The California Public Utilities Commission (CPUC) issued an order Thursday to overhaul rules governing the operation and planning of natural gas pipeline systems, citing the state’s impending transition away from the fossil fuel, as well as operational issues, constraints, and safety-related incidents that have occurred in recent years.
The Order Instituting Rulemaking (OIR) responds “to past and prospective events that together will require changes to certain policies, processes, and rules that govern the natural gas utilities in California,” CPUC said. “Over the next 25 years, state and municipal laws concerning greenhouse gas emissions will result in the replacement of gas-fueled technologies and, in turn, reduce the demand for natural gas.”
The OIR follows the approval by San Francisco officials of an ordinance banning natural gas in new construction and renovations of municipal buildings, and the approval by the California Energy Commission of measures against gas in new buildings in five cities and one county.
CPUC said Thursday that, “in order to ensure safe and reliable natural gas service at just and reasonable rates in California, the commission will:
- develop and adopt updated reliability standards that reflect the current and prospective operational challenges to gas system operators;
- determine the regulatory changes necessary to improve the coordination between gas utilities and gas-fired electric generators; and
- implement a long-term planning strategy to manage the state’s transition away from natural gas-fueled technologies to meet California’s decarbonization goals.”
The rulemaking will be conducted in three phases, CPUC said, with a decision issued following each phase.
The first phase, Track 1A, “will examine reliability standards for the gas transmission systems to determine, among other things, whether design changes are necessary to account for a warming climate, and the service capacity of current and future gas system infrastructure,” CPUC said.
“Track 1B will examine proposals for mitigating the negative impact that operational issues with gas transmission systems have on wholesale and local gas market prices, and gas system and electric grid reliability.”
Finally, CPUC said, “Track 2 will determine the regulatory solutions and planning strategy that the commission should implement to ensure that, as the demand for natural gas declines, gas utilities maintain safe and reliable gas systems at just and reasonable rates, and with minimal or no stranded costs.”
CPUC said that compliance with renewable portfolio standards by electricity distributors will cause natural gas demand to decline over the next 25 years.
“As retail sellers procure less electricity from gas-fired generators, which comprise approximately 30% of the demand for natural gas in California, the gas throughput assigned to these customers will also decline, thereby allocating more costs to remaining customers, such as residential, small commercial, and industrial ratepayers,” CPUC said.
The CPUC order comes amid a national debate surrounding the role of natural gas in the transition toward a low-carbon energy sector.
Past safety-related incidents that influenced the OIR include the 2010 rupture of a Pacific Gas and Electric Co. pipeline in San Bruno that caused eight fatalities, and a 2015 leak at Southern California Gas Co.’s Aliso Canyon natural gas storage field that released an estimated 120,000 metric tons of methane into the atmosphere.