The California Public Utilities Commission voted 5-0 to end ratepayer-funded subsidies for natural gas line extensions to new homes and other buildings to curb greenhouse gas emissions and harmful air pollutants from gas appliances, namely, water and space heaters and stoves.
No other state “has done what we have done today and completely eliminated gas hookup subsidies” to new developments, said Commissioner Cliff Rechtschaffen of the proposal approved Sept. 15. He noted that the subsidy, which will end in July, was an outdated vestige of the past to promote gas use in buildings.
“It is a common-sense solution to align new building construction with the state’s greenhouse gas emissions reduction goal,” said Commissioner John Reynolds. Terminating the subsidies “levels the playing field” between gas and electric use in buildings, he added.
The decision will save ratepayers $164 million a year. The investor-owned utility customer subsidies totaled about $124 million last year, and $622 million between 2017 and 2021.
Not only will investor-owned utility customers save money, but the decision will reduce the amount of stranded gas lines as the state moves to eliminate gas use. In addition, doing away with the 10-year subsidies of new gas extensions to newly constructed buildings will help reduce greenhouse gases by 40% by 2030, and improve the quality of life and health for customers, particularly low income, states the decision.
Gas hookups can continue, but not at ratepayer expense.
Step towards decarbonization
“The decision is a small but important step toward decarbonizing buildings in California,” said Matt Vespa, Earthjustice senior attorney. “It is getting us ready to more broadly decarbonize,” including developing a trained workforce.
Buildings produce about a quarter of California’s greenhouse gas emissions.
At the end of next week, the California Air Resources Board is expected to set emission reduction standards for gas heaters and water heaters by 2030, leading to their phaseout. The move is folded into California’s State Implementation Plan required to meet federal ozone standards.
In addition, Gov. Gavin Newsom proposed new 2030 emissions reduction targets for the building sector, including installing 6 million electric heat pumps. He also set a 2030 goal of 3 million climate-ready and climate-friendly homes, rising to 7 million by 2035. In addition, the recently passed state budget contained almost $1 billion for equitable building decarbonization.
Virtually no utilities opposed the proposal, “at least in principle”–with some objecting to the timing and application to non-residential building use, Rechtschaffen said.
The decision allows for a narrow exemption for gas use in new nonresidential buildings when there are no viable alternatives to gas.
Environmental advocates accepted the limited exemption because it requires “ a lot of scrutiny,” Vespa said.
CPUC staff proposed eliminating the gas line subsidy for all new construction to increase all-electric buildings, which are expected to cost less than newly constructed dual-fuel buildings.
Back in 1983, the CPUC voted to phase out the gas line subsidy, but the Legislature passed a law prohibiting state regulators from doing so.
Oregon, Colorado, and New York are also considering ending gas line subsidies to new construction and may follow suit.