Progress Report: How States Are Kicking Gas
This blog tracks the progress of six states striving to equitably wind down investment into the fossil gas system.
Tackling the climate crisis requires a rapid transition away from “natural” gas – a polluting fossil fuel – and onto emissions-free, efficient all-electric appliances. And yet, across the country, the gas system is a climate beast that is only growing. Nationwide, gas customers are on the hook for more than $150 billion in gas distribution system investments – and this amount is only increasing, as gas utilities continue to invest in their systems despite the climate emergency.
With the transition to clean electric heating already underway, states have a responsibility to protect households from unchecked, unnecessary investments in a gas system that is on its way out. This blog tracks the progress of six leading states attempting to kick gas: California, Colorado, Illinois, New Jersey, New York, and Washington. While these states are making progress, more action is urgently needed nationwide to secure an affordable, equitable transition away from gas and toward clean, electric appliances.
The future is all-electric
When a gas utility invests in gas infrastructure, such as a pipeline, it expects to recover the cost from customers—plus a profit—over up to eight decades. Yet scientists overwhelmingly agree that we need to cut climate-warming emissions in half by 2030, and to net-zero by 2050, to avoid the worst impacts of climate change. For buildings, that means largely eliminating gas heating in fewer than three decades.
Numerous studies demonstrate that transitioning from gas to efficient, all-electric appliances is the single, most cost-effective strategy for cutting emissions from buildings. In a national decarbonization model, the Net Zero America project at Princeton University found that cutting emissions will require electrifying most, if not all, water heating, space heating, and cooking in the United States by 2050. This would render virtually all new pipeline investments useless decades before their 80+ year expected lifetimes.
The all-electric transition will come with numerous co-benefits, including cleaner, healthier air inside and outside buildings and independence from the political and price volatility of fossil gas. It also means our energy system will look markedly different in three decades—and our investments in it need to change accordingly.
Customers deserve an affordable gas transition
Gas utilities provide gas to homes and businesses through distribution pipelines. Customers pay for this service in two components.
First is the “commodity cost” —the price of the gas itself, which is passed directly from the utility to the customer. Gas commodity costs can be volatile: with prices more than tripling in parts of the West last winter due to supply interruptions.
More consequential for long-term gas costs, though, are gas infrastructure costs. Investing in infrastructure, such as pipelines, is gas utilities’ core business model: they pass the cost of the investment, plus an added profit, on to their customers as part of their gas bills. State regulatory commissions are tasked with ensuring that these investments are reasonable and necessary.
As households transition from gas-burning appliances to all-electric ones, gas utilities should be scaling down their infrastructure investments. And yet, across the country, many utilities continue to propose expensive—in some cases, record-breaking—investments into the gas system. In Nevada, Southwest Gas is requesting a rate increase of nearly $70 million this year; Illinois gas utilities requested more than $900 million in increases last year; and Colorado’s largest gas utility requested $200 million more in rates last year while raking in record-high profits of $1.74 billion. At the same time, customers in many areas saw their gas bills more than double due to high winter gas prices.
Stakes are high, time is short
These gas system investments are a ticking time bomb.
In California, analysis found that a failure to cut investment into the gas system as customers depart will result in unthinkable rate increases for the remaining clients, with rates growing more than 900% by 2050 compared to today.
Without intervention, it may be the customers least able to electrify, including “lower-income Black and Brown people and rural residents,” who are left paying for these bad investments. To avoid this, states must act now to minimize gas system investments and achieve a managed, least-cost transition off of gas.
States from coast-to-coast made progress toward a managed gas transition in 2023. Yet, across the country, much more is needed.
Here is our tracker of state gas planning progress:
|End to Gas Line Extension Subsidies
|CA eliminated subsidies for developers to connect new properties to the gas system in July 2023, a move that will save gas customers an estimated $160 million per year.
|Gas Planning Proceeding
|CA’s Long-Term Gas Planning Rulemaking, initiated in 2020, has notably resulted in a Staff Proposal (not approved) to decommission segments of the gas system and a decision to increase scrutiny of gas investments over $75 million. Yet, much more action is needed in this proceeding, and at a much faster pace, to meaningfully reduce gas investments in line with CA climate targets.
|PG&E Targeted Electrification Pilot
|PG&E has proposed a nation-leading pilot to electrify the CSU Monterey Bay campus and retire the gas pipeline serving the university, saving gas customers money in the process.
|Targeted Electrification Legislative Effort
|In 2023, legislation endeavored to encourage strategic, targeted electrification projects. The bill failed, but further legislation around long-term gas planning may be introduced this year.
|Electric Subsidies for New Homes with Gas
|A Proposed Decision would remove electric line extension subsidies for new buildings that are connected to the gas system.
|Gas Appliance Incentives
|CA is reducing utility incentives for gas appliances in new construction while boosting codes and policies that support electrification.
|Gas Appliance Incentives
|CO will fully phase out utility incentives for gas appliances by 2027 while significantly increasing incentives for building electrification.
|Senate Bill (SB) 291 – Utility Regulation
|A new law in 2023 took steps to protect customers from bad gas investments, including removing subsidies for connecting new properties to the gas system and strengthening gas planning requirements.
|Clean Heat Targets
|CO’s pathbreaking Clean Heat legislation requires gas utilities in the state to cut emissions 22% by 2030 relative to a 2015 baseline. Any scenario to meet the Clean Heat targets will require a rapid deployment of electrification.
|Gas Infrastructure Plans
|CO’s gas utilities must file infrastructure plans that provide stakeholders and decisionmakers greater insight into proposed gas investments, including a consideration of “non-pipeline alternatives" (e.g., electrification) to investing in the gas system.
|Gas Planning Legislative Effort
|In 2023, advocates in IL developed gas transition legislation to establish a Clean Heat Standard and remove subsidies for connecting new properties to the gas system, among other measures. The bill may be heard in the 2024 legislative session.
|Historic Gas Rate Case Wins
|In 2023, gas utilities in IL requested $900M rate increases. Advocates prevailed in slashing these rate increases and convincing regulators to establish proceedings that will enable long-term planning to avoid gas system expansion and emissions.
|Gas System Transition Legislative Effort
|NY HEAT is a critical legislative effort that would bring gas utility regulation into alignment with NY’s climate law by eliminating rules that promote and subsidize gas system expansion. Provisions include ending gas system extension subsidies and paring back gas utilities’ “obligation to serve” all customers, which would enable neighborhood-scale electrification projects that facilitate strategic downsizing of the gas system. The bill will be considered in 2024.
|All-Electric New Buildings
|In 2023, NY adopted the All-Electric Building Act, which requires zero-emission new homes and buildings starting in 2026. This marks the first time that a state has implemented this policy through statewide law.
|Gas System Planning Process
|In 2022, NY established a new long-term gas system planning process that seeks to avoid new investment in fossil fuel infrastructure and reduce emissions. Every three years, each gas utility must develop a 20-year gas system plan capable of meeting demand and must include at least one scenario for doing so without new investments in traditional gas system infrastructure.
|Gas System Emissions Reduction Pathways Study
|In 2022, NY required the gas utilities to collectively undertake a Statewide Gas System GHG Emissions Reduction Pathways Study that analyzes the scale, timing, costs, risks, uncertainties, and customer bill impacts of achieving a meaningful reduction in gas system emissions.
|Gas Planning Executive Order
|In 2023, NJ’s Executive Order 317 instructed state utility regulators to initiate a “Future of the Natural Gas Utility” proceeding to develop plans to reduce gas utility emissions 50% by 2030 relative to a 2006 baseline. On the heels of the Order, the NJ Board of Public Utilities pressed pause on a $2.5 billon infrastructure investment filing, citing the need to plan for the future of gas before allowing continued investments in pipe replacement programs.
|End to Gas Line Extension Allowances
|Two of WA’s largest gas utilities, Avista Utilities and Puget Sound Energy, will phase out subsidies to connect new properties to the gas system by 2025.
|Gas Planning Legislative Effort
|In 2023, legislation aimed to establish a managed transition from gas to all-electric buildings for WA’s largest dual-fuel utility, including by enabling targeted electrification projects and limiting new connections to the gas system. The bill may be re-introduced in 2024.
Investing in new gas infrastructure today is like investing in a (super expensive) DVD player just before the dawn of streaming — except it’s our public dollars (the money of everyone who pays a gas bill) that are at play. With the climate clock ticking, our money should be going toward investments that will serve us long into the future—not into a fossil gas system that’s on its way out. Several states have begun to take significant actions to manage the transition off of gas, but much more is needed to secure an affordable transition to the clean energy future.