Gas utilities defend Mass. pipeline extensions as state probes fuel's future

Policies that govern how new and existing gas utility customers share the cost of pipeline extensions remain an important part of the regulatory framework in Massachusetts, companies told state regulators overseeing a so-called Future of Gas proceeding.

The line extension policies — and customer growth more broadly — are not inconsistent with current state climate policy, the companies said. The gas distributors stressed that they have already taken steps to limit new hookups and will soon launch a new process to consider alternatives to pipeline projects, including line extensions.

The filings stem from a Massachusetts Department of Public Utilities (DPU) June 14 request for data about the companies' line extension policies (Docket 20-80). Those policies spread the cost of extending infrastructure to new customers across the existing ratepayer base. In its request, the DPU sought to understand whether incentivizing system growth is consistent with the state's climate policy.

Massachusetts has established emission limits for building heating and gas distribution that require gas utilities to decarbonize their business. Meanwhile, the state's gas utilities grew their combined customer count by an average of 14,565 meters per year from 2019-2022, according to American Gas Association analysis of the most recent US government data.

Gas utilities said customer growth was not in conflict with state policy but could in fact help achieve climate goals.

Converting oil customers as electrification catches on

Converting homes and businesses to gas from more carbon-intensive fuel oil in particular supports Massachusetts' emission reduction goals, companies said.

Fuel oil remained the main source of residential space heating across the service area operated by Fitchburg Gas and Electric Light Company Inc., which is part of Unitil Corp. and which does business as Unitil, the company said in Aug. 13 testimony.

Since 2021, more than 4,000 of Eversource Energy's new customers were residents who faced financial hurdles to electrifying as they sought to transition from heating oil, the company said in an Aug. 13 filing. Switching to gas reduced these customers' CO₂-equivalent emissions by about 25%, Eversource said.

As Massachusetts seeks to electrify buildings, oil-to-gas conversions can help reduce emissions as policymakers address electrification's affordability and grid impacts, according to Eversource and Boston Gas Co., which does business as National Grid.

"Ultimately, heat decarbonization will depend upon the pace at which electrification and energy efficiency can be scaled, and the pace at which electric sector decarbonization — particularly as it pertains to winter peak days — can be enabled," James Patterson, director of customer connections at National Grid USA Service Co. Inc., said in Aug. 13 testimony.

Patterson said data from the state's pilot program allowing 10 cities to prohibit gas in new buildings will provide information on electrification's economic impacts.

Preventing subsidies, not providing them

Unitil's Bay State subsidiary said line extension policies do not incentivize system expansion or encourage customers to choose gas service. Instead, the policy prevents existing customers from subsidizing new customers, the company said.

The policy's proponents note that adding customers disperses the long-term cost of maintaining the system among a larger base, reducing the cost per ratepayer. In Massachusetts, if the cost of extending infrastructure to a new customer outweighs the estimated long-term benefit to existing ratepayers, the new customer must make a payment to close the deficit, called a contribution in aid of construction (CIAC), Unitil said.

Avangrid Inc. subsidiary The Berkshire Gas Co. said 584 out of 2,418 line extensions constructed over the past 10 years required a CIAC, or about 24%.

The percentage of Eversource Energy's main extensions that did not require a CIAC over the last decade ranged from 60% to 86% per year.

The companies noted that they have stopped marketing gas to potential customers and now inform homes and businesses about electrification options and alternatives to gas service. This followed the DPU's December 2023 order to stop using ratepayer funds to promote gas, Unitil said.

Since that policy went into effect, 359 of Eversource Energy's 517 prospective customers have elected to continue pursuing gas service, the company said. Meanwhile, the company provided rebates to gas customers to install about 4,000 residential heat pumps in 2023 and launched a nation-leading utility-scale networked geothermal project in June.

The companies noted that they intend to launch a process in September to seek stakeholder feedback on a framework for analyzing non-pipeline alternatives to system investments. This would provide a venue to consider line extension policies, they said.