Future of Gas Report

Future of Gas Report filed on 3/18/22

Context:  This is a report which utility companies put together with outside consultants as part of a Department of Public Utilities exploration of how natural gas fits into Massachusetts' energy future and whether the resource might help or hinder the state's emissions reduction efforts. 

4/4/2022

Natural Gas Investments Fuel Climate Concerns

Creem Suggests Intervention, Barrett Flags High Electric Costs

Colin A. Young, State House News Service, 4/4/22 3:12 PM

APRIL 4, 2022.....The tensions between what some key lawmakers would like to see Massachusetts do en route to achieving net-zero carbon emissions and the proposals in a utility-driven report on the role natural gas could play in decarbonization were on full display Monday at the Senate Committee on Global Warming and Climate Change.

Unhappy with the process and the strategies described in the recently-filed Future of Gas report, chairwoman Sen. Cynthia Creem said the Legislature "may have to intervene" in the Baker administration's study of the future of natural gas as Massachusetts strives to get to net-zero greenhouse gas emissions by 2050.

"In my view, reaching net-zero emission requires that the future of gas is largely a future without gas," Creem, the Senate's majority leader and chairwoman of the committee, said.

Monday's hearing revolved around the Future of Gas report, which utility companies put together with consultants as part of a Department of Public Utilities exploration of how natural gas fits into Massachusetts' energy future and whether the resource might help or hinder the state's emissions reduction efforts.

State law requires that Massachusetts reduce its emissions by 25 percent by 2020 (preliminary estimates show a 28.6 percent reduction), by 50 percent by 2030, by 75 percent by 2040 and by at least 85 percent by 2050, with tag-along policies to get the state to net-zero emissions by the middle of the century. All reductions are calculated against the baseline of 1990 emissions levels.

"However, Massachusetts is currently doubling down on natural gas through the Gas System Enhancement Plan program, known as the GSEP program," Creem said. "Under GSEP, ratepayers will pay $20 billion over the next few decades to replace gas pipelines that are inconsistent with our climate mandates."

A number of people invited to testify Monday echoed Creem's argument, that ratepayers are going to be on the hook for new gas infrastructure that could become obsolete in the coming decades and that gas utilities are using the GSEP program meant to remedy gas leaks to instead prepare their systems to handle newer fuels like renewable hydrogen or biogas in an attempt to stay in business through a transition away from natural gas.

"There's a stark binary facing us right now," Caitlin Peale Sloan, vice president at the Conservation Law Foundation, said during Monday's hearing. "Are we going to start to ramp down gas utility infrastructure and invest the billions left to be spent under GSEP into sustainable solutions with low ongoing costs and operating costs? Or are we going to plow ahead and put billions more into the gas system?"

Activists have been unhappy with the Future of Gas process since the DPU allowed the gas utilities to hire their own consultants to prepare the report and Creem said Monday that the process does not allow climate organizations to challenge the assumptions used in the study. She said the DPU process "will not truly be complete or fair" unless DPU explicitly considers the interplay with the GSEP program.

"The Legislature may have to intervene to ensure that GSEP is considered and to ensure that there was an opportunity to scrutinize the gas companies' proposals before the commonwealth chooses which future to pursue," she said. "The decisions about our path to net-zero is far too important to be rushed or to be made behind closed doors."

GSEP was introduced as part of a 2014 gas leaks law and a 2019 examination of the safety of natural gas infrastructure in Massachusetts found the program has been "a legislative and regulatory success." The program encourages utilities to replace leak-prone pipes by maintaining a mechanism for companies to recover the costs associated with replacement.

John Buonopane, who represents gasworkers as president of United Steelworkers Local 12012 and is part of the New England Gas Workers Alliance, said that "radical efforts to halt the maintenance of this infrastructure" would be "short-sighted and potentially dangerous." He was the lone pro-gas voice at Monday's hearing and said Massachusetts should "take a cautious, pragmatic approach that will keep residents safe and warm while adopting new technologies and energy sources."

"Although we know that we have to address climate change and increase renewable energy resources in an affordable and equitable manner, we strongly believe that natural gas will continue for many years to be an important and necessary resource for the commonwealth's clean energy future," Buonopane said. "We know that with appropriate oversight, natural gas can and probably will remain an efficient, affordable and safe energy source for the residents of the commonwealth for decades to come."

Future of Gas Report

In the Future of Gas report, the consultants recommend that the local gas distribution companies (LDCs) and DPU get to work putting decarbonization strategies and regulatory reforms into place in order to support the state's climate commitments.

"The LDCs should explore mechanisms to coordinate the use of the gas and electric systems to minimize the combined cost of decarbonizing building heating needs for customers. This includes developing strategies and funding to increase electric technology adoption, authorization for renewable fuel procurement, as well as regulatory support for new rate designs and cost-recovery mechanisms that support decarbonization," the consultants from Energy and Environmental Economics and ScottMadden wrote.

The report identified and examined eight pathways to decarbonization that each would comply with the state's emissions reductions commitments and "are designed to reflect different futures for the LDCs and their customers, ranging from ongoing use of the LDCs' distribution networks to 100% decommissioning of gas distribution infrastructure in the Commonwealth."

The consultants did not endorse any one specific pathway but recommended that Massachusetts pursue a "coordinated gas and electric decarbonization strategy" that relies upon a wider array of technologies and strategies rather than phasing out the gas system entirely. The consultants said the "coordinated" strategy "is likely to be better able to manage the costs and feasibility risks of decarbonization than scenarios that rely more heavily on single technologies or strategies."

For each LDC, the consultant report formed the basis of their own utility-specific "net zero enablement plan." Those plans were also submitted to DPU as part of the overall proceeding.

The Current State of Gas

More than half of all homes in Massachusetts (52 percent) relied on natural gas for heating as of 2019, with 24 percent of homes heating with oil and 17 percent of houses using electric heat, according to the report. Oil (including kerosene) has fallen out of favor with Bay Staters in the last 20 years as customers have shifted to natural gas and, to a lesser degree, electricity for their heating.

In 2000, gas heated 44 percent of homes while fuel oils were relied upon in 39 percent of homes. Between 2000 and 2019, the consultants wrote in the report, the market share for natural gas increased by about 20 percent to 52 percent of homes while the fuel oil market share dropped by 38 percent to 24 percent. Twelve percent of homes heated with electricity in 2000 compared with 17 percent as of 2019.

There are approximately 1.7 million natural gas customers in Massachusetts, with 91 percent being served by either National Grid or Eversource. Berkshire Gas Company, Liberty Utilities and Unitil together serve another 7 percent of customers while the state's four municipal gas companies serve the remaining 2 percent.

Gas service is more common in eastern Massachusetts. While nearly every town east of Worcester has access to natural gas, service west of Worcester is concentrated around Springfield, along the Interstate 91 corridor, and in about a dozen towns in the Berkshires.

The many differences among the five LDCs -- differences in housing stock, the proportion of owner-occupied buildings, average income levels of customers, the concentration of environmental justice neighborhoods, and more among service areas -- will complicate decarbonization efforts, as will business differences among the LDCs. For example, Liberty and National Grid have the highest proportion of residential sales while Berkshire and Unitil have the highest proportion of industrial sales. National Grid also has the highest proportion of commercial sales.

"Utilities with a higher share of harder-to-electrify customer segments, particularly industrial and some large commercial customers, may need to emphasize hybrid and renewable gas strategies more than LDCs with a larger share of residential customers," the report said.

And because most Massachusetts gas customers get their electricity from a different utility than the one providing their gas service, a "coordinated" gas and electric strategy for decarbonization will also require the participation and planning of multiple utilities, "thus increasing the complexity and time required for planning (including regulatory submissions and benefit/cost sharing)," the report found.

Customer Consequences

One thing the Future of Gas report makes clear is that change is inevitable for the state's 1.7 million gas customers.

"In order for decarbonization goals to be met, nearly every LDC customer will need to take action to retrofit their homes and businesses," the consultants wrote.

The implications for consumers would vary based upon what decarbonization strategy Massachusetts pursues, but the consultants agreed that "the significant changes facing customers will require a focused and tailored communication outreach and program development for environmental justice communities, low-income customers, and landlords/tenants to address challenges and hurdles unique to these customer groups."

Sen. Michael Barrett, who has previously cautioned that decarbonization should proceed with a particular focus on the impacts on ratepayers so as to not turn people against clean energy efforts, said Monday that he was among those who want to move away from natural gas as quickly as possible. But he questioned a panel of invited guests as to why the consumer costs of making the shift are not often discussed in great detail.

Massachusetts has some of the highest per kilowatt-hour electricity prices in the country and Barrett's concern is that shifting to greater electrification will inevitably drive up monthly electric bills, not to mention the up-front costs of buying and installing cleaner technologies like heat pumps.

Barrett mentioned a Massachusetts resident who drives (and presumably charges) a Tesla electric car, and relies on air source heat pumps and electric lighting at their home. The senator said that person's electric bill for the month of January, during some of the coldest days of the year, was $1,007.

"Why are people refusing to talk about monthly electric bills, and whether in fact they might go beyond current combinations of monthly heating bills and electric bills today?" Barrett asked the panel. "Don't we have to acknowledge the risks of very high bills so that we can figure out how to mitigate them and avoid the economic harm but also the political blowback that could be lurking if we tiptoe around the issues and speak rather unrealistically about 80 percent of people realizing fewer costs once they move through heat pump? It's moving to a heat pump that's the cost."

Before the panelists could respond, Creem partly illustrated the point that Barrett was trying to make with his questioning.

"So I'm just going to say, if you have answers please do them quickly because we do have another panel waiting to get on, so," the chairwoman said.

-END-
04/04/2022

4/4/22 from State House News Service Future of Gas Hearing: Senate Committee on Global Warming and Climate Change hosts a hearing on the recently filed Future of Gas report, which utility companies put together with outside consultants as part of a Department of Public Utilities exploration of how natural gas fits into Massachusetts' energy future and whether the resource might help or hinder the state's emissions reduction efforts. After opening remarks from Sen. Creem, who chairs the committee, senators will hear from representatives from climate activist groups like Brookline Mothers Out Front, Rewiring America and the Acadia Center. An economist and two researchers will then present on the current state of the gas system, and the committee will also hear from an official in the attorney general's office, a decarbonization strategist, a member of the Vermont House of Representatives, the Conservation Law Foundation, John Buonopane of United Steelworkers Local 12012, and an attorney from National Consumer Law Center, among others. In October 2020, the DPU launched an investigation of the future of gas and required gas companies operating in Massachusetts to hire an independent consultant to look into ways that the companies might be able to help the state meet the state's commitment to get to net-zero greenhouse gas emissions by 2050 while still protecting ratepayers and ensuring energy reliability. The report filed by gas utilities last month identified "eight decarbonization pathways" that the gas companies said would comply with the state's emissions reductions commitments and "are designed to reflect different futures for the [local distribution companies] and their customers, ranging from ongoing use of the LDCs' distribution networks to 100% decommissioning of gas distribution infrastructure in the Commonwealth." Climate activists have been weary of the utility-driven DPU process since it began and recently became more vocal about feeling shut out of the proceedings, the Boston Globe reported on 3/31/2022. A Senate committee source told the News Service that Monday's hearing will help the committee determine whether the Legislature should intervene to ensure an adequate process before the state commits itself to any specific decarbonization strategies for the gas system.

May DPU public hearings:  https://www.mass.gov/info-details/dpu-20-80-notice-of-filing-and-public-hearing