Modernizing Gas Utility Planning: New Approaches for New Challenges

Significant new uncertainties and options for the gas industry are creating new challenges for regulators who are responsible for ensuring that utility investments are in the public interest.

Many of the unknowns relate to the potential for customers to switch from gas to electricity for heating and other uses and the potential for utilities to replace fossil methane with alternative gases. Gas customers could face higher costs if their numbers decline in favor of electrification or if investments in alternative gases far exceed current resource costs.

Yet current typical tools and processes for regulating gas distribution utilities do not give regulators complete information on which to make decisions about long-term utility investments in this context.

Commissions across the country are recognizing the need to review and update their planning approaches. This paper surveys current efforts to modernize gas utility planning and draws lessons for those considering similar work. At the heart of the paper are five principles for redesigning planning to restore confidence that utility investments will be in the public interest:

1. Build equity into planning so decisions are made with equitable service and distribution of costs and benefits in mind.
2. Consider an expanded range of investment and resource options.
3. Establish integrated gas planning by combining integrated resource planning practices with gas distribution system planning.
4. Use combined energy planning to take the broadest possible view of emissions reduction opportunities.
5. Foster collaboration with state agencies that have expertise in emissions reduction.

EU can stop Russian gas imports by 2025

The Russian government’s decision to invade Ukraine puts into sharp contrast the deep entanglement between energy, security and geopolitics. Now more than ever, the European Union needs unity and resolve in its response and a focus on resilience in the face of interlinking crises.

Authors from Ember, E3G, Bellona and RAP have collaborated to identify the indispensable role clean energy solutions play in rapidly ending the EU’s reliance on fossil gas imports from Russia.

Key findings of our analysis:

• Clean energy and energy efficiency can replace two-thirds of Russian gas imports by 2025. Europe can cut Russian gas imports by 66% by delivering the EU’s Fit for 55 package and accelerating the deployment of renewable electricity, energy efficiency and electrification. This is equivalent to a total reduction by 101 billion cubic meters. An urgent uplift in policy is now required to achieve the necessary level of implementation.
• New gas import infrastructure is not required. Security of supply and reduction of Russian gas dependence does not require the construction of new EU gas import infrastructure such as liquified natural gas terminals. Alternatively sourcing 51 billion cubic meters of gas imports via existing assets is sufficient.
• Coal power does not need to be extended. The above measures would enable the EU to achieve the necessary decrease in fossil gas demand without slowing the decline of coal-fired electricity generation.

To achieve urgent reductions in the use of fossil gas in Europe, it is important for decision-makers to identify and tackle counterproductive policies. The authors recommend 10 key measures to realise the additional potential for reducing gas use identified in this analysis:

• Increase ambition and fast track adoption of the “Fit for 55” package. This is relevant in particular for the Renewables Directive, Energy Efficiency Directive, Emissions Trading System and the Energy Performance in Buildings Directive.
• Clarify financial resources to support clean energy solutions. Ensure that allocated funding under the EU’s Recovery and Resilience Facility is used to that effect. Establish a facility for early, front-loaded release of Multiannual Financial Framework funds where the delivery of gas savings can be accelerated.
• Make energy efficiency an energy security priority and scale action. Energy efficiency has the largest potential to reduce cost impacts on consumers. Consider opening existing funding resources such as the Connecting Europe Facility for scaling national energy efficiency programmes.
• Remove any incentives that currently deepen or perpetuate gas consumption. Examples include financial support for gas heating systems and special tax regimes or exemptions for industry. Replace them with investment support for clean heating, in particular for low- and middle-income families. Innovative schemes such as on-bill financing, tax credits or heating appliance lease schemes should be supported.
• Support the rollout of renewables and heat pumps. Establish concrete investment programmes, reduce administrative burdens and accelerate support for critical enablers such as grid infrastructure, demand-side flexibility and better use of transmission networks and storage. Integrated regional markets can buffer fluctuating renewable resources across larger regions.
• Make low-carbon supply chains an energy security priority. A skilled workforce and input materials to the low-carbon supply chain are critical to delivering this vision. The EU can enhance and scale Member States’ efforts and can establish a cooperative approach with the United States and other partners on scaling supply chains.
• Ensure equity in the energy response. Governments must ensure the costs and benefits of the transition are shared fairly among consumers. Increased carbon revenues or windfall profit taxes can be earmarked for investments in renewables and efficiency, as well as bill support for vulnerable customers. Enabling access to energy services can unlock bill savings for low-income families. Regulators should address energy poverty by designing fair network tariffs and ensuring suppliers of last resort are properly financed.
• Put in place a European Commission task force. This could drive and monitor a whole economy approach so that supply chain bottlenecks can be anticipated and efforts streamlined across different parts of the Commission.
• Conduct analysis to identify latent potential that can be fast tracked. In particular, analysis should be identified for industrial end use of gas, or inefficiencies in gas use (transformation losses, methane leakage) to line up even higher gas savings post 2025.
• Avoid gas infrastructure or contractual gas lock-in. The “substitution” effect from Russian gas to other sources is expected to decline sharply after 2025, meaning that additional import or other gas infrastructure will face rapidly declining utilisation.

Participating in Power: How to Read and Respond to Integrated Resource Plans

To address climate and equity challenges, utilities will have to transform the way they plan – ensuring that a full range of resources are considered to meet utility customers’ needs. One of the most important opportunities to ensure such outcomes is via integrated resource plans, or IRPs, which regulated utilities submit to their public utility commission (PUC) to demonstrate how they plan to meet consumer needs over longer time scales of 10 to 20 years. PUC processes need public input, but participation has historically been limited because of the technical and legal expertise required. A new guidebook from RAP and the Institute for Market Transformation (IMT) aims to address that barrier. “Participating in Power: How to Read and Respond to Integrated Resource Plans” is intended as an educational resource for local governments and other entities who are advocating for advancing clean energy and equity priorities via intervention in the IRP process.

In an interactive webinar, staff from IMT and RAP talked through the guidebook’s advice for reading, analyzing, and developing comments in response to an IRP. The presenters discussed how stakeholders can gain an understanding of IRP modeling and the process, so that they can effectively engage with PUCs and offer alternative solutions to the traditional, fossil-fuel-based assumptions that the utility may present. Meg Jamison, director of the Southeast Sustainability Directors Network, also joined to answer questions about local-level engagement in IRP processes.

Utility Integrated Resource Planning

In a presentation for the NW Energy Coalition, Elaine Prause discussed the increasing complexity of utility integrated resource planning and the importance of effectively engaging diverse stakeholders in the planning process.

Under Pressure: Gas Utility Regulation for a Time of Transition

(Note: A shorter summary version of this report can be found here.)

The way we use fossil gas as a fuel for heating buildings and other end uses is rapidly changing. Efficiency gains and improved electric end-use technologies are constraining demand for gas. At the same time, the urgency to address climate change is increasing, with the new U.S. national target to cut greenhouse gas emissions by more than half by 2030 adding to existing state-level decarbonization policies. Increased awareness of the health and safety risks of fossil gas is also accelerating the transition to other sources of energy. These shifts are happening as gas utility distribution systems in many places are aging — meaning that utilities may be seeking approval for major investments while the size of their customer base is poised to shrink. Regulators and utilities that do not get ahead of these trends may face the need to impose unsustainable rate increases on customers, likely imposing high costs on those who can least afford it.

These changes mean that the current paradigm for gas utility regulation is coming under pressure, and regulators need a range of practical options to consider as they confront the changing circumstances. This paper offers recommendations that can serve as building blocks to facilitate the gas transition in an efficient and equitable way. Our recommendations fall into three categories:

• Revitalizing gas planning through a robust stakeholder process, dynamic system mapping, scenario analysis and short- and long-term transition plans.
• Enhancing energy efficiency and electrification programs by removing barriers to fuel-switching, expanding and coordinating programs, considering non-pipeline alternatives, and targeting electrification geographically.
• Reforming gas rate-making by lowering the risk of rate impacts, updating cost allocation and rate design, and better aligning utility incentives with customer objectives and public policy goals.

Regulators can use these policy tools to enable a smooth transition that maintains the safety and reliability of the gas system, addresses possible impacts to disadvantaged communities, and supports access to crucial energy services at reasonable rates for everyone.

EV Policy Options for Montana

​In a webinar for Montana legislators and energy office staff, Camille Kadoch and David Farnsworth discussed electric vehicle policy options and the role of integrated resource planning in advancing transportation electrification.

Key Elements of Integrated Resource Planning

​In a presentation for Vote Solar, David Farnsworth and Jessica Shipley provided an overview of integrated resource planning and its role in clean energy procurement.

Making a Clean-Energy Future an Equitable Future

Our jobs, comforts, and ability to survive all depend on something most people take for granted until it goes missing: energy. It powers our lighting, our appliances, our cell phones – our entire daily lives. We need it to search for jobs or work from home, to access essential goods, to cook and store food, to keep our homes at safe temperatures, to access water, and to connect with loved ones. For those who are medically dependent on electricity, access to energy can keep them out of our hospitals—currently overwhelmed by the COVID-19 pandemic—and out of harm’s way. Yet one unfortunate reality of energy is that it is not equitable, and this is a problem that directly harms public health.

Americans in low-income households, communities of color, small towns, and many rural areas do not have equal or affordable access to reliable energy. What’s more, the environmental cost of producing and delivering energy — the pollution of our air, water, and ground — tend to be concentrated in some of those same places.

The coronavirus has further revealed the extent to which these inequities affect vulnerable households. While some states have stepped in to block utilities from disrupting service for nonpayment during the pandemic, in others people who are now unemployed and struggling to afford basic needs amid the crisis must also worry about their electricity or gas being cut off. And new research is pinpointing the extent to which air pollution may have put residents of some communities more at risk of serious respiratory illness and mortality from COVID-19.

While achieving energy equity would require new policies, the time is right. Rapid changes in the power sector present real opportunities for improvement. Renewable energy development is becoming much less expensive, as are technologies such as energy storage that can make the power grid more flexible, cleaner, and more affordable. Coal plants are retiring, and states are encouraging the electrification of home heating and vehicles. But without attention to affordability and access, this transition runs the risk of once again  leaving many Americans  behind.

In a new report produced with the support of the Robert Wood Johnson Foundation, Synapse Energy Economics, RAP and Community Action Partnership take an in-depth look at the disparate impacts of electric and natural gas infrastructure on economic, social, and health outcomes — and consider how to ensure that a clean-energy future is a more equitable future. The report finds a variety of opportunities for policymakers:

• Improve access to energy. Utility customers should be better protected against having their service shut off when they fall behind on payments. Incentives to invest in distributed energy resources, like combined solar and storage systems, can expand the reach of these innovations.
• Make energy easier to afford. Clean-energy technologies must be affordable and accessible, while electricity rate designs should protect low-income households from paying more than their share of the costs to integrate these technologies into the electric grid. Communities served by cooperative utilities need resources to work with utility management to affordably transition away from coal.
• Reduce environmental hazards. Energy and environmental regulators need to align their work to recognize the full value that clean-energy technology brings to controlling pollution from energy infrastructure. Communities can also use clean energy to build greater resilience in the face of extreme-weather events. And as carbon allowance trading markets expand, states participating in them should invest the revenues with environmental justice goals in mind.
• Put people to work on the energy transition. Workers and communities that depend on the fossil-fuel industry need a path to training and secure, well-paid new employment, and the clean-energy workforce needs to become more diverse.

The report includes case studies from municipalities, states, and regions across the country that are working to achieve the goals described above. The small city of Bloomfield, Iowa, has taken charge of its energy future, transforming its approach to resource planning, investing in efficiency and solar power, and spurring local development. In Ohio, a statewide arrearage management program provides a model for protecting customers from utility shutoffs. In Minnesota, Xcel Energy and the state’s utility regulators are working together to implement performance-based regulation, with benchmarks for improving customer service quality and workforce diversity. And the 10 northeastern states that participate the Regional Greenhouse Gas Initiative are reducing carbon dioxide emissions (and other pollution) from power plants, improving community conditions and health outcomes.

Despite these innovations, policymakers need a better understanding of how to improve energy resiliency and reduce environmental impacts in low-income communities, rural areas, and communities of color. Projects undertaken thus far are not on a large enough scale to fill the equity gap. Integrated resource planning, which considers in detail the cost and environmental impacts of a given energy resource, could be a helpful tool to evaluate communities’ options. It can help decide when an expensive investment can be avoided in favor of cleaner alternatives, such as building a microgrid instead of a transmission line. The intersection of energy infrastructure with water, broadband, and transportation also needs consideration. For example, expanding broadband service to rural communities can enable access to “smart grid” energy technology.

Fortunately, this period of rapid change in the energy sector is accompanied by growing awareness of the need to address the sector’s disparate impacts. Community advocates are speaking out, and in some states legislatures and regulators are taking steps to build equity into the energy transition — and providing examples that can be replicated elsewhere. And the ongoing crisis of COVID-19 adds new urgency to getting this transition right — we know more starkly than ever before that the “old normal” is no longer sustainable. The time is now to ensure that a transformed energy sector does not leave rural and low-income communities and communities of color behind — but, instead, empowers them to be partners in creating more affordable and healthier outcomes.

Support for this study was provided by the Robert Wood Johnson Foundation. The views expressed here do not necessarily reflect the views of the Foundation.

Energy Infrastructure: Sources of Inequities and Policy Solutions for Improving Community Health and Wellbeing

In this report, produced with the support of the Robert Wood Johnson Foundation, Synapse Energy Economics, RAP and Community Action Partnership take an in-depth look at the disparate impacts electric and natural gas infrastructure have on economic, social, and health outcomes — and consider how to ensure that a clean-energy future is a more equitable future. The report finds a variety of opportunities for policymakers, including policies to make energy more affordable for vulnerable communities, expand access to energy, reduce environmental hazards, and create jobs in the clean energy transition.

The report also includes case studies from municipalities, states, and regions across the country that are working to achieve these goals. The small city of Bloomfield, Iowa, has taken charge of its energy future, transforming its approach to resource planning, investing in efficiency and solar power, and spurring local development. In Ohio, a statewide arrearage management program provides a model for protecting customers from utility shutoffs. In Minnesota, Xcel Energy and the state’s utility regulators are working together to implement performance-based regulation, with benchmarks for improving customer service quality and workforce diversity. And the 10 northeastern states that participate in the Regional Greenhouse Gas Initiative are reducing carbon dioxide emissions (and other pollution) from power plants, improving environmental conditions and community health outcomes. This report highlights these successes and provides policymakers with insights into how to create a successful – and economically inclusive – transition to a clean energy future.

Better grid integration beats coal plant ramping to reduce wind, solar curtailment