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Ore. regulators adopt rules to allow renewable gas purchase, investment

Oregon regulators finalized a batch of rules that clear the way for utilities to begin flowing renewable natural gas to customers, expanding the alternative fuel market on the U.S. West Coast.

The Oregon Public Utility Commission voted July 14 to adopt rules for procuring and producing renewable natural gas, or RNG, a form of fuel processed from methane waste from farms, landfills, wastewater treatment plants and other facilities. The action fulfills the commission's rulemaking mandate under Senate Bill 98, a 2019 law that seeks to support Oregon's transition to a low-carbon economy by encouraging RNG development.

The law allows Oregon gas utilities to include a growing percentage of RNG in their annual gas supply. Under the law, RNG can constitute up to 5% of a company's annual purchases through 2024, with the percentage maxing out at 30% in 2045. The law allows utilities to recover any prudently incurred cost to meet the voluntary targets, with companies allowed to dedicate up to 5% of their total revenue requirement to procuring RNG.

Commissioners said the rulesdeveloped by PUC staff, utilities and consumer groups over several monthsare likely to require fine-tuning but applauded stakeholders for working swiftly to meet a July 31 deadline.

"This is an example of PUC staff leading a collaborative effort to initiate a new program in a new space, not just for Oregon, but for the West," PUC Chair Megan Decker said during the July 14 meeting.

Creating an RNG market

The utilities involved in crafting the rules included Northwest Natural Gas Co., Cascade Natural Gas Corp. and Avista Corp.

"We're excited to use this landmark law, one of the first of its kind in the nation, to acquire a renewable product for our customers and bring our region one step closer to a clean energy future," Northwest Natural Holding Co. President and CEO David Anderson said in a July 16 news release.

One of the rules that stakeholders debated at length governs a system to account for and track RNG supplies and their environmental benefits.

An accounting method is necessary for policymakers to determine the greenhouse gas emissions reductions and other benefits associated with using RNG. It also prevents RNG market participants from claiming credit for RNG's environmental benefits under multiple programs or in more than one jurisdiction.

The final rule requires participants to estimate the carbon intensity of each dekatherm of RNG throughout its life cycle, from its production through its transportation and delivery to customers. Each dekatherm of RNG generates a renewable thermal certificate. The renewable thermal certificate represents that unit of RNG's environmental attributes, including its life cycle carbon intensity. The certificate can then be tracked, traded and ultimately retired through an electronic system.

The commission left open the possibility of using more complex accounting methods in the future, saying they could provide more value but might not be viable until the market evolves.

Regulating RNG purchases and investments

The PUC also adopted a rule requiring program participants to file annual reports, which will include data on RNG purchases, detailed descriptions of expenditures and a summary of renewable thermal certificate transactions. Under a separate rule, utilities must also track the incremental costs of procuring or producing RNG in lieu of traditional natural gas.

The commission adopted distinct rules governing cost recovery mechanisms for large and small gas utilities. To help the PUC evaluate RNG purchases and investments during ratemaking proceedings, commissioners established requirements for utilities to provide information in future integrated resource plans.

Another rule requires utilities that invest in biogas production to engage in competitive bidding and establishes guidelines for issuing requests for proposals.