Massachusetts DPU Completes Investigation into Future Role of Commonwealth’s Gas Distribution Companies

After a three-year investigation and the receipt of substantial stakeholder input, the Massachusetts Department of Public Utilities (DPU or Department) recently issued an order (D.P.U. 20-80-B) to set forth the role that local gas distribution companies (LDCs) will play in achieving the state’s net-zero emissions target by 2050.

The DPU detailed the principles that will guide its decision making in the future and identified areas of further inquiry. In contemplating the clean energy transition, the DPU remained focused on safeguarding ratepayer interests, such as maintaining a safe, reliable, and affordable system.

In its investigation, the Department and LDCs retained consultants who reviewed eight “decarbonization pathways” that considered an array of potential ways in which the gas system could evolve over the upcoming decades to meet the Commonwealth’s greenhouse gas emissions targets.

The decarbonization pathways vary in nature and scope, ranging from completely decommissioning the gas system to pivoting the gas system toward the directed transportation of renewable gases to high efficiency gas appliances. As noted in the order, any one of the pathways could cost from $65-$121 billion (in 2020 dollars). Without indicating its preference among the eight options discussed, the DPU used the decarbonization pathways as a backdrop for creating a flexible regulatory framework that will allow for decarbonization moving forward.

The DPU noted that it and the LDCs can play integral roles in encouraging customers to use electrified and decarbonized heating technologies, such as expanding Mass Save energy efficiency programs that facilitate heat pump adoption. The Department rejected the suggestion that natural gas procurement policies ought to be changed to support renewable natural gas (RNG), finding too many uncertainties with respect to RNG’s costs, availability, and carbon intensity. On the other hand, the DPU viewed networked geothermal projects as those with the greatest potential to reduce greenhouse gas emissions in the heating section.

The Department also directed each LDC to file individual Climate Compliance Plans every five years, with the first such Plan due on or before April 1, 2025. To ensure that the LDCs make progress toward their respective plans, the DPU is also requiring them to propose performance metrics that promote a proactive approach to achieving climate targets.

Further, each LDC, in coordination with the applicable electrical distribution company, must also study the feasibility of piloting a targeted electrification project. The LDCs must file those pilot project proposals with the DPU by March 1, 2026 for inclusion in its 2030 Climate Compliance Plan.

The order also acknowledges that the LDCs have invested billions of dollars in existing natural gas infrastructure. To ensure that they can recover those investments while also strategically decommissioning the gas system and dissuading LDCs from future gas customer expansion, the DPU instructed the LDCs to revise their per-customer revenue decoupling mechanism to a decoupling approach based on total revenues.

The DPU recognized that, as more gas customers leave the gas system for alternatives, there likely will be a corresponding increase in rates for remaining customers. Therefore, the DPU supported identifying and quantifying the costs associated with decarbonization, and once quantified, evaluating the impacts on ratepayers.

Similarly, prior to approving any cost recovery for new investments in pipeline and distribution mains, the DPU will require the LDCs to demonstrate that they considered non-gas pipeline alternatives. Some of the alternatives discussed in the order include energy efficiency measures, demand response solutions, electrification, and networked geothermal systems. In future cost recovery cases, LDCs will bear the burden of demonstrating that the non-pipeline alternatives considered were found to be non-viable or cost prohibitive.

A meaningful step toward the Commonwealth’s clean energy future, this order will have lasting implications on LDCs, their customers, and Massachusetts stakeholders. For questions regarding the order or other energy-related matters, please contact Andrew Kaplan, Paul Connolly, James Avery, Randall Rich, Nicholas Salalayko, or any member of Pierce Atwood’s Energy Practice Group.