THE DEPARTMENT of Public Utilities unveiled a new regulatory approach to natural gas on Wednesday that takes some tentative steps to begin weaning the state off of its favorite fossil fuel.
After three years of studies and analysis, the DPU issued an order that requires gas utilities to begin to rein in their businesses and move toward a “beyond gas future.”
The utilities won’t be allowed to recover any money they spend on promoting gas use and will be required to consider non-gas alternatives (electrification, geothermal, and energy efficiency) to any future gas expansion projects.
The companies will also have to pursue electrification pilot programs along with geothermal projects currently underway in Framingham and Lowell and file climate compliance plans every five years starting in 2025.
“The department seeks to dissuade gas customer expansion and to align rate design with the Commonwealth’s climate objectives,” the order states, suggesting utilities will move away from rates based on per-customer revenue and embrace broader overall revenue targets.
The order puts off until later answers to sticky questions about how the state’s natural gas infrastructure will remain safe, reliable, and affordable as more and more customers shift away from the fuel for heating and cooking.
“As in the case of the transition to clean energy in the electricity sector, the decarbonization of the natural gas industry may result in higher costs being imposed on ratepayers. Given the urgency of addressing the climate crisis, however, we are reluctant to slow the pace at which the transition must occur due to concerns about affordability,” the order said.
The DPU said it recognized the need to find additional resources to promote energy efficiency and help low-income customers, but it rejected calls for assessing exit fees on customers who stop buying gas from their local utility.
“The department is concerned that charging an additional fee to exit the gas system may disincentivize customers from fully electrifying,” the order said. “At the same time, in the absence of a gas exit fee, residential and small business customers who are not able to leave the system may bear even higher energy bills. The Department is open to reviewing any alternative funding sources so long as they help facilitate a safe, reliable, and equitable transition for all ratepayers.”
The DPU also rejected the idea of incorporating renewable gas into the broader pipeline system because of uncertainty about its cost, availability, and zero-emission claims. The order defined renewable gas as biomethane produced through anaerobic digestion, renewable hydrogen, and synthetic natural gas. However, the DPU said it does support allowing individual customers to purchase renewable natural gas directly.
The DPU order recognized the difficult transition ahead and offered assurances to the gas utilities.
“As we chart the path for this transition, we emphasize that nothing we do here is intended to jeopardize the rate recovery of the billions of dollars of existing investments in natural gas infrastructure by the [utilities] operating within the Commonwealth,” the DPU said in its order. “Traditional notions of the regulatory compact continue to apply to those investments and, accordingly, there generally must be some demonstration of imprudence before recovery of existing investments can be challenged. At the same time, however, it is fair to say that a different lens will be applied to gas infrastructure investments going forward. The Department will be examining more closely whether such additional investments are in the public interest, given the now-codified commitment toward achieving the Commonwealth’s target of achieving net-zero greenhouse gas emissions by 2050 and the urgent need to address climate change.”
