Key Northeastern States Take Steps to Study the Transition to Net-Zero GHG Emissions
On June 4, 2020, the Massachusetts Attorney General (AG) filed a Petition which requested the Massachusetts Department of Public Utilities (DPU) to open an investigation into the potential changes to support the Commonwealth’s legislatively mandated greenhouse gas (GHG) emission limit reductions (the Petition). Specifically, the AG’s Petition seeks to evaluate the industry, regulatory and policy adjustments necessary to meet the state GHG limits, and to “determine what near and long-term adjustments are necessary to maintain a safe and reliable gas distribution system and protect consumer interests as the Commonwealth transitions” to carbon neutrality by 2050. The AG’s Petition follows a similar proceeding begun in March by the New York Public Service Commission (the Commission) titled, Proceedig on Motion of the Commission in Regard to Gas Planning Procedures. CASE 20-G-0131 (the Proceeding). Similar to the AG’s Petition, the purpose of the Proceeding is to consider issues related to gas distribution utilities’ planning procedures. Collectively, these state actions highlight the challenges the states will encounter to meet the requirement of net-zero carbon emissions by 2050, and the difficult to reconcile dynamic with the maintenance of reliable energy generation and distribution systems, historically powered by fossil fuels.
Massachusetts AG Petition
The AG’s Petition states the requested investigation by the DPU will afford the opportunity to solicit utility and stakeholder input to “develop a nation-leading regulatory and policy roadmap to guide the evolution of gas distribution industry companies, provide ratepayer protection and allow the Commonwealth to move into its net-zero GHG emissions energy future.” In addition to the statutory and regulatory requirements that have been established since the Global Warming Solutions Act (GWSA) and Green Communities Act of 2008, the Petition’s focus on gas distribution comes two years after a series of gas explosions occurred in the Merrimack Valley with tragic consequences.
In a concurrently issued statement, AG Healey stated, “[i]n order to combat the climate crisis and meet our clean energy goals, we must transition away from fossil fuels and change the way gas utilities do business in our state. We want the DPU to take a close look at the future of the natural gas industry in Massachusetts and make the policy and structural changes we need to ensure a clean energy future that is safe, reliable, and fair.”
The AG’s Petition offers that the investigation should occur in two phases. In phase one, the DPU would direct the local distribution companies to submit detailed economic analyses and business plans depicting future gas demand in a carbon-constrained economy, as well as probable revenues, expenses, and investments. The companies would also identify the “challenges that a substantially decarbonized economy creates for [the companies] and present ideas and solutions for both near and far-term future” as the state moves towards carbon neutrality. The initial phase would also provide for the necessary stakeholder inputs on associated regulatory, policy and legislative directives that may become presented to further facilitate the GHG emissions mandates.
Phase two of the investigation would seek the development and implementation of the “necessary policy, business and regulatory pathways to achieve the Commonwealth’s climate change mandates and protect the Commonwealth’s gas consumers.” Through this phased approach, the AG seeks the DPU to focus on three subject items during its investigation: 1) Ratepayer Protection, Equity and Fairness; 2) Planning, Forecast and Supply, and 3) Capital Investments.
Ratepayer Protection, Equity and Fairness
The AG’s petition urges the DPU to consider what steps it needs to take to ensure that low-income customers are not left behind during the transition and that their rates remain affordable as gas companies’ revenue requirements are spread over a shrinking customer base. The DPU also should consider policy measures to assist low- to moderate-income customers to transition their homes to clean energy.
Planning, Forecast and Supply
The AG’s Petition suggest the DPU’s investigation should consider whether the Department needs to adjust its guidelines for reviewing gas companies’ forecast and supply plans to require additional data about transitioning away from natural gas as a heating fuel and for meeting future demand through demand response, energy efficiency, or other carbon-neutral options.
According to the petition, the DPU should examine the investment needed to ensure a safe and reliable gas system over the next 30 years, while gas demand declines. The AG’s Office also urges the DPU to examine whether there are other cost-effective alternatives to traditional gas infrastructure investment that may align better with the state’s climate goals.
Although the DPU has set a docket for the Petition, it has not yet taken action to open the investigation. The Petition itself follows on similar actions taken in California and New York. In 2019, the California Energy Commission approved new local building requirements against gas in five cities and one county across the state. Similar to California, the New York State Public Service Commission recently announced a review of current gas supply planning protocols, as the state pursues ambitious goals to mitigate climate change.
New York State Proceeding
On March 19, 2020, the Commission issued an order instituting a Proceeding on Motion of the Commission in Regard to Gas Planning Procedures. CASE 20-G-0131 (the Proceeding). The purpose of the Proceeding is to consider issues related to gas distribution utilities’ planning procedures.
According to the Commission, the Proceeding derives from claims of supply constraints from gas utilities in differing regions of New York State. These supply constraints involve, in turn, the potential prevention of gas utilities from accepting new firm service applications, the possible need to invoke a moratoria on new service connections, as well as similar steps to manage the stated supply constraint. Moreover, the Commission is mindful of the requirements of New York’s recently enacted Climate Leadership and Community Protection Act, Chapter 106 of the Laws of 2019 (CLCPA), and how gas utility planning must now factor in these new requirements. Accordingly, the key topics of the Commission’s Proceeding include:
The Proceeding will study the causes of gas constraints, including: (a) a shortage of pipeline supply capacity; (b) inadequate distribution infrastructure to deliver available pipeline supply; or (c) a combination of these and other factors.
The Proceeding calls for a proposal to modernize the gas planning processes to account for the CLCPA’s policy directions, minimize total lifetime costs, and one that is inclusive of stakeholders.
The Proceeding looks to evaluate non-pipe solutions like energy efficiency (EE), clean demand response, and temporary supply with an eye toward reducing or eliminating the need for gas infrastructure and investments.
Gas Moratoria Standards
The Commission’s order explains that existing utility tariffs differ regarding how a utility declares a moratorium on new customer additions, and the Proceeding will explore best practices and opportunities to improve these moratorium processes.
The Commission acknowledges that demand side resources like EE and electrification, whether authorized or under consideration by the Commission in separate proceedings, could be further informed by this Proceeding, so as to optimize the deployment of these resources.
For next steps, the Commission ordered the gas distribution utilities to make several filings, including: (a) a supply and demand analysis with regard to the locations in their respective service territories known to be vulnerable to supply constraints; (b) a supply and demand analysis with regard to that utility’s entire service territory; (c) a proposal for the peaking services and moratorium management issues; and (d) a status report and proposals regarding the utility’s current or anticipated use of demand reducing measures (e.g., EE, demand response, non-pipe alternatives), and other measures to address identified areas of supply/demand imbalance or to aid in the management of moratoria. The initial utility filings are currently expected in July 2020. Following and/or concurrently with these utility filings, the Commission directed Commission Staff to file a proposal to modernize the gas system planning process.
This Proceeding in New York and the anticipated proceeding in Massachusetts will continue to play out in the near term. The underlying State policy directives, however, whether the CLCPA in New York or GWSA in Massachusetts, will have far-reaching impacts on a wide range of stakeholders going forward.