You may be surprised to learn that Connecticut natural gas ratepayers are subsidizing the expansion of the natural gas system. Yes, in 2021 as we are trying to stop burning fossil fuels that contribute to climate change, ratepayers’ funds are being used to increase the number of natural gas customers.
The System Expansion Program (SEP) began in 2013 when the Malloy administration and legislature directed the Public Utilities Regulatory Authority (PURA) to develop a ten-year plan to encourage households that used heating oil to convert to natural gas. At the time, it was believed that burning gas instead of oil would reduce emissions (though it turns out that between combustion emissions and methane leaks, gas is not a good climate solution). The conversion program required ratepayer investments in gas pipelines and infrastructure that will lock in the use of natural gas for decades. Meanwhile, the supposed cost benefits to customers have disappeared as gas prices have increased.
In 2020, PURA recognized that the program was not working as intended and asked its office of Education, Outreach, and Enforcement (EOE) to review the program. In a victory for common sense and a recognition of the facts, EOE’s review concluded that “the program should ‘downsize’ immediately and the System Expansion Program should end at the 10-year mark.”
Among other findings, EOE recognized that:
- The climate justification for the program has diminished: State policy is relying far less now than in 2013 on natural gas as a tool to meet the state’s Global Warming Solutions Act emissions goals, and EOE expects the deemphasis on natural gas to continue.
- The program is unfair to ratepayers: Diverting millions of ratepayer dollars into the program instead of lowering customer bills is “a significant change in the treatment of customers that must be addressed.”
- The evaluation process has been flawed: The criteria for assessing the program were, “far too liberal to provide any meaningful assessment of the program.”
- The program does not meet current needs and priorities: The program is designed in a way that, “does not adequately account for market trends, and cannot respond rapidly to negative trends,” such as changes in the difference between gas and oil prices and increased concern with emissions.
Now that EOE has issued its report on the System Expansion Program, it is up to PURA to enact the recommendations.
There is another problem with the gas expansion program, namely the way it has been marketed to potential new gas customers. In August 2021, Connecticut’s Attorney General and Office of Consumer Counsel filed a petition to PURA calling for an investigation into Eversource’s gas expansion marketing tactics. According to the Hartford Courant, a South Windsor resident received plainly deceptive materials from Eversource designed to pressure people into signing up for the gas expansion program. “These mailers and high-pressure marketing tactics are nothing short of alarming,” Attorney General William Tong said. PURA agreed to investigate and on Dec. 17, 2021 issued a Notice of Violation against Eversource, along with a $1,797,000 civil penalty.
Connecticut is not the only state to be increasingly wary of investing more in natural gas infrastructure. As a recent RMI study, Overextended: It’s Time to Rethink Subsidized Gas Line Extensions, notes: “A new natural gas customer is added to the system every minute in the United States, and existing gas customers are covering their construction costs through subsidies known as line extension allowances. Each year, these extensions of gas service enable utilities to pass hundreds of millions of dollars in costs to existing customers while expanding the fossil fuel system for decades to come … Utility regulators in every state should reform line extension allowances to eliminate subsidies for gas, align with state climate policies, and reduce the financial burden on existing gas customers.”
Among the states beginning to act is Massachusetts, where the advisory council that oversees Mass Save, the state’s energy efficiency program, is seriously questioning the continuation of incentives for the conversion of home heating systems from oil to gas. Critics of Mass Save point out that heating with natural gas will still produce large amounts of greenhouse gas emissions and lock in the emissions for decades. And who designed the Mass Save program? Gas utilities, among others.
Meanwhile the State of Maryland’s People’s Counsel recently wrote that Maryland gas utilities are continuing to expand their distribution infrastructure despite the growing danger of climate change. Why? Because it benefits shareholders. But the problem goes deeper than that. As Maryland and other states transition away from fossil fuels, ratepayers will still be paying for the investments gas companies are making right now. The question is, who will bear the unrecovered costs of obsolete infrastructure, ratepayers or shareholders? The question has not been answered in Maryland, but given the efforts of gas utilities to expand, it is reasonable to assume that they are counting on ratepayers.
In Connecticut, we need to ask the following question: who will pay for gas infrastructure that becomes obsolete as the state transitions away from burning fossil fuels?
One of the best ways to address the question would be to open a Future of Gas docket at PURA, similar to what the Department of Public Utilities did in Massachusetts. Initiated by the Massachusetts Attorney General’s office, Docket 20-80 is considering what an orderly decrease in the use of natural gas for heating would look like, what alternatives exist for heating buildings, how much ratepayer money should utilities spend on repairing and replacing leaking pipelines that may be phased out, and how should remaining gas ratepayers be protected from the costs of maintaining a distribution system that has fewer and fewer customers.
Gov. Ned Lamont’s recent Executive Order No. 21-3 suggests that Connecticut needs to look squarely at the future of natural gas. “GHG emissions from buildings have increased instead of being on track to achieve the roughly one-third reduction in such emissions needed to achieve the GWSA 2030 target, [and] a new Comprehensive Energy Strategy is needed that identifies the best clean, affordable and resilient heating and cooling options for buildings, and reconsiders the natural gas expansion program recommended in the 2013 Comprehensive Energy Strategy.”
Governor, push to completely end the current natural gas expansion program that is expensive, unfair to ratepayers, and inconsistent with the state’s greenhouse gas emission reduction goals. Then join with Attorney General Tong to request that PURA open a docket that explores the future of gas. Ratepayers, voters, and future generations will thank you.
Peter Millman is a member of Beyond Gas CT, a coalition that includes the Conservation Law Foundation, Sierra Club CT, Acadia Center, The Nature Conservancy, Save the Sound, CT Citizen Action Group, and People’s Action for Clean Energy.