Charting California’s Gas Infrastructure Transition

Posted by Callie McKenna and Edson Perez on May 13, 2024 8:30:00 AM

Necessary Steps to Decarbonize the Gas System in the Golden State

California has long been thought of as a pioneer in the clean energy movement, often first among states to seize new opportunities and try bold ideas to ensure a sustainable future for its residentsboth environmentally and economically.  

However, the severe impacts of climate change, including wildfires and extreme heat, are taking a heavy toll on the state. These climate challenges are pushing California toward an energy affordability crisis, driven by substantial yet necessary infrastructure investments to mitigate their effects. Amidst urgent efforts to reduce pressures on rates and lower utility bills, a significant, yet overlooked, cost driver continues to undermine California’s progress—the outdated fossil gas infrastructure system, which isn’t only extremely costly to maintain but also hinders the health and safety of Californians and impedes the state’s clean energy objectives. 

The state has set the ambitious goal of achieving carbon neutrality by 2045, a target that requires a comprehensive transition away from fossil gas. However, regulatory and legislative progress has so far been too slow to keep the building sector on track to meet that objective. To date, the state has failed to formulate a strategy for a smart, managed, and cost-effective transition away from fossil gas.  

Although 2045 may seem far in the future, time is ticking for decision makers to take action to 1) curb the unnecessary spending of ratepayer money on new fossil fuel infrastructure that is putting extra upward pressure on monthly bills, and 2) carve a thoughtful, equitable, and affordable path forward towards the state’s climate goals.  

What is the urgency?  

Electrification is on the rise in California, with local and state entities making an effort to reduce reliance on expensive and polluting fossil gas. Despite good intentions, tangible statewide progress has been slow, largely due to outdated regulatory processes and rules. 

Even so, California residents and businesses are making decisions every day to swap out their gas appliances for electric ones, especially in the face of a growing market for clean heat pumps and rising and volatile gas prices. In the last 5 years, gas prices have risen 60% after decades of climbing steadily. That, plus accelerating spending on gas pipelines, means that gas bills are heading in only one direction: up. Just last year, PG&E customers incurred costs (to be paid back for decades via customer bills) close to $400 million to replace just 139 miles of gas pipelines that have a likely lifespan of 10-15 years. Over the long term, this makes electrification the most economic home energy option for those who can afford to transition and leaves vulnerable customers who can’t on the hook for rapidly rising costs.  

These market- and consumer- driven decisions, in the aggregate, have major implications for our energy infrastructure and affordability, which together create an urgency for state lawmakers to establish a responsible path forward.  


Pitfalls and exacerbated inequities 

An unmanaged energy transition exacerbates existing inequities, resulting in the phenomenon called the “death spiral.” As Californians of means voluntarily electrify their homes and businesses, minimizing or eliminating their gas consumption, gas rates will increase for the fewer customers that are left to pay for the same amount of gas infrastructure. More customers are then expected to electrify to avoid rising gas bills, leaving vulnerable customers who have little ability to buy new appliances, including renters, low-income residents, and fixed-income seniors, with no choice but to pay ever-rising gas bills. The California Energy Commission (CEC) projects that without intervention, the last set of ratepayers remaining on the gas system could see their gas bill increase to more than $600 per month by 2050. 

Without a concerted effort to implement a strategy for a managed energy transition, Californians stuck on the gas system will continue to experience rising gas bills. The state’s laissez-faire mindset stands to cost ratepayers millions of dollars.  

A Managed Transition: Opportunities for Advancement (SB 1221) 

In order to mitigate the “death spiral,” it is vital that policy makers consider strategies to avoid sinking more and more ratepayer money into a soon-to-be-obsolete fossil fuel system. This begins with 1) identifying proposed pipeline projects that could instead be served with lower-cost, clean technologies, and 2) identifying existing pipeline segments that serve residential areas of the gas distribution system that could be easily and cost-effectively electrified.  

The use of pilot programs would help identify best practices for this new approach to managing the gas transition. Within a pilot program, a utility would select a small percentage of its residential service area to strategically implement neighborhood-scale decarbonization using zero-emission alternatives, like energy efficiency, load management, and electrification, and then decommission the gas pipelines that are no longer serving customers. Such pilot programs would help California utilities and regulators identify potential obstacles to large-scale implementation of building decarbonization, including how to ensure low-income and vulnerable populations are electrified without placing cost burdens on them.   

Senate Bill 1221, introduced by Senator Min, directs the California Public Utilities Commission to create a framework for the cost-effective decarbonization of priority neighborhood decarbonization zones through a set number of pilot projects. SB 1221 prioritizes the decarbonization of environmental justice and low-income neighborhoods, and gives special consideration to projects that provide high-wage jobs.

The pilot programs facilitated by this legislation can help answer many of the crucial questions decision makers have when considering how to approach the energy transition on a state-wide scale. More specifically, SB 1221 works to identify, document, and report on key challenges and successes, including hurdles to customer participation, and cost and affordability implications. SB 1221 presents an opportunity for legislators to support policy that helps meaningfully and thoughtfully advance the state towards its climate goals, and helps their constituents transition away from a system destined for significant cost increases.  

Recommendations Moving Forward 

While SB 1221 is an important start to the complex challenge of building decarbonization, complementary policies – like making zero-emission alternative analyses a standard practice before any new pipeline investments – will be crucial to keep energy costs down for Californians.   

Passing legislation, like SB 1221, is just the beginning! California should continue to examine where current practices and policies are falling short as the state continues to navigate the evolving energy landscape. There are a few clear and logical next steps to be executed in parallel with the implementation of pilot programs, many of which are identified in the recently released Joint Agency Whitepaper issued by the California Energy Commission, the California Public Utilities Commission, and the California Air Resources Board. These include: 

  • Require gas utilities to file comprehensive, transparent, and climate-aligned long-term gas infrastructure plans that include consideration of “Zero Emission Alternatives.” 

The current regulatory frameworks and requirements for gas utilities system planning are neither in alignment with state clean energy goals nor in the best interest of California gas ratepayers. In short, unlike electric utilities, gas utilities aren’t currently required to develop long-term gas infrastructure plans. Instead, they continue investing ratepayer funds in gas infrastructure maintenance and upgrades without taking California’s decarbonization goals into account. With an aging gas system at hand, billions of dollars of investment may be at stake over the next several years. As such, that framework needs to be updated as soon as possible. Within those plans, gas utilities must be asked to consider where zero emission alternatives, like energy efficiency, gas demand response, and electrification, can provide more affordable and reliable energy. 

  • Modernize utilities’ “obligation to serve.” 

While statute does not explicitly define a utility’s obligation to serve as an obligation to provide gas service, it has been interpreted as such. This interpretation issue has proven to be a significant impediment to systematic gas decommissioning – an absolutely critical tool for keeping gas bills affordable throughout this time of transition. Without clarification, obligation to serve allows one person to overrule a whole community’s desire to electrify their neighborhood, preventing strategic and cost-effective decommissioning and imposing significant costs on their neighbors.  

  • Care for our energy workforce with smart protections. 

It is vital to consider the human impact of any energy transition that impacts infrastructure needs, and this transition is no exception. This involves implementing workforce protections, training programs to meet the growing workforce needs of the state’s clean, electric economy, and capitalizing on transferable skills (for example, between fossil pipeline work and thermal energy networks). 

Passing legislation like SB1221 and building upon it to include more transformational gas transition policies are integral steps to California’s clean energy future. We urge the state’s policy makers to take action before it’s too late.  

Topics: State Policy, California, Building Decarbonization



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