Massachusetts Poised to Reshape Natural Gas Distribution Companies to Address Climate Change

About one year ago, the Massachusetts Department of Public Utilities or DPU opened an investigation (D.P.U. 20-80) to examine the appropriate role of gas LDCs in helping to meet the Commonwealth’s 2050 climate goals. The proceeding sought to identify and evaluate strategies to move to net-zero GHG while simultaneously protecting ratepayer interests. The potential to “recast” the role of the LDCs was a principal part of the focus.

Consultants were retained by the LDCs and an extensive stakeholder process has been completed. A material step in the process was to identify and then evaluate the merits of what turned out to be eight “pathways” that each reflected changing roles for LDCs. A two-volume report – Independent Consultant Report Vol. I and Vol. II – has been released in draft, is being finalized and will ultimately be reviewed by the DPU. It is clear that the role of the LDCs will evolve substantially. These “pathways” reflected various ranges of “electrification” and differing roles for LDCs (including with the use of renewable natural gas or even networked geothermal systems).

A number of factors were considered in the analysis of the pathways, such as the high incremental costs of converting existing building stock, performance of air source heat pumps on cold days, the need for substantial upgrades to the electric distribution system, the need for clean, renewable energy sources, challenges associated with installing geothermal systems in already crowded streets, the cost and availability of renewable fuels and, finally, cost or rate implications of customer migration.

While the “pathways” are very different, there were several “commonalities” for all. The following steps or actions will likely enjoy substantial support in the short term because the underlying policy was “common” to all the pathways:

• Increase energy efficiency through building shell retrofits and energy efficient equipment, particularly for all-electric buildings or buildings using large amounts of decarbonized fuels.
• Building electrification where possible, including all-electric residential new construction and hybrid electrification for some existing buildings.
• Increase use of RNG from waste sources, including from landfill gas, with most scenarios employing a blend of 5-10% in the LDC distribution system by 2030.

Given these analyses and findings on “commonalities,” there will be a number of actions pursued by the DPU, other energy-related agencies in the Commonwealth and perhaps also the legislature. The report lists six major areas of focus in terms of DPU “regulation,” the first three of which relate to opportunities for a range of vendors and service providers:

• Increase scope and funding for energy efficiency programs and examine interrelationship between electric and gas programs and policies.
• Advance use of RNG by, for example, updated LDC forecast and supply plan standards to require a percentage of RNG in supply mix or provide customers with option to purchase RNG from the LDC (like “greener” electric supply); alternatively, enable customers the option to purchase RNG directly from third-party suppliers.
• Develop and advance “pilot” programs for “innovative” technologies and R&D; adopt cost recovery and tracking methodologies.
• Manage LDC costs and investments to reflect changing conditions; e.g. pre-approve capital investment plans.
• Manage customer affordability issues, including managing transition costs, EJ and stranded costs.
• Establish, review and pre-approve LDC transition plans; establish planning, investment and cost recovery structures that reflect the plan forward.

A number of businesses and organizations should consider participating in future proceedings and shaping policy or modifying their business practices in recognition of likely policy directions. Suppliers and vendors of efficiency equipment or renewable fuel and fuel-related equipment may find greater opportunities. Larger institutional customers may seek to act individually or collectively to secure RNG or geothermal opportunities and be sure that they secure appropriate rate treatment. Real estate developers and owners should be mindful of policy changes and opportunities to fund new infrastructure for heating or energy efficiency.

Please contact Jim Avery or Paul Connolly if you have questions on these developments.