Gas Provisions in the Energy Bill

This post identifies the provisions of S.2829, the senate draft energy bill, that speak to the future of natural gas in the Commonwealth. I am prepared to vote for these provisions as written. I feel that Senators Barrett and Creem together with senate staff have done a careful job with this language and I support the direction they are moving in. However, of course, the senate will be carefully considering all amendments offered and the language may further evolve in the conference negotiation that will occur once the House also approves an energy bill.

In general, the thrust of the natural gas language in S.2829 is to authorize gas companies to sell networked geothermal systems as an alternative to gas service, and to require them to systematically consider doing so, without mandating that they do so. This posture balances emerging enthusiasm for networked geothermal systems with uncertainty about the feasibility and cost-effectiveness of these systems.

The sections below show the effects of S.2829 on the statutes governing gas companies. Language removed is stricken, while language added is underlined.

Allow gas companies to provide networked geothermal

Chapter 164 of the General Laws governs gas and electric utilities. Currently, section 1 of that chapter defines gas companies in a way that limits their ability to engage in alternative energy production. The bill would revise the section as shown below to permit them to engage in alternative energy production and, in particular, to supply geothermal energy:

”Gas company”, a corporation organized for the purpose of making and selling or distributing and selling, gas within the commonwealth, even though subsequently authorized to make or sell electricity; provided, however, that gas company shall not mean an alternative energy producer a gas company may make, sell or distribute geothermal energy, including networked geothermal and deep geothermal energy.

Chapter 164, Section 1 showing amendment proposed by Section 42 of S.2829

Require alternatives analysis for gas service territory expansion

S.2829 does not ban gas service territory expansion, but requires that before approving an expansion the department of utilities consider our greenhouse gas goals and whether there are alternative approaches (which could, of course, be networked geothermal). The bill would revise the service territory expansion statute as shown below:

The department may, after notice and a public hearing, authorize a gas or electric company to carry on its business in any town in the commonwealth other than the town named in its agreement of association or charter, subject to sections eighty-six to eighty-eight, inclusive, [these sections provide for local approvals] and it may purchase, hold and convey real and personal estate in such other town necessary for carrying on its business therein.

Notwithstanding any general or special law to the contrary, the department, in deciding whether to exercise its authority pursuant to this section, shall consider whether a request to the department to authorize gas distribution service is reasonable and in the public interest; provided, however, that in determining reasonableness and the public interest, the department shall consider factors including, but not limited to: (i) the commonwealth’s interest in complying with the greenhouse gas emissions limits and sublimits established pursuant to chapter 21N, including the statewide emissions limit set for 2050; (ii) the commonwealth’s interest in avoiding the stranding of assets and the likelihood of its costs being borne by ratepayers; and (iii) whether an alternative to gas service is available and likely to provide substantially similar service.

Chapter 164, Section 30 showing amendment proposed by Section 46 of S.2829, bracketed explanatory phrase added.

Require alternatives analysis for gas service petitions

Under current law, if a gas company refuses service to a customer within their service territory, the customer has the right to petition the DPU for delivery of gas service. The petition must be granted if the costs of the new delivery connection can be recovered by the gas company. S.2829 would soften that right, allowing the DPU to consider whether the petitioner has adequate alternatives and whether the petition is in the public interest, including the public interest in reducing greenhouse gas emissions. The bill would revise the gas service statute as shown below:

On written petition of any person, having a residence or place of business in a town where a corporation is engaged in the manufacture, transmission or sale of gas or the distribution of electricity, aggrieved by its refusal or neglect to supply him with gas or electricity, the department may, after notice to the corporation to appear at a time and place therein named to show cause why the prayer of such petition should not be granted, issue an order directing and requiring it to supply the petitioner with gas or electricity, upon such terms and conditions as are legal and reasonable; provided, however, that if such corporation is engaged in such town solely in the transmission of gas such order shall not be made where it appears that compliance therewith would result in permanent financial loss to the corporation; provided further, however, that, notwithstanding any general or special law to the contrary, in determining whether to issue an order directing a corporation to supply a petitioner with gas service, the department shall consider: (i) whether the grant of the petition is in the public interest, including the public interest in reducing greenhouse gas emissions and complying with the limits and sublimits established pursuant to chapter 21N; and (ii) whether, in the totality of the circumstances, the petitioner can secure adequate substitutes for gas-fired services for space heating, water heating and cooking appliances, which, in the case of space heating, may include thermal energy that provides heating or cooling without combustion; provided further, that the department may, in order to advance the public interest in reducing greenhouse gas emissions and complying with the limits and sublimits established pursuant to said chapter 21N, order actions that may vary the uniformity of the availability of natural gas service in the commonwealth.

Chapter 164, Section 92 showing amendment proposed by Section 74 of S.2829.

Require alternatives analysis for and phase down Gas System Enhancement Plans

S.2829 makes deep revisions to the Gas System Enhancement Plans that the legislature mandated 10 years ago (Section 2 of an Act Relative to Natural Gas Leaks (Chapter 149 of the Acts of 2014) The GSEP program created incentives that have accelerated investment in gas line replacement. According to the Department of Utilities 2023 Annual Report, “During the 2022 [Gas System Enhancement Plan] construction year, the [gas companies] spent approximately $561 million to replace 276 miles of leak-prone mains and 17,598 associated services.”

The revisions proposed by S.2829 spring from several years of discussion and debate about the future of gas in the context of our efforts to decarbonized home heating. This discussion notably included a deep study conducted by the Department of Public Utilities, the 20-80 docket, and a working group on the Gas System Enhancement Plans.

At its heart, the GSEP program is a special funding mechanism designed to encourage utilities to repair leaks: It gives utilities accelerated cost recovery for eligible projects. The modifications to GSEP have the effect of broadening eligibility for accelerated cost recovery to other measures if those measures are cost-effective. At the same time, the phasedown of the recovery rates from ratepayers as mandated by new section (i) (shown below) has the effect of winding down the accelerated recovery to zero after 2030. Even without GSEP, utilities will retain their obligation to repair their pipes and will be able to recover their costs for doing so in the same way that they have historically recovered costs from ratepayers — through their normal rate-setting applications to the Department of Public Utilities. For pro’s and con’s to these changes, see discussion at pages 44-46 of the report of the GSEP working group and pages 2-5 of the minutes of the December 4, 2023 meeting of the GSEP working group.

As shown below, S.2829 rewrites the GSEP language from 2014 to eliminate replacement mandates and require the consideration of alternatives including decommissioning (which might lead to replacement with networked geothermal). Additionally, the new language would sunset the program by 2030.

Section 145. (a) For the purposes of this section, the following words shall, unless the context clearly requires otherwise, have the following meanings:—

”Customer”, a retail natural gas customer.

“Decommissioning proposal”, a proposal to decommission a portion of existing natural gas infrastructure to be retired or replaced by a non-gas pipe alternative.

”’Eligible infrastructure replacement measure”, a retirement, repair or replacement or an improvement of existing infrastructure of a gas company that: (i) is made on or after January 1, 2015 and not later than December 31, 2028; (ii) is designed to improve public safety or infrastructure reliability seeks in a balanced manner to preserve and improve public safety, improve infrastructure reliability, minimize ratepayer impacts, minimize the risk of stranded assets and reduce greenhouse gas emissions in compliance with the limits and sublimits established in chapter 21N; (iii) does not increase the revenue of a gas company by connecting an improvement for a principal purpose of serving new customers; (iv) reduces, or has the potential to reduce, lost and unaccounted for natural gas through a reduction in natural gas system leaks; (v) is not included in the current rate base of the gas company as determined in the gas company’s most recent rate proceeding; (vi) may include use of advanced leak repair technology approved by the department to repair an existing leak-prone gas pipe to extend the useful life of the such gas pipe by no not less than 10 years; and (vii) may include replacing gas infrastructure with utility-scale non-emitting renewable thermal energy infrastructure; and (vii) involves circumstances in which a non-gas pipe alternative has been shown to be infeasible or not cost-effective; and (viii) is not inconsistent with the greenhouse gas emissions limits and sublimits established in said chapter 21N.

“Non-emitting renewable thermal energy infrastructure”, utility-scale distribution infrastructure that supplies heating or cooling from fuel sources whose combustion does not emit greenhouse gas emissions as defined in section 1 of chapter 21N; provided, however, that such infrastructure may include, but shall not be limited to, infrastructure for networked geothermal and deep geothermal energy.

“Non-gas pipe alternative”, an activity or investment that delays, reduces or avoids the need to build or upgrade traditional natural gas infrastructure including, but not limited to, electrification or non-emitting renewable thermal energy infrastructure.

”Plan”, a targeted infrastructure replacement program construction plan a detailed compilation of eligible infrastructure measures and decommissioning proposals that a gas company files pursuant to subsection (b).

”Project”, an eligible infrastructure replacement project measure or decommissioning proposal proposed by a gas company in a plan filed under this section.

(b) A gas company shall file with the department a plan to address aging or leaking natural gas infrastructure within the commonwealth and the leak rate on the gas company’s natural gas infrastructure in the interest of public safety and reducing lost and unaccounted for natural gas through a reduction in natural gas system leaks. Each company’s gas infrastructure plan that shall include interim annual targets for the department’s review. The department shall review these interim such annual targets to ensure each gas company is meeting the appropriate pace to reduce the leak rate on and to replace the gas company’s natural gas infrastructure in a safe and timely manner to preserve and improve public safety, improve infrastructure reliability, minimize the risk of stranded assets and reduce greenhouse gas emissions in compliance with the limits and sublimits established in chapter 21N. The interim targets shall be for periods of not more than 6 years or at the conclusion of 2 complete 3-year walking survey cycles conducted by the gas company A gas company filing a plan shall update the targets each year based on overall progress. The gas companies shall incorporate these interim targets into timelines for removing all leak-prone infrastructure filed pursuant to subsection (c) and may update them based on overall progress. The department may levy a penalty against any gas company that fails to meet its interim most recently updated annual target in an amount up to and including the equivalent of 2.5 per cent of such gas company’s transmission and distribution service revenues for the previous calendar year.

(c) Any plan filed with the department shall include, but not be limited to: (i) capital investment in eligible infrastructure measures and decommissioning proposals concerning replacement of mains, services, leak-prone meter sets and other ancillary facilities composed of non-cathodically protected steel, cast iron and wrought iron, prioritized to implement the federal gas distribution pipeline integrity management plan annually submitted to the department and consistent with subpart P of 49 C.F.R. part 192; (ii) an evaluation of the cost to retire, replace or repurpose natural gas infrastructure with non-pipe alternatives including, but not limited to, utility-scale non-emitting renewable thermal energy infrastructure; (iii) an anticipated timeline for the completion of each project; (iiiv) the estimated cost of each project; (iv) rate change requests; (vi) a description of customer costs and benefits under the plan including the costs of potential stranded assets and the benefits of avoiding financial exposure to such assets; (vii) the relocations, where practical, of a meter located inside of a structure to the outside of said structure for the purpose of improving public safety; (viii) a comparison of costs and benefits of proposed eligible infrastructure measures in low and moderate income communities with costs and benefits of such measures in upper income communities; (ix) a comparison of projected greenhouse gas emissions reductions from eligible infrastructure measures with other investment alternatives, such as electrification; (x) an analysis of how the proposed plan fits within the company’s climate compliance plan approved by the department; and (viixi) any other information the department considers necessary to evaluate the plan.

As part of each plan filed under this section, a gas company shall include a timeline for removing all remedying leak-prone infrastructure on an accelerated basis specifying an annual replacement pace and program end date with a target end date of: (i) not more than 20 years from the filing of a gas company’s initial plan; or (ii) a reasonable target end date considering the allowable recovery cap established pursuant to subsection (f). The department shall not approve a timeline as part of a plan unless the allowable recovery cap established pursuant to subsection (f) provides the gas company with a reasonable opportunity to recover the costs associated with removing all leak-prone infrastructure on the accelerated basis set forth under the timeline utilizing the cost recovery mechanism established pursuant to this section to preserve and improve public safety, improve infrastructure reliability, minimize the risk of stranded assets and reduce greenhouse gas emissions, on an accelerated basis specifying an annual remediation pace and an end date of November 1, 2030. After filing the initial plan required under this section,, a gas company shall, at 5–year intervals, annually provide the department with a summary of its replacement remediation progress to date, a summary of work to be completed during the next 52 years and any similar information the department may require. The department may require a gas company to file an updated long-term timeline as part of a plan if it alters the cap established pursuant to subsection (f).

(d) If a gas company files a plan on or before October 31 for the subsequent construction year, the department shall review the plan within 6 months. The plan shall be effective as of the date of filing, pending department review. The department may modify a plan prior to approval at the request of a gas company or make other modifications to a plan as a condition of approval. The department shall consider the costs and benefits of the plan including, but not limited to, impacts on ratepayers, reductions of lost and unaccounted for natural gas through a reduction in natural gas system leaks and improvements to public safety. The department shall give priority to plans narrowly tailored to addressing leak-prone infrastructure most immediately in need of replacement. preserving and improving public safety, minimizing ratepayer impacts, improving infrastructure reliability, minimizing the risk of stranded assets and reducing greenhouse gas emissions in compliance with the greenhouse gas emissions limits and sublimits established in chapter 21N.

(e) If a plan is in compliance with this section and the department determines the plan to reasonably accelerate eligible infrastructure replacement and provide benefits operates in a balanced manner to reasonably preserve and improve public safety, minimize ratepayer impacts, improve infrastructure reliability, minimize the risk of stranded assets and reduce greenhouse gas emissions in compliance with the limits and sublimits established in chapter 21N, the department shall issue preliminary acceptance of the plan in whole or in part. A gas company shall then be permitted to begin recovery of the estimated costs of projects included in the plan beginning on May 1 of the year following the initial filing and collect any revenue requirement, including depreciation, property taxes and return associated with the plan.

(f) On or before Annually, not later than May 1 of each year, a gas company shall file final project documentation for projects completed in the prior year to demonstrate substantial compliance with the plan approved pursuant to subsection (e) and that project costs were reasonably and prudently incurred. The department shall investigate project costs within 6 months of submission and shall approve and reconcile the authorized rate factor, if necessary, upon a determination that the costs were reasonable and prudent. Annual changes in the revenue requirement eligible for recovery shall not exceed (i) 1.5 per cent of the gas company’s most recent calendar year total firm revenues, including gas revenues attributable to sales and transportation customers, or (ii) an amount determined by the department that is greater than 1.5 per cent of the applicable percentages of the gas company’s most recent calendar year total firm revenues, including gas revenues attributable to sales and transportation customers as established in subsection (i). Any revenue requirement approved by the department in excess of such cap may be deferred for recovery in the following year.

(g) All rate change requests made to the department pursuant to an approved plan, shall be filed annually on a fully reconciling basis, subject to final determination by the department pursuant to subsection (f). The rate change included in a plan pursuant to section (c), reviewed pursuant to subsection (d) and taking effect each May 1 pursuant to subsection (e) shall be subject to investigation by the department pursuant to subsection (f) to determine whether the gas company has over collected or under collected its requested rate adjustment with such over collection or under collection reconciled annually. If the department determines that any of the costs were not reasonably or prudently incurred, the department shall disallow the costs and direct the gas company to refund the full value of the costs charged to customers with the appropriate carrying charges on the over-collected amounts. If the department determines that any of the costs were not in compliance with the approved plan, the department shall disallow the costs from the cost recovery mechanism established under this section and shall direct the gas company to refund the full value of the costs charged to customers with the appropriate carrying charges on the over collected amounts.

(h) Notwithstanding any general or special law or regulation to the contrary, pursuant to a decommissioning proposal approved by the department, a gas company may terminate natural gas service to a customer where such proposal ensures that the affected customer retains continuous access to safe, reliable and affordable energy services and can secure adequate substitutes for gas-fired services as determined by the department. [Note that Section 101 of S.2829 requires the Department of Public Utilities to promulgate regulations governing service terminations under this sub section by December 31, 2024.]

(i) For the purposes of subsection (f), the applicable percentage of the local gas distribution company’s most recent calendar year total firm revenues, including gas revenues attributable to sales and transportation customers, beginning:
(A) on or after November 1, 2024, and before November 1, 2025, shall be 2.8 per cent;
(B) on or after November 1, 2025, and before November 1, 2026, shall be 2.5 per cent;
(C) on or after November 1, 2026, and before November 1, 2027, shall be 2.0 per cent;
(D) on or after November 1, 2027, and before November 1, 2028, shall be 1.5 per cent;
(E) on or after November 1, 2028, and before November 1, 2029, shall be 1.0 per cent;
(F) on or after November 1, 2029, and before November 1, 2030, shall be 0.5 per cent;
and (G) on or after November 1, 2030, shall be 0 per cent.

(hj) The department may promulgate rules and regulations under to carry out the provisions of this section. The department may discontinue the replacement program a plan and require a gas company to refund any costs charged to customers due to failure to substantially comply with a such plan or failure to reasonably and prudently manage project costs.

Chapter 164, Section 145 (added by section 2 of Chapter 149 of the Acts of 2014) showing amendment proposed by Section 76 of S.2829, bracketed explanatory note added.

Repeal gas system expansion mandate

Section 84 of S.2829 repeals Section 3 of Act Relative to Natural Gas Leaks (Chapter 149 of the Acts of 2014). That section required the department of public utilities to “authorize gas companies . . . to design and offer programs to customers which increase the availability, affordability and feasibility of natural gas service for new customers” and provided mechanisms for financing gas system expansions and conversions.