The path for gas utility decarbonization in Washington state 

The transition from gas to electricity is well underway in Washington state in response to both climate change and bold state policies designed to address it. State climate policies set progressive targets, like the Clean Energy Transformation Act requiring 80% of electric utilities’ resources to be clean (renewable or non-emitting) by 2030 and 100% clean by 2045. And, the Climate Commitment Act, which utilizes an emissions trading market to reduce economy-wide emissions, including from gas utilities, to 45 percent below 1990 levels by 2030, 70% below 1990 levels by 2040, and 95% below 1990 levels by 2050. But the exact path to get there is left up to regulators and utilities. 

This implementation phase is critical to making these state climate policies a reality. The Washington legislature took the next step to providing a pathway for fossil gas utilities to begin to decarbonize. The Gas Utility Decarbonization policy, HB 1589, passed this year and supports the state’s largest electric and gas utility in planning the decarbonization of its gas system and establishes the programs and regulatory tools that will enable a managed transition of the gas system as customers choose to electrify their homes and businesses.  

What does the Gas Utility Decarbonization policy do? 

For example, typically gas and electric utilities like Puget Sound Energy (PSE) submit separate plans for their gas and electric businesses to the Washington Utilities and Transportation Commission (UTC). This law directs the UTC to consider PSE’s proposed electric and gas plans as an integrated whole, to inform decisions that support reliable, affordable and decarbonized energy at the lowest reasonable cost to customers. 

Additionally, the law provides a process for PSE to obtain regulatory approval of new clean energy projects, essential to replacing gas in its system. The purpose of this new process is to allow for more certainty for the company and customers about which new clean energy resources will be built during a new phase of building and procurement of resources to meet state clean energy goals. 

The law also allows for the accelerated depreciation of PSE’s gas system, which ensures its gas assets are fully depreciated by 2050. Some advocates have raised concerns about the rate impacts on low-income customers, and the law’s failure to address the utility’s “obligation to serve” customers with gas. However, the language gives the UTC ample discretion to adjust the depreciation schedules to address affordability and require a reduction in PSE’s rate base. Ultimately, we believe that setting gas utilities on a path to fully depreciate gas infrastructure is a necessary step to fully transition to a decarbonized energy system. 

Importantly, the law also strengthens requirements for PSE’s energy efficiency, demand response, and targeted electrification programs, including more stringent planning standards, and new incentives and rebates for low-income customers to transition from gas to electricity. While this law only applies to PSE, we are hopeful that its implementation will provide valuable lessons learned that can inform a comprehensive policy for all gas utilities in the future. 

A managed transition is the lowest-cost approach 

As PSE notes in its factsheet on the law, this transition is already happening with gas demand declining 7% and 3% for its residential and commercial customers in 2023, respectively. With this trend expected to continue in the coming years, now is the time to plan accordingly to support this transformation. 

The transition from gas to electricity won’t happen overnight, but it will happen. It is up to advocates, policymakers, and regulators to work with utilities and shape when and how it will unfold. Research from Synapse and Climate Solutions used modeling to compare various cost scenarios of starting a managed transition in 2025, 2030, 2035, versus an unmanaged transition. As you can see in the figure below, a managed transition now is most effective at keeping costs affordable and reducing the risks of stranded assets for utilities. 

Residential Average Gas Bills in Four Scenarios through 2065 

Misinformation is fueling pushback from critics 

This report helps to counter some pervasive misinformation about the law. Some of the Gas Utility Decarbonization policy’s detractors have filed ballot measures to not only repeal the law, but to make it harder for gas utilities to reduce gas service. Critics falsely claim that the law will ban gas, and require current gas customers to switch out their appliances.  

NWEC has joined Climate Solutions and Washington Conservation Action in challenging several approved ballot titles to ensure that the information provided to voters is clear and accurate. If the proponents are successful in qualifying for the November general election ballot, voters will be faced with a choice: retaining meaningful policies that allow for a timely, managed transition of the gas system, coupled with supportive electrification programs; or saddling customers with the risks of costly stranded assets. 

It’s worth noting that PSE itself supported this law, asking for the regulatory and planning tools to make a sensible transition. Notably this law could have gone further to amend PSE’s “obligation to serve” to allow the company to decline to provide gas service when it is not economical to continue to invest in the gas system. While the “obligation to serve” was left intact in the final policy, we believe that this law remains a positive step towards the strategic planning needed to successfully switch from gas to electricity. 

At the end of the day, the UTC has an essential role to play in implementation – reviewing PSE’s plans to protect customer’s interests and ensuring progress towards PSE’s winding down of its gas business. The writing is on the wall, and it’s imperative to support planning for gas utility decarbonization to achieve Washington state’s climate goals.