In compliance with an order by the California Public Utilities Commission (CPUC), the California investor-owned gas utilities filed their first Draft Renewable Gas Procurement Plans (RGPPs) on December 28, 2022.
On February 25, 2022, the CPUC issued Decision 22-02-025 implementing the Biomethane Procurement Program authorized in Senate Bill 1440. Under the Program, each investor-owned retail gas utility has been assigned a target for procurement of biomethane, defined as renewable natural gas (RNG) and/or bio-synthetic natural gas (bio-SNG), to reduce short-lived climate pollutant emissions. Consistent with CPUC direction, each utility RGPP establishes a biomethane procurement strategy through 2030, including anticipated bill and rate impacts, using the RGPP template approved by the CPUC in June 2022. By design, the utility RGPPs will include short-term targets with feedstock limitations (diverted organic waste from California landfills) to be met by 2025, and medium-term targets for procurement through 2030, which will reflect direction provided after the CPUC reviews the status of RGPP activities in 2025. Per D.22-02-025 the utilities may use flexible compliance methods, including banking, borrowing and trading, to satisfy program targets.
SoCalGas/SDG&E
Southern California Gas Company (SoCalGas) and San Diego Gas & Electric Company (SDG&E) jointly filed a RGPP for SoCalGas, which will be responsible for biomethane procurement for the two affiliated utilities. In summary, the draft SoCalGas/SDG&E RGPP includes: A short-term target to procure 9.9 billion cubic feet (Bcf) of biomethane annually produced from diverted organic waste from landfills by the year 2025.
- An expectation that approximately 43.4 Bcf of biomethane will be procured annually to meet the medium-term target by the end of 2030. As permitted under D.22-02-025, SoCalGas and SDG&E will consider procurement of biomethane from other feedstocks to meet the medium-term target, including landfill, agricultural waste (except purpose-grown crops), dairy and other livestock.
- Plans to issue at least one solicitation for biomethane contracts, and potentially bilateral contracts as well.
- Commitment to employ the Standard Biomethane Procurement Methodology (SBPM) cost-effectiveness test framework approved by the CPUC to assess and prioritize projects.
- Three-tier approach to submission of advice letter filings for CPUC approval of contracts, with level of scrutiny depending on contract cost.
- Using the North American Energy Standards Board’s (NAESB) Base Contract with RNG addendum for contracting.
- Verification of RNG eligibility through Renewable Thermal Credits (RTCs), attestation of feedstock eligibility and quality, deliverability arrangements, and verified carbon intensity (CI) values.
- Monitoring requirements for compliance with other program specifications.
- Annual reporting per Decision 22-12-057.
PG&E
The Pacific Gas and Electric Company (PG&E) RGPP includes:
- A short-term procurement target of 7.452 Bcf annually during the 2025-2029 time period. PG&E may use biomethane produced from pyrolysis projects sourced from diverted organic waste, including the pilot required by D.22-02-025, to meet the short-term procurement target.
- A medium-term procurement target of 27.745 Bcf annually during the 2023-2040 time period.
- An expectation that PG&E may begin procurement from all sources eligible for the medium-term target after it has met the 2025 target for diverting its share of organic waste. The additional sources may include methanation of captured CO2, bio-SNG, organic waste feedstocks beyond those eligible to meet the short-term target, and dairy biomethane (subject to CPUC limitations that may be reevaluated in 2025).
- Combination of competitive solicitations and bilateral negotiations to receive offers from sellers.
- SPBM evaluation for valuing and prioritizing projects.
- A program cost cap and annual cost cap for ratepayer protection. The program cost cap is a total available dollar amount for above-market RNG procurement costs based on an annual bill increase over the program lifetime. The annual cost cap is calculated as the incremental program above-market dollars based on an increase in revenue requirement from the previous year that can be attributed to above-market costs of RNG. The proposed cost caps were identified in the RGPP filed at the CPUC, but redacted from the public version of PG&E’s filing.
- Other program implementation, verification and reporting requirements as summarized above, and consistent with D.22-02-025.
Southwest Gas
The Southwest Gas (SWG) RGPP includes:
- A short-term procurement target of 0.286 Bcf annually. SWG will attempt to procure 0.0953 Bcf by the end of 2023, 0.1906 Bcf by 2024 and 0.286 Bcf by 2025.
- A medium-term procurement target of approximately 1.63 Bcf. SWG plans to procure 0.554 Bcf by the end of 2026, 0.823 Bcf by 2027, 1,091 Bcf by 2028, 1,359 Bcf by 2029, and 1.344 Bcf in 2030.
- SWG will explore arrangements with a currently interconnected biomethane producer and other potential sources in or near its northern and southern California service territory, including landfills and food waste diversion.
- SWG will issue an RFP consistent with CPUC requirements, and use the SBPM for project cost-effectiveness analysis and prioritization.
The RGPP filings raise questions of cost allocation, including the potential allocation of program costs to non-core gas customers and core transport agents (CTAs). These issues will be addressed in a new rulemaking (R.22-12-011) approved on December 15, 2022 by the CPUC.
According to the process established in D.22-02-025, the CPUC will review the draft RGPPs and issue a decision providing instruction for the final RGPPs. The utilities will then submit final RGPPs via advice filing. In 2025 the CPUC will initiate further proceedings on the RGPP process.
Contact: Brian Biering or Lynn Haug
