Spending billions fixing gas system makes no sense
Lawmakers shouldn't allow utilities to retool to carry new fuels
TO HAVE ANY CHANCE of averting climate catastrophe, the latest climate science is definitive that we must actively decommission much of our existing fossil fuel infrastructure. Flying in the face of this dire warning, Massachusetts is on course to spend roughly $40 billion recommissioning its gas distribution system. How is this possible?
In 2014, at a time of heightened concern about the threat of explosions from gas leaks and the need to reduce fugitive gas, the Legislature enacted the Gas System Enhancement Plan (GSEP) to encourage the Commonwealth’s six investor-owned gas companies to replace their aging pipes more quickly in exchange for speedier cost recovery paid for by ratepayers.
Since then, GSEP’s original purpose has quietly morphed. Gas companies are now using the plan as an accelerated investment vehicle for making their gas distribution systems biomethane- and hydrogen-ready. With the cooperation of the Department of Public Utilities, their regulator, they are reinvigorating over 90 percent of their asset base and tying it to a nearly 10 percent rate of return through the end of the century.
GSEP’s new purpose is unabashedly acknowledged in gas industry-supported research. The Associated Industries of Massachusetts recently funded a UMass-Lowell study supporting the development of hydrogen in the Commonwealth, including piping and burning it to heat buildings—a false solution for our climate, safety, and public health. The report suggests that “the GSEP timeline could be accelerated” to expedite the introduction of hydrogen since 4,000 miles of mains await GSEP replacement with hydrogen-compatible plastic pipe.
Is there any hope for a full vetting of the GSEP program? Not according to the DPU. In late March, DPU rejected Attorney General Maura Healey’s call to convene a working group to examine GSEP closely and also excluded interested parties from future discovery, including the attorney general’s office and community stakeholders. All indications are that the DPU is fast-tracking the gas companies’ regulatory requests, presumably to lock in decisions before the upcoming change in administration.
Pay attention because these requests would enable the gas companies to procure biomethane and hydrogen, even if they cost more than natural gas, and to impose new ratepayer tariffs to fund each company’s “decarbonization” activities. These proposals presume that alternative gases are fossil free, zero emitting, compatible with existing infrastructure, and present no health or safety hazards. Wishful thinking at best. Robust scientific evidence is clear that these gases are not affordable, clean, safe, or healthy when piped into homes and businesses.
GSEP’s opportunity costs must not be buried by the Future of Gas Investigation and ignored by DPU. What do those costs look like?
Despite stakeholder requests, the investigation has not provided a total cost for GSEP even though these costs are clearly embedded in the consultants’ modeling. However, a report appendix does show annual GSEP investment forecasts through the program’s termination in 2039.
Let’s do the math. Assuming DPU’s approved rate of return on pipeline assets (currently averaging 9.65 percent) and the 60-year asset life for plastic pipes claimed by the gas companies, then the Investigation’s annual forecasts indicate total GSEP costs of $40 billion (in constant 2019 dollars). Yes, that’s $40 billion with a B. This staggering cost translates into roughly $23,500 per gas customer—enough to install a cold climate heat pump or solar panels and weatherize the building shell of the customer’s residence or business.
The Senate just passed its climate omnibus amendment S.2819, thankfully including provisions mandating a GSEP stakeholder working group and an adjudicatory process for the DPU’s review of the gas companies’ “Net Zero Enablement Plans.” The spotlight now shifts to the House where legislators have a critical opportunity to guide our gas system transition, aligning it with our climate mandates and reigning in a runaway GSEP program.
Legislators should take three crucial steps this session.
Second, prohibit the use of alternative gases, such as hydrogen and biomethane, for heating residences and businesses. The DPU should not be permitted to greenlight the gas companies’ ill-conceived plans for these gases as they do not meet reasonable standards for safety, health, emissions, and cost.
Third, provide incentives for utility companies to invest in networked ground source heat pumps. We need to shift the substantial financial benefits of GSEP (including asset depreciation past 2050 and cost recovery on an annual basis) from gas pipe replacement to the installation of renewable, non-emitting thermal infrastructure such as GeoGrid water pipes that can heat and cool our buildings.
By correcting the gas companies’ investment calculus, these three legislative actions will lead to a smart, strategic deceleration of investments in fossil fuel infrastructure while opening the door for gas companies to evolve their business models toward non-emitting, renewable thermal energy.Following these three fixes, important work will still remain. The glaring disconnect between GSEP’s original purpose and its runaway reality must be addressed. To ensure that large investments of ratepayer money actually move us toward our climate goals, the Legislature should replace GSEP with a tailored “gas system transition program” focused on promoting safety, reducing emissions, and using resources wisely during the energy transition.
Dorie Seavey is a climate economist and author.