Regulatory Approaches for a Cost-Effective Gas Transition: Ratemaking, Incentives, and Other Tools

Posted by Reports on Jun 11, 2024 12:28:03 PM

Publish Date: June 11, 2024

The regulated gas distribution network is undergoing significant transformation due to a combination of market and policy forces. Increasingly, cost-competitive electric heating solutions are leading to decreased gas throughputs in many jurisdictions — a trend expected to accelerate as federal incentives for heating electrification and ambitious state and local climate goals take effect.  

Traditional regulatory frameworks in which utilities are incentivized to expand their systems and stranded asset risks are borne primarily by ratepayers are becoming increasingly misaligned with a contracting gas sector. A new approach to rates and ratemaking will be required to ensure that the gas transition materializes in a way that is equitable and affordable for customers. 

This paper offers an overarching regulatory toolkit to facilitate a cost-effective gas transition in the near-, intermediate- and long-term. Regulators, stakeholders, and gas utilities can use this paper to customize a portfolio of solutions for their own state’s specific circumstances.  

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Topics: Energy Efficiency, Building Electrification, Building Decarbonization