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Washington, DC, climate goals create roadblock for natural gas incentive program


According to Market Intelligence, December 2022


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Washington, DC, climate goals create roadblock for natural gas incentive program

Washington, D.C., regulators rejected Washington Gas Light Co.'s request to extend a pilot project to encourage natural gas use in residential buildings, saying the incentive program might conflict with the district's climate goals.

The Public Service Commission of the District of Columbia, or PSC, said recent changes to clean energy laws mean it could ultimately shoot down proposed gas incentives. Partly for that reason, it is not prudent to extend a pilot project to assess the incentive program's viability, the PSC said in a Dec. 5 ruling.

The decision is another sign that regional climate change policies are creating obstacles for gas in the building sector. It comes as several towns and cities in California and Massachusetts, as well as Seattle, are advancing measures to discourage gas in new buildings or renovations.

The order also shows how quickly public policies are beginning to shift when it comes to natural gas's place in climate-friendly energy strategies.

In 2017, the PSC took the view that Washington Gas' proposed Multi-Family Piping Program could help Washington improve energy efficiency. The commission approved a two-year pilot for the incentive program, which would defray the cost to developers of installing natural gas piping and venting in multifamily buildings. The PSC extended the pilot for another two years in 2018 so Washington Gas could evaluate test projects.

Washington Gas asked the PSC in March to approve a fifth year and allow the company to continue signing up developers. That request came two months after Washington signed into law the Clean Energy DC Omnibus Amendment Act of 2018.

The district's Office of the People's Counsel, a government advocate for Washington ratepayers, raised several concerns about the request, including that Washington Gas "has not made a showing that extending the program that incentivizes expansion of gas 'squares' with the district's environmental policies."

The PSC agreed in its ruling that extending the pilot could create unjustifiable costs for ratepayers "should the commission ultimately determine that the program is imprudent and not aligned with the district's climate goals." Washington Gas has approved 20 pilot customers, which PSC determined is sufficient to evaluate the program.

The D.C. government itself opposed the incentives, saying they run counter to the district's shift from fossil fuels. The government said enrolling more developers is inconsistent with the 2018 Clean Energy Act, which requires the PSC to factor Washington's climate commitments into regulatory decisions.

The Sierra Club said the incentive program is incompatible with a recommendation from the Department of Energy and Environment to change Washington's building codes to require net-zero-energy residences beginning in 2021.

The PSC said Washington Gas did not address those arguments, and the commission is hesitant to extend the pilot until parent company AltaGas Ltd. submits a plan to evolve the utility's business to align with the district's climate goals, a condition of AltaGas' acquisition of Washington Gas.

That business plan is due Jan. 1, 2020. AltaGas on Dec. 6 requested that PSC extend the deadline to March 16, 2020.