As California strikes to decarbonize its electrical grid by 2045 and implement its broader economy-wide decarbonization targets, state regulators are starting to develop a coordinated, equitable and cost-effective plan to proactively handle the transition of the legacy gas system.
Tomorrow, the California Public Utilities Commission is set to open a new rulemaking on its long-term gas planning, the first such rulemaking since 2004 — nicely earlier than the state’s greenhouse gas legal guidelines went into impact. The California energy system has advanced dramatically in the final 15 years, which is why this sort of planning is so necessary for customers, employees, the economic system, and in the end, the success of the state’s climate targets.
Why we’d like a plan
Generally, California’s gas utilities can incorporate the prices of constructing gas infrastructure into the charges they cost customers, as long as the CPUC deems the funding to be “used and useful.” When the gas system not meets this threshold of being “used and useful,” the remaining funding worth is thought-about stranded. The danger of this stranded worth is that it’s going to make California seem like a riskier, and subsequently dearer place to do enterprise, at the actual time we have to make main new investments in our energy infrastructure.
As California reduces gas use in buildings, the pool of customers footing the invoice for the gas system will shrink, which might increase prices and unduly burden lower-income and different weak communities.
In May 2019, EDF launched the report, “Managing the Transition: Proactive Solutions for Stranded Gas Asset Risk in California” through which we talk about how an unmanaged departure from the gas system might result in extreme monetary penalties for customers, and define varied regulatory methods to mitigate these impacts. After an in depth stakeholder course of, Gridworks adopted up this report with the launch of “California’s Gas System in Transition: Equitable, Affordable, Decarbonized and Smaller.” Both studies advocate contemplating the monetary implications of this transition and spotlight the want for a gas planning course of.
Concurrent with the launch of those two studies, we’ve got rapidly seen that this is not a hypothetical dialog. In 2019, greater than a dozen cities or native jurisdictions have began to ban new pure gas hookups. The first and maybe most outstanding of those cities was Berkeley in July 2019.
What California’s plan contains
We are happy to see the CPUC taking stakeholder suggestions significantly by opening this new rulemaking, which incorporates a number of important factors:
- The CPUC seeks to determine new guidelines for gas pipelines that provide pure gas-fired power vegetation. As California strikes towards a carbon-free electrical grid, we might want to depend upon our present pure gas-fired technology in several methods to produce our electrical energy. Our present gas electrical technology fleet will likely be used much less typically, however will proceed to supply important reliability assist as we rely extra closely on solar, wind and different intermittent technology sources. As a consequence, the reliability and market guidelines for the gas pipelines feeding these pure gas-fired mills might want to evolve as nicely.
- The CPUC might want to rethink the price allocation of the gas system. Presently, residential customers pay the bulk of the gas system price. As residential customers rely much less on gas in houses and buildings, the buyer base who pays for the gas system might want to change. The residential customers who stay related to the system usually tend to be low-income, lots of whom are already struggling to pay their energy payments, and can not afford a rise. To guarantee customers will not be left holding the bag, California might want to rethink how we equitably allocate the gas system prices to different non-residential customers, corresponding to electrical mills.
- The CPUC seeks to implement a long-term planning technique to handle the state’s transition. Over the subsequent few a long time, Californians will change their present gas home equipment with low-emitting electrical choices that run on clear energy. As a consequence, the quantity of gas that we’d like will go down, and the want for gas infrastructure itself will go down. As we electrify extra of our economic system and cut back our reliance on gas, we’d like a plan to handle that transition. While it might not occur tomorrow, California should take care of these probably stranded property quickly, so it is prudent for this to be a proactive, deliberate transition, which is able to enable prices to be unfold out.
EDF strongly helps the CPUC taking this step. We encourage them to undertake the new rulemaking and to start out planning this transition in the best and equitable method attainable.
We additionally encourage different states to contemplate California as a mannequin as regulators and stakeholders bear this rulemaking course of. The problem of long-term gas utility planning is not distinctive to California. As we see extra states undertake climate targets, they should take into account how greatest to transition their legacy gas system with out imposing extreme monetary penalties.
A proactive method is greatest, and the CPUC’s new rulemaking can be utilized as a mannequin. They are asking the proper set of questions, that are immediately transferable to different markets. Making guidelines for long-term gas planning that considers reliability, price allocation, electrical technology and right-sizing the system for future use is a important win for the buyer and the environment.