BOSTON — 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 over the next three decades, 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.
With Order 20-80, DPU aims to “guide the evolution of the natural gas distribution industry to clean energy” with an eye toward the state’s goal of getting to net-zero greenhouse gas emissions by 2050 while still protecting ratepayers and ensuring energy reliability. It is the culmination of a process that got underway in October 2020 and included input from dozens of “institutional and individual stakeholders.”
The policy aims to discourage gas system expansions by requiring gas distribution companies to evaluate whether there are non-gas alternatives — things like electrification, networked geothermal or targeted energy efficiency — available that would make additional gas infrastructure investment unnecessary. In order for a gas utility to receive full cost recovery for a gas system expansion, it will “bear the burden of demonstrating that [non-gas alternatives] were adequately considered and found to be non-viable or cost prohibitive,” DPU said in the order.
“It is fair to say that a different lens will be applied to gas infrastructure investments going forward. The Department will be examining more closely whether such additional investments are in the public interest, given the now-codified commitment toward achieving Commonwealth’s target of achieving net-zero GHG emissions by 2050 and the urgent need to address climate change,” 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.”
DPU is also going to require distribution companies to file Climate Compliance Plans every five years (starting in 2025) to outline their plans for transitioning to clean energy and to ensure their compliance with the state’s emissions limits, and the agency also will no longer allow gas distribution companies to recover costs for the promotion of natural gas use.
“As Massachusetts moves towards net zero emissions by 2050, the DPU must develop a regulatory structure for the gas sector befitting that requirement,” DPU Chair James Van Nostrand said. “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.
DPU said its Wednesday 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. But, the department said, that’s the direction Massachusetts needs to go if it is going to achieve its greenhouse gas reduction targets.
In general, the order that DPU issued Wednesday does not directly address affordability. 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. Given the urgency of addressing the climate crisis, however, 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,” DPU said in the order. “Rather, the Department will address these issues in a separate proceeding, to be commenced later this year, dedicated toward examining innovative solutions to address the energy burden and affordability, such as capping energy bills by percentage of income or offering varying levels of low-income discounts, that have been implemented in other jurisdictions.”
The department said it is 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.”
Last year, the final report from the Commission on Clean Heat recommended that Massachusetts develop and implement a “clean heat standard” that could incentivize cleaner heating technology and promote the electrification of building stock, encourage joint natural gas and electric system planning, and reorganize existing energy efficiency and clean energy transition programs to be more user-friendly for residents, businesses and contractors, among other proposals.
The residential and commercial building sector-specific sublimits established in keeping with the state’s 2021 climate law require 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.
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