CPUC Eliminates Gas Line Extension Allowances

On September 20, the California Public Utility Commission (“Commission”) issued Decision 22-09-026 in its Building Decarbonization Rulemaking, R.19-01-011, to eliminate allowances for new residential gas line extension applications, and with a limited exception, for all new non-residential gas line extension applications, submitted on or after July 1, 2023. Applications submitted prior to July 1, 2023 will not be affected by the Commission’s decision.

For many years, the total cost for new gas line extensions, a portion of which were refundable, were paid, up front, by the applicants for the extensions. The refundable costs were offset, in whole or in part by all other gas customers. The Commission authorized these gas line extension “allowances” in recognition of the benefit that new gas customers provided through their contribution to shared gas utility costs. However, the Commission has decided to eliminate those allowances on the grounds that “current gas line subsidies were established during a period when the state’s energy needs and policy goals were very different from today’s, and are no longer consistent with today’s GHG emission reduction goals, the urgent need to reduce gas rates to ensure affordability, and the long term need to minimize future stranded investment.”

The Commission’s decision does provide a limited exception that allows non-residential customers to request approval of gas line extension allowances, in a single, annual application filed on their behalf by their gas utility, provided the applicants can demonstrate that their new projects meet certain specified criteria: (a) the project shows a demonstrable reduction in GHG emissions; (b) the project’s gas line extension is consistent with California’s climate goals; and (c) the project demonstrates that it has no feasible alternatives to the use of natural gas, including electrification.

Contact: Ron Liebert