Mass. outlines new strategy for getting customers and utilities off of natural gas

As Massachusetts works to zero-out planet warming emission by 2050, one big question has been how the state will wean itself off of natural gas and heat the majority of homes and buildings with electricity instead. One big obstacle has been gas utilities, which make money off of maintaining existing pipelines and building new infrastructure.

Now, after more than three years of considering the future of the natural gas industry in Massachusetts and what role it can play in the state's efforts to significantly reduce its greenhouse gas emissions, the Department of Public Utilities issued an order Wednesday meant to signal to gas utilities that it won't be business as usual going forward.

At its heart, the order is a strategy to help steer the state toward a cleaner energy system that is safe, reliable and affordable for all. It says that utilities can't charge gas customers for new gas infrastructure if there are viable non-gas alternatives. It changes the existing cost recovery process that incentivizes adding new gas customers. And it prohibits utilities from using ratepayer money to "promote" natural gas.

"I really do think that this is potentially the most transformative climate decision in Massachusetts history," said Kyle Murray, a senior Massachusetts advocate with the Acadia Center, a climate advocacy and research group. "The department really looked at everything and delivered a decision that is well thought out [and follows] the science and data and the available information."

The so-called "Future of Gas" proceeding dates back to 2020, when then-Attorney General Maura Healey asked the Department of Public Utilities to investigate whether the state and gas utilities were doing enough to plan for the shift to electric heat and the eventual decommissioning of the existing natural gas system. Healey was particularly worried about a scenario in which wealthy residents buy heat pumps and get off gas, leaving those who can't afford to transition to pay for all of the fixed costs of an aging system.

The department took up the issue and asked the gas utilities to take a first stab at writing their own plans for decarbonizing the gas system. Last March, the utilities came back with a plan that relied heavily on so-called "renewable natural gas," which is methane gas that's trapped at landfills or farms and mixed into the pipeline system.

The plan was immediately blasted by environmentalists who said it was an attempt by gas utilities to maintain the status quo. In the new department order, the commissioners rejected the utility proposal, writing that renewable natural gas is expensive, in short supply and may not have the climate benefits supporters often claim.

This new order "sets the tone and tells utilities, 'We're not messing around with renewable natural gas, and we're going to be transitioning most of your customers off of gas,'" said Caitlin Peele Sloan, vice president of the Conservation Law Foundation in Massachusetts.

"It is fair to say that a different lens will be applied to gas infrastructure investments going forward," the order says. "In this 'beyond gas' future, we will be exploring and implementing policies that are geared toward minimizing additional investment in pipeline and distribution mains and achieving decarbonization in the residential, commercial, and industrial sectors."

The order requires gas utilities to submit "Climate Compliance" plans every five years, beginning in 2025, to ensure that they're sufficiently working to eliminate emissions and electrify. And it says that the gas and electric arms of big utilities like National Grid and Eversource work together to ensure an affordable and orderly transition.

In statements, both National Grid and Eversource, the two biggest gas utilities in the state, said they were reviewing the new order and are committed to helping Massachusetts meet its 2050 climate goals.

"As Massachusetts moves towards net zero emissions by 2050, the [department] must develop a regulatory structure for the gas sector befitting that requirement," utilities department chair Jamie Van Nostrand said in a statement. "We are pleased to unveil a forward-thinking framework that charts a path for moving toward clean energy and enhancing the state's ability to achieve its climate goals while ensuring a fair, equitable, and orderly process."

The home construction industry and others, including former Gov. Charlie Baker, have cautioned for years that restricting natural gas could stall housing production — one of Gov. Maura Healey's main priorities — and add unnecessary expenses for residents.

Van Nostrand said on Wednesday that the new order shouldn't have major impacts on housing affordability, but conceded that it could make it slightly harder for customers to install natural gas furnaces in new housing. Still, he added, that's the direction Massachusetts needs to go if it is going to achieve its greenhouse gas reduction targets.

In general, the order does not directly address how the state and utilities will ensure that the transition from gas is equitable and affordable for lower-income residents. Instead, the department said it plans to launch another proceeding by the end of this year focused specifically on affordability and "energy burden," or the amount of a household's income that is spent on home energy bills.

"As in the case of the transition to clean energy in the electricity sector, the decarbonization of the natural gas industry may result in higher costs being imposed on ratepayers," the order stated. However, "given the urgency of addressing the climate crisis ... we are reluctant to slow the pace at which the transition must occur due to concerns about affordability for low- and moderate-income utility customers."

The department said it's confident that it can develop a solution to address both decarbonization and affordability, but foreshadowed that getting there "likely will require a change in our statutory authority."

In the meantime, many in the state are celebrating today's order as a major step forward in Massachusetts efforts to slash emissions from homes and other businesses.

"This is a game changer. The DPU has planted a flag in the ground on the way to our liberating ourselves from natural gas, and the debate will never really be the same," Sen. Mike Barrett, who co-chairs the state legislature's Telecommunications, Utilities and Energy committee, wrote in an email.

"The report elevates the logic for ramping down an old fossil infrastructure as we ramp up a new age of electrification, so that we don’t end up paying to operate two systems at full strength."

Massachusetts has over 21,000 miles of natural gas pipelines, many of which lead directly to homes and businesses. According to the state, approximately 52% of households, or 1.4 million homes, heat with natural gas. Emissions from buildings currently account for about 35% of the state's total greenhouse gas emissions.

The state's 2021 climate law requires a 28% reduction in emissions by 2025 and a 47% reduction by 2030, all compared to the baseline of 1990 emissions. As of 2020, the commission said, emissions for the residential and commercial buildings sector were 18% below 1990 levels.