utilities to be regulated as “thermal” utilities–based on the service (heat) that they provide rather than the fuel source (gas)–there is a possibility to explore how gas pipes can be replaced by water pipes to create geothermal networks to power clean electric appliances. While this is of course a radical transformation, it also offers a future for gas utilities that can truly aid in the decarbonization of the grid rather than delay or deny it. 

Since this is an investigatory proceeding, the Commission’s goal is to acquire information and build the record to contribute to future proceedings or to serve as background for future legislation. There has been little to no action on the Commission’s part in the past year of the proceeding and stakeholders are currently waiting to see what response, if any, the Commission will make to their comments. 

What’s Next:

  • It’s unclear when or what the response to initial comments will be. 

What’s Needed:

  • Unclear until next steps are determined regarding the proceeding.

Lessons Learned:

  • It’s helpful to engage directly with Commissioners when possible as this can help educate and encourage them to open a proceeding
  • Create a “big tent” coalition that includes local community groups
  • Ensure that scope of the proceeding is actionable; with investigatory proceedings there can be a flurry of action at the outset followed by long periods of silence 
  • There needs to be sufficient time and effort put forward by the Commission for stakeholder outreach to ensure that as many stakeholders as possible can engage

 

Colorado

Current Status:

The proceeding “Amendments to Gas Rules Implementing SB 21-264 & HB 21-1238” was opened by the Colorado Public Utilities Commission (CPUC) in September 2021 at the prompting of SB 21-264 (“Clean Heat Plans”). This bill required gas utilities in Colorado to submit a plan to reduce GHG emissions by 4% in 2025 and 22% in 2030 while also re-evaluating the cost-effectiveness of gas distribution by using updated social costs for carbon and methane.  This bill provided a springboard for the CPUC to open a proceeding that will have a lasting impact on Colorado’s gas distribution system. As we’ve seen in other states, the work of gas planning and its ancillary issues does not necessarily happen through a single long-term gas planning proceeding. While this proceeding was opened to consider the rules and timeline for gas utilities’ Clean Heat Plans, it has been expanded to make the proceeding more holistic and coordinated. 

Throughout the proceeding, the proposals and arguments made by the main utilities engaged in the proceeding–Xcel Energy and Black Hills Energy, both dual fuel utilities, and Colorado Natural Gas, a gas-only utility–have reflected arguments seen elsewhere: the prominence of Hydrogen and RNG in a “decarbonized” future, the centrality of Carbon Capture and Storage (CCS), and arguments defending “customer choice,” a line of thinking that has been most popular in “preemption states,” where it has been enshrined in the law that customers have the right to choose to use gas or any other fuel source to power their homes. However, the rules dictating the creation of the Clean Heat Plans will require utilities to account for cost-effectiveness and to consider electrification pathways. 

After releasing a draft decision this summer, the Commission issued a final decision on Dec. 1, 2022 that reflects the new mandate of regulators in the era of climate change. They write: “We have, and continue to find, it appropriate to take the concepts of line extension policies, gas infrastructure planning, and implementation of the requirements in SB 21-264 and HB 21-1238 together in this single rulemaking because we find the topics interwoven and the record supportive of implementing rules in these areas” (pg. 13). This holistic approach opposes the fragmented approach championed by Black Hills Energy, which requested a “bifurcated” approach to gas planning that would inevitably slow down the process and disconnect related issues. In response to this request, the Commission founds that a “single rulemaking approach” was preferable and that “the focus of the broader gas rules should be on integrated planning, and that the rules regarding CPCNs, gas infrastructure planning, demand side management, and clean heat plans will all be needed ‘in order to make progress towards our near-term and long-term emissions goals.’” (Pg. 28)

One rule change proposed by the Commissioners in the draft decision was the effective elimination of line extension allowances (LEA). Removing ratepayer subsidies for new gas hookups would significantly affect the cost-effectiveness of continued growth of the gas distribution system, further tilting the scale toward electrification as the lowest-cost pathway. While the final decision did not remove LEAs, the Commission will require them to be recalculated for each utility in future proceedings based on the “full incremental cost of growth” while taking into account climate impacts. As revised, rule 4210(c) states: “Line extension policies, procedures, and conditions shall be based on the principle that the connecting customer pays its share of the estimated full incremental cost of growth, including any costs associated with increases in design day peak demand.” This recalculation, coupled with the rule 4210(e): that “line extension policies, procedures, and conditions shall generally align with the greenhouse gas emission reduction goals” will require utilities to revise their LEA policies to reflect these new rules by the end of 2024. 

In addition to acknowledging the need for integrated planning and this revision to the economics of building new gas lines, this proceeding was significant for how it affected the Commission’s view of gas planning moving forward. The Commission acknowledged how this proceeding is foundational for what’s to come: “We foresee this rulemaking as one incremental step in the larger evolution of the shifting regulatory framework for the gas industry” (pg. 13). The “future” of gas won’t be decided in a single rulemaking, but will require a series of thoughtful, coordinated proceedings to ensure equitable and timely transformation. 

What’s Next

  • Final Decision issued by the Commission on Dec. 1, 2022
  • The Colorado Energy Office, with the support of a multi-stakeholder steering committee, is embarking on a “Future of Gas” study to consider the trade-offs of various long-term approaches to meet the state’s building sector decarbonization goals. The outcomes of this study will help inform future sector-based, clean heat targets. 

What’s Needed

  • Intervening in proceedings is resource intensive. More support for community-based organizations who are interested in participating would help ensure that as many voices as possible are represented. 
  • Better coordination across states that have ongoing gas proceedings would help share knowledge and tactics for how to engage more effectively with gas utilities and other stakeholders. 

Lessons Learned

  • Various policies and goals–from a binding resolution to an Executive Order–can help launch a gas system planning proceeding.

Contact: Kiki Velez, NRDC: kvelez@nrdc.org to offer support in any of the above areas. 

 

Minnesota

Current Status:

  • Active
  • Docket # 21-565
  • Recent Actions: Comments on Scope

The Minnesota Public Utilities Commission (MPUC) opened its gas proceeding, “In the Matter of a Commission Evaluation of Changes to the Natural Gas Utility Regulatory and Policy Structures to Meet State Greenhouse Gas Reduction Goals” (# 21-565) in July 2021. The inciting incident for this proceeding was the 2021 Natural Gas Innovation Act, which also encourages gas utilities to propose “innovation plans” that consider alternatives to gas, including electrification, district thermal energy, carbon capture and storage, hydrogen, RNG, energy efficiency, and innovative technologies. Currently, utilities are working on their plans (with no specific timeline, but anticipated filings sometime in mid-2023), and it remains to be seen how these plans will intersect with the recommendations that emerge from the current “Future of Gas” proceeding. 

The “Future of Gas” proceeding is still in the early stages of development, with much still to be decided. A joint letter (Sept 2022) from Fresh Energy, Citizens Utility Board (CUB), Comunidades Organizando el Poder y la Acción Latina (COPAL-MN), Minnesota Center for Environmental Advocacy, RMI, and Sierra Club offered a series of suggestions regarding the structure and scope of the proceeding, including the need for a “Future of Gas Roadmap.” This roadmap includes more space and time for stakeholder engagement, as this proceeding currently only has three planned technical workshops and comment sessions–far fewer than what is normal or needed. They have also recommended that an action phase be built into the procedure to ensure productive outcomes from the workshops and comment periods. 

If the Commission adopts this Future of Gas Roadmap, the proceeding will help socialize decarbonization pathways such as electrification and district energy while also helping to build the case for recalculating line extension allowances, accelerated infrastructure replacement, and taking a closer look at gas supply and distribution planning. Any meaningful progress toward planning for the future of the gas system and how capital should be invested in the state’s energy infrastructure will help further the goals of decarbonization statewide. 

What’s Next

  • Determining how NGIA plans will intersect with the proceeding
  • Technical Conferences 

What’s Needed

  • Broader public awareness about the impact of the gas system on health, equity, housing, etc. 
  • Support for community based organizations to more fully engage in PUC proceedings.
  • Studies on workforce impacts, economic impacts and costs of decarbonization.

Lessons Learned

  • Accelerated infrastructure replacement and plateauing per-customer usage is causing a lot of rate cases, even with the addition of new customers each year, which demand a lot of resources and time that can overwhelm state agencies. Therefore these types of “future of gas” proceedings won’t just happen on their own and require continued support and input from stakeholders to evolve in a productive direction, including concrete procedural steps for how the proceeding should unfold. 
  • It’s important to watch out for scope creep; the parallel Natural Gas Innovation Act (NGIA) is helping to ensure that the proceeding stays focused on GHG reduction principles.

Contact: Joe Dammel, Fresh Energy: dammel@fresh-energy.org to offer support in any of the above areas.

 

Massachusetts

Current Status: 

  • Active
  • Docket # 20-80
  • Recent Actions: Awaiting statement from DPU following final comment period

Massachusetts’s “Future of Gas” proceeding (# 20-80) began in 2020 following the Attorney General’s petition to the Massachusetts Department of Public Utilities (DPU) to open an investigation into the function that gas will serve in reaching the state’s goal of net-zero GHG emissions by 2050. In addition to this direction, the recent memory of the deadly Merrimack Valley pipeline explosion continues to catalyze action regarding the state’s aging gas infrastructure. The thermal energy network advocacy group, HEET, offers a series of maps  that demonstrate the ongoing leaks in the gas pipeline system across Massachusetts. Together, these examples make a compelling case for the urgency of addressing the future of gas. 

The scope of the proceeding includes an investigation into the many pathways available for the gas system within the parameters of the state’s climate goals and directs each of the five gas utilities (Berkshire Gas, Liberty, Eversource, National Grid, and Unitil) to prepare future-of-gas plans. It has changed shape a few times already with new modeling scenarios that include network geothermal and full decommissioning of the existing gas system. After two years of stakeholder meetings, comments, and reports, stakeholders now await a statement from the DPU on how this information will be used to recommend policy or open further proceedings.

A major point of contention during the proceeding arose with regard to the underlying assumptions of the modeling. In one instance, the modeling assumed all biofuels were fully carbon neutral and assumed leak rates from the gas distribution system that were much lower than estimates from recent peer reviewed studies. The analysis also only evaluated net system costs out to 2050, failing to evaluate any system costs post-2050. This modeling decision is disadvantageous to certain scenarios evaluated in the modeling effort, particularly the 100% decommissioning scenario where the vast majority of system-level cost savings are realized post-2050 when ratepayers are no longer financially supporting two separate energy distribution systems (electricity and gas). Extending the modeling time horizon beyond 2050 would better demonstrate the true cost savings associated with gas system decommissioning and highlight the cost-effectiveness of strategies that paired electrification with targeted pruning of the gas system. (See Acadia Center’s additional modeling revisions here).

Envisioning a future completely without gas is both an imaginative and technical challenge, and it is no surprise that many of our tools and assumptions are not yet equipped to accurately project how this scenario will look. Working to refine modeling assumptions and technical analysis with rigorous oversight is critical to ensuring that economy-wide modeling efforts investigating the future of the gas system produce the accurate outputs needed to effectively inform policy decision makers. Getting certain assumptions right – including accurate lifecycle modeling for biofuels and accurate cost savings projections from gas system decommissioning – will be critical to ensuring these modeling efforts provide scientifically and economically sound outputs. 

What’s Next

  • Comments from the DPU
  • More analysis on relevant topics, e.g. life cycle analysis of biofuels
  • Hopefully the incoming environmentally progressive Governor, Maura Healey, will take these findings to expedite state-wide decarbonization

What’s Needed

  • Federal leadership to assist with some of the technical modeling challenges that multiple states are currently facing would help compensate for lack of resources at the state level while adding consistency across similar proceedings in different states.  

Lessons Learned

  • Design the scope in such a way that there is more oversight by the DPU over the modeling and analysis performed by the gas utilities. In other words, it’s not recommended that gas utilities be the direct clients of the consultants doing the determining modeling for the investigation. 
  • Ensure there are smaller, targeted technical sessions with experts in addition to broad-reaching stakeholder meetings as these will ensure there is space for debate over complex issues. 
  • Clean Heat Standards and Future of Gas proceedings should be coordinated and aligned as they work better in concert.

Contact: Ben Butterworth, Acadia Center: BButterworth@acadiacenter.org to offer support in any of the above areas. 

 

Washington D.C.

Current Status: 

  • Active
  • Docket # FC-1167
  • Recent Actions: Active: Reply Briefs regarding PSC’s authority to order electrification under consideration

The DC Public Services Commission (DCPSC) opened an investigatory proceeding (Docket # FC-1167) in 2020 following the merger of AltaGas and Washington Gas Light Company (WGL) in 2018. The joint settlement submitted by both parties in the merger proceeding required that AltaGas and WGL file a climate business plan that demonstrated how they are advancing or meeting DC’s energy and climate goals. At present these goals include reducing GHG emissions by at least 50% by 2032; carbon neutrality by 2050; net zero energy for building codes by 2026; and electrifying buildings by 2050. 

However, the business plans submitted by AltaGas and WGL in 2020 fell short of what advocates perceived as climate aligned business plans. Rather, they focused on the potential of expanding gas and hydrogen, including a $4B gas pipe replacement plan, and ignored electrification and non-pipeline alternatives. The insufficiency of these plans prompted advocates to demand an evidentiary proceeding to better address the future of gas in DC. In addition, the mandate of the Commission had been recently modified by the 2018 CleanEnergy DC Omnibus act to uphold “the conservation of natural resources, and the preservation of environmental quality, including effects on global climate change and the District’s public climate commitments” (Pg. 3). This broadened mandate, combined with stakeholder intervention, prompted the DCPSC to open another proceeding to continue the dialogue and ensure alignment between the utility and DC’s climate goals. 

The scope of the proceeding, formally called “In the Matter of the Implementation of Electric and Natural Gas Climate Change Proposals,” includes: 1) considering “to what extent utility or energy companies under our purview are helping the District of Columbia achieve its energy and climate goals” 2) “tak[ing] action, where necessary, to guide the companies in the right direction” and 3) “the development of a comprehensive plan for how utility or energy companies can help the District achieve its 2032/2050 goals and satisfy the directives of the Clean Energy Act” (Pg. 5). 

In recent months, the DCPSC’s role has broadened to include pertinent discussions regarding rate cases that the utility had otherwise attempted to argue was outside the purview of the proceeding: rates, gas system planning, climate goals, and other decarbonization pathways. This change came after stakeholders argued that “the Commission is well within its authority to order electrification,” despite objections by PepCo’s (Potomac Electric Power Company), and asserting that “the Commission has an essential role to play in facilitating decarbonization in the District” (Pg. 2). 

What’s Next

  • Awaiting response to the reply briefs regarding PSC’s authority to order electrification 

What’s Needed

  • Due to the revised, climate-oriented mandate for the DCPSC, more regulatory staff who are knowledgeable in this area are needed to ensure success. 
  • Studies on hard-to-electrify sectors and whether there is a valid use of RNG in these sectors. 
  • Leak Detection studies to determine how to minimize and mitigate the costs to rehabilitating leaky distribution networks while also pruning the gas system as a whole.
  • Modeling for the remaining gas load.

Lessons Learned

  • Having progressive leaders and enabling legislation can accelerate proceedings. DC’s progressive council is constantly moving up climate goals which in turn shapes the direction of regulatory proceedings.
  • Enabling legislation to direct DCPSC’s mandate to align with climate goals helps PSC take up the mantle of climate action and provide them with the tools and expertise they need to do so.  

Contact: Casey Studhalter, DC Dept of Energy and Environment, casey.studhalter@dc.gov to offer support in any of the above areas. 

 

Rhode Island 

Current Status:

The Rhode Island Public Utilities Commission (RIPUC) opened the “Investigation Into the Future of the Regulated Gas Distribution Business in Rhode Island in Light of the Act on Climate” (Docket # 22-01-NG) in June 2022. As the title implies, the primary inciting incident for this proceeding is the 2021 Act on Climate which sets forward GHG reductions requirements to meet the state’s 2050 economy-wide net-zero goal and directs state agencies to address “the impacts on climate change…in the exercise of its existing authority.”

In addition to this policy direction, a gas outage incident in recent memory on Aquidneck Island created new urgency for addressing the current and future capacity of the gas system. In January 2019, three concurrent upstream events led to extreme low pressure on Aquidneck Island, which is at the end of the transmission line in Rhode Island. As a result, Rhode Island Energy (RIE) had to turn off gas to Aquidneck Island for a week while the system was repressurized, leaving many without heat in the middle of winter. During the ratepayer advocate investigation that followed, one of the proposed solutions that RIE offered to prevent future outages was building more gas infrastructure, even though one of the reasons the system failed was due to the fact that the utility had connected more customers than its contracts could fulfill. 

Rhode Island offers a unique opportunity for regulation as the gas and electricity service for nearly the entire state are owned and operated by the same company, RIE. Even though RIE has separate entities for gas and electric, there are possibilities for regulating them together as one company, which could result in more holistic and productive proceedings. 

As the proceeding is in the early stages, it remains to be seen how productive the proceeding will be. Lessons learned from Massachusetts’s Future of Gas proceeding are being imported as the RIPUC will have more oversight over the technical research performed by the utilities. In addition, advocates in the “Beyond Gas RI” coalition pushed for RIPUC to extend its purview, which typically ends at the meter, by addressing the health and air quality effects of fossil fuel appliances inside the home. 

Most recently, RIPUC has responded to public comments regarding its initial scope, making substantive changes to the work plan and issues under consideration. In receiving several comments to broaden the scope to explicitly include equity, electrification, health impacts, air quality, and other considerations, RIPUC acknowledged that these issues were pertinent to the scope but did not consider it necessary to call them out as such in the scope at this time. However they assured stakeholders that they should “expect the issues they raised to be considered during the proceeding” (pg. 3). However, one recommendation for scope expansion that they did feel was necessary to call out in the revision was the need to examine how gas system emissions are measured. 

Overall, the scope for this investigatory proceeding is very inclusive and should serve to build up a bank of PUC resources for proceedings to follow on the heels of this one. Future dockets on gas safety and reliability, energy efficiency, and rate cases can all draw from the stock of resources established through this proceeding.

What’s Next

  • The revised scope will be discussed at an open meeting. 

What’s Needed

  • More technical expertise to combat rampant misinformation, particularly concerning air source heat pump effectiveness in cold weather and grid stability. 
  • Resources for regrants to ensure community-based organizations can engage in proceedings.
  • Communications support to socialize concepts of beneficial electrification and managed transition from gas.

Lessons Learned

  • If gas utilities will be funding their own technical and feasibility studies, it’s important that the PUC have strong oversight over this process.
  • Acadia Center has been calling for a moratorium for gas on Aquidneck Island due to recent issues with gas distribution there. This small geographical area offers a case study for how to “prune” the tree of the gas system and thus offers a tangible example for Commissioners to envision what a future without gas might look like. 

Contact: Hank Webster, Acadia Center: hwebster@acadiacenter.org to offer support in any of the above areas.

 

New York

Current Status:

  • Active
  • Docket # 20-G-0131
  • Recent Actions: Accelerated depreciation studies submitted by utilities; GHG inventory report released for public comment

The New York Public Service Commission (NYPSC) opened the “Proceeding on Motion of the Commission in Regard to Gas Planning Procedures” (# 20-G-0131) in May 2020 to develop gas moratoria protocol and align gas system planning with the Climate Leadership and Community Protection Act (CLCPA), which established emissions reduction targets and mandated emission-free electricity for the state by 2040. The initial inciting events–gas moratoria by Con Edison and National Grid in Westchester and Long Island and NYC, respectively, occurred in 2019 and called attention to the flaws in the gas planning process. Rather than simply approving the construction of new pipelines to address capacity challenges, the NYPSC launched the gas planning proceeding to establish a framework for assessing the risks and steps involved with future capacity crises. 

While the moratoria served as the primary cause for the proceeding, after the transition from Governor Cuomo to Governor Hochul, and along with that a new chair of the Commission, alignment with the CLCPA began to emerge as the leading goal of the proceeding. In fact, the development of the CLCPA scoping plan, which has been occurring in the background of this proceeding, has proven to have a strong effect on the direction of the proceeding itself. The Climate Action Council established by the CLCPA has become the main venue for the state’s decarbonization plan, rather than the gas proceeding, where some stakeholders may have initially hoped these conversations would occur. This is not to say that gas proceedings cannot be the field where these debates are held; however, if an external climate plan is being developed concurrently, there may be some strategic sense to addressing deep decarbonization in that plan. 

In February 2021, staff issued a gas planning proposal that was adopted by NYPSC in May 2022. The framework then initiated several processes, including: utility long-term planning, depreciation studies, a non-pipeline alternative (NPA) framework, and an avoided cost-of-gas working group. This action will require that, every three years, gas utilities submit plans that comply with the state’s GHG emission reduction goals. These plans are required to include at least one pathway with non-pipeline alternatives. Also in May, the Commission “adopted new rules that set forth the process for initiating, operating, and lifting a natural gas moratorium” which will “minimize impacts to customers while ensuring safe and adequate utility service” (NYPSC). 

In November 2022, gas utilities submitted depreciation studies that evaluated how different accelerated depreciation schedules would impact ratepayers and costs. Revised depreciation schedules would have a significant impact on a utility’s infrastructure planning. Shortening the time over which a utility can recover the cost of existing and new infrastructure from ratepayers would push utilities to recover those costs much more quickly than the useful life of that infrastructure demands. The likely result would be an increase in rates charged to gas customers. By asking utilities to develop schedules that align with New York’s regulatory deadlines for emissions reductions, these studies highlight how the current business model of gas utilities depends on the ability to continue recovering costs of infrastructure investments well beyond 2050–the year by which New York is meant to achieve economy-wide net-zero emissions.

Currently, an independent consultant hired by the Commission is evaluating the preliminary draft of National Fuel’s Long Term Plan, with the final draft expected mid-December. In addition, Commissioners are waiting for the Climate Action Council to finalize the CLCPA scoping plan before taking their next step in the proceeding (due out December 2022). 

What’s Next:

  • Changes to the “100 foot rule,” also known as a line extension subsidy
  • NYPSC awaiting final scoping plan for CLCPA 

What’s Needed:

  • Cost study that provides a comprehensive picture of what the gas system costs and how much a transition is likely to cost.
  • Better rate design.
  • An expert to moderate and intervene in the ongoing avoided cost-of-gas working group.

Lessons Learned: 

  • Politics matter. Even though regulatory agencies are independent bodies, political pressures, transitions, and changes affect how proceedings unfold and what issues take priority. 
  • Gas proceedings can help take an issue from a specific rate case and make it applicable to all future rate cases. By importing questions of stranded assets and ratepayer subsidies from rate cases to gas proceedings, these issues can be debated more “philosophically” and in a less hostile environment where the utilities’ profits are not currently at stake. The conclusions and record from these debates can then be used to shape future rate cases and potentially affect how utilities justify their bids to expand the gas system. 
  • Regulators are facing a future entirely unlike the past century of energy regulation. Disruption to the status quo will be a feature of their positions as we mitigate the climate crises and this requires radical shifts in how auditors view their primary mandate of assessing risks and costs. 

Contact: Justin Gundlach, BDC: jgundlach@buildingdecarb.org to offer support in any of the above areas. 

 

Conclusion

With ten gas proceedings underway, there still remains significant opportunity in the regulatory space for systemic action against fossil fuels. In fact, every state with a greenhouse gas emission reduction goal (currently 25 states and D.C.) should have a future of gas proceeding underway. As Commissions alter their mandates in light of climate change, the traditional framework of mitigating risk and evaluating costs becomes increasingly more complex. The decarbonization movement can help shape how these costs and risks are understood by demonstrating the harmful, long-lived effects of the gas system and its assets as well as the benefits of alternative electrification pathways for workers, communities, and even some utilities. Through advocacy, coalition building, regulation, and legislation, we can build a future without gas. 

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Thank you for reading our second issue of DecarbNation. You can check out issue one, on the building decarbonization legislation passed in 2021-22, here. Sign up to receive an alert when the next issue drops here. Please send any questions or comments to Kristin George Bagdanov, Mgr. of Policy Research and Knowledge Sharing at kristin@buildingdecarb.org.

Recommended Reading

Alter, Abigail, Sherri Billimoria, and Mike Henchen. “Overextended: It’s Time to Rethink Subsidized Gas Line Extensions.” RMI, 2021. https://rmi.org/insight/its-time-to-rethink-subsidized-gas-line-extensions/.

Bilch, Andy, Michael Colvin, and Timothy O’Connor. “Managing the Transition: Proactive Solutions for Stranded Gas Asset Risk in California.” Whitepaper. Environmental Defense Fund, 2019. https://www.edf.org/sites/default/files/documents/Managing_the_Transition_new.pdf.

Lucas W. Davis and Catherine Hausman. “Who Will Pay for Legacy Utility Costs?” Journal of the Association of Environmental and Resource Economists 2022 9:6, 1047-1085). https://www.journals.uchicago.edu/doi/pdf/10.1086/719793 

Farnsworth, Davis. “An Escape from the ‘Jaws of Delusion’: Planning for the End of Cheap Gas.” Regulatory Assistance Project (blog), August 10, 2022. https://www.raponline.org/blog/an-escape-from-the-jaws-of-delusion-planning-for-the-end-of-cheap-gas/.

“Gas Resource and Infrastructure Planning for California: A Proposed Approach to Long-Term Gas Planning.” GridWorks, January 2021. https://gridworks.org/wp-content/uploads/2021/01/CA_Gas_Resource_Infrastructure_Plan_Report_FINAL.pdf.

Harwood, Meghan, Sean Newlin, Kiki Velez, and Michelle Vigen Ralston. “The Flipside Report: A White Paper on Targeted Geographic Electrification in California’s Gas Transition.” Whitepaper. Building Decarbonization Coalition and Common Spark Consulting, July 2021. /wp-content/uploads/the_flipside_report_-_targeted_electrification_for_gas_transition.pdf.

Hens, Isabelle, Emily Lamon, Steven Weissman, and Building Decarbonization Coalition. “A Methodology for Geographically-Targeted Building Electrification for Environmental and Social Justice Communities in California,” 2021. /wp-content/uploads/geographically-targeted_building_electrification_for_environmental_and_social_justice_communities_in_california.pdf 

Karas, Natalie, Michael Colvin, Ted Kelly, Erin Murphy, and Timothy O’Connor. “Aligning Gas Regulation and Climate Goals: A Roadmap for State Regulators.” Environmental Defense Fund, January 2021. https://blogs.edf.org/energyexchange/files/2021/01/Aligning-Gas-Regulation-and-Climate-Goals.pdf.

Spector, Julian. “What Are Public Utility Commissions? A Beginner’s Guide.” Canary Media (blog), October 12, 2022. https://www.canarymedia.com/articles/guides-and-how-tos/power-by-people-puc-involvement-guide.

Velez, Kiki. “California’s Building Transition.” Building Decarbonization Coalition, January 2021. /wp-content/uploads/recommendations_for_gas_transition_regulatory_proceedings_at_the_cpuc.pdf

Acknowledgments

A special thank you to the many advocates who took the time to speak with me about the gas planning proceedings in their states as well as the many resources they provided as background for this research. 

Thank you especially to the following people:

Abigail Alter, RMI

Sherri Billimoria, RMI

Ben Butterworth, Acadia Center

Joseph Dammel, Fresh Energy

Laura Feinstein, Sightline

Justin Gundlach, BDC

Kelly Hall, Climate Solutions

Greer Ryan, Climate Solutions

Casey Studhalter, DC Department of Energy and Environment

Kiki Velez, NRDC

Hank Webster, Acadia Center

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