Massachusetts Reshapes Natural Gas Distribution Companies

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About a year ago, the Massachusetts Department of Public Utilities or DPU initiated an investigation (DPU 20-80) to examine the appropriate role of gas SDLs in achieving the Commonwealth’s 2050 climate goals. The proceeding aimed to identify and assess strategies for moving to net zero GHGs while protecting the interests of ratepayers. The possibility of “recasting” the role of LDCs was one of the main concerns.

Consultants have been retained by LDS and an extensive stakeholder process has been completed. An important step in the process was to identify and then assess the merits of what turned out to be eight “paths” that each reflected the changing roles of LDCs. A two-volume report – Independent Consultant Report Vol. I and Vol. II – has been released in draft form, is being finalized and will eventually be reviewed by the DPU. It is clear that the role of LDCs will change considerably. These ‘paths’ reflected various ranges of ‘electrification’ and different roles for LDCs (including with the use of renewable natural gas or even grid geothermal systems).

A number of factors were taken into account in the pathway analysis, such as the high incremental costs of converting existing building stock, the performance of air-source heat pumps in cold weather, the need for substantial upgrades to the electricity distribution system, the need for clean facilities, renewable energy sources, the challenges associated with installing geothermal systems on already congested streets, the cost and availability of renewable fuels and, finally, the cost or rate implications of customer migration.

While the “paths” are very different, there were several “commonalities” for all. The following steps or actions are likely to have substantial support in the short term because the underlying policy was “common” to all pathways:

  • Increase energy efficiency through building envelope retrofits and energy-efficient equipment, especially for all-electric buildings or buildings using large amounts of decarbonized fuels.

  • Electrification of buildings where possible, including new all-electric residential construction and hybrid electrification for some existing buildings.

  • Increase the use of RNG from waste sources, including landfill gas, with most scenarios using a 5-10% blend in the LDC distribution system by 2030.

Given these analyzes and ‘commonalities’ findings, there will be a number of actions taken by the DPU, other energy-related agencies in the Commonwealth and possibly also the Legislature. The report lists six main areas of focus in terms of DPU “regulation”, the first three of which relate to opportunities for a range of suppliers and service providers:

  • Increase the scope and funding of energy efficiency programs and examine the interrelationship between electricity and gas programs and policies.

  • Advancing the use of RNG, for example, by updating SDL forecasting and supply plan standards to require a percentage of RNG in the supply mix or offering customers the option to purchase GNR from SDL (such as a “greener” power supply); alternatively, giving customers the option to purchase RNG directly from third-party vendors.

  • Develop and advance “pilot” programs for “innovative” technologies and R&D; Adopt cost recovery and tracking methodologies.

  • Manage LDC costs and investments to reflect changing conditions; for example, pre-approved capital investment plans.

  • Manage customer affordability issues, including managing transition costs, EJ and stranded costs.

  • Establish, review and pre-approve LDS transition plans; establish planning, investment and cost recovery structures that reflect the plan ahead.

A number of businesses and organizations should consider participating in future proceedings and developing policies or changing their business practices in light of likely policy directions. Suppliers and sellers of energy efficiency equipment or renewable fuels and fuel-related equipment may find greater opportunities. Large institutional customers may seek to act individually or collectively to obtain RNG or geothermal opportunities and ensure that they obtain appropriate tariff treatment. Property developers and owners need to be alert to policy changes and funding opportunities for new heating or energy efficiency infrastructure.

©2022 Pierce Atwood LLP. All rights reserved.National Law Review, Volume XII, Number 63

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