Earlier this year, California enacted legislation mandating that the state become a carbon-neutral economy by 2045. To succeed in this ambitious task, we must phase out the use of natural gas in all sectors, including building, industry and power.
We have a long road ahead of us: California is currently one of the country’s largest consumers of natural gas.
California’s energy agencies are moving in numerous directions to address this challenge. The California Air Resources Board recently announced a strategy to end the sale of gas space and water heaters starting in 2030. The California Energy Commission’s 2022 building standards lay the groundwork for an all-electric building code. And at the California Public Utilities Commission, we recently eliminated subsidies for extending gas lines to serve new buildings, ending a financial incentive for gas system expansion.
Taking these efforts one step further, the PUC just adopted a new framework for review of significant gas infrastructure projects.
Previously, gas infrastructure projects, no matter their size or significance, were considered in general rate cases, in which the agency reviews projected utility spending and sets gas and electric rates. These cases are the most expansive PUC proceedings, assessing billions of dollars of proposed utility spending and decisions that are hundreds of pages long. Individual gas projects can get buried in these applications and not receive the scrutiny they deserve.
This is at odds with the imperative to address climate change. We must closely consider the need for new investments in the gas system that are unrelated to safety to avoid stranded assets and reduce reliance on gas.
Recognizing these concerns, the decision requires that gas utilities seek individual approval of gas infrastructure projects exceeding certain thresholds, such as $75 million in costs or significant air quality effects. These thresholds will capture the gas projects likely to have the most substantial impact.
To ensure that safety remains paramount, the framework exempts safety and emergency projects. Projects scheduled to be in service by Jan. 1, 2024, are also exempt to give the gas sector time to adjust to the new rules. Routine maintenance and repairs are also excluded.
Applications for other projects will have to demonstrate the need for them and provide information on potential environmental impacts, alternatives, safety and reliability, projected costs for ratepayers, and a summary of engagement with communities likely to be affected. This framework is along the same lines as an existing PUC order governing review of significant electric infrastructure projects.
The decision remedies another lacuna in the existing regime: a glaring lack of transparency about planned projects. Neither the PUC nor other interests have enough information about gas utility planning.
Under the new rules, utilities must file annual reports detailing planned long-term gas infrastructure projects exceeding $50 million over the next 10 years. These reports must include a detailed description of each project, projected capital expenditures, cost drivers and environmental implications.
For projects planned to commence within five years, utilities must go further, presenting information on non-pipeline alternatives, projected operational costs and reliability benefits. This will facilitate close scrutiny of such projects to ensure that we don’t increase reliance on the gas system and dig a deeper hole for ourselves. This will also allow us to compare utility plans with cleaner alternatives.
Meanwhile, the CPUC is developing a broader, long-term gas strategy. There are many tough questions to work through.
Even as we decrease gas use, how do we maintain the safety of aging pipelines? How do we strategically prune gas infrastructure not needed for hard-to-electrify sectors such as steel and cement? How do we keep rates affordable, especially for low- and moderate-income consumers, as we electrify? How do we provide a just transition for gas workers who will be directly affected?
Addressing these complex questions will take time. In the interim, it’s important that we carefully review all significant gas projects that could make the decarbonization challenge even harder.
Clifford Rechtschaffen is a member of the California Public Utilities Commission. Simi Rose George is one of his advisers.