Advocacy Win: DPU Halts Gas Line Extension Subsidies, Saving Customers Millions

On August 8th, the Massachusetts Department of Public Utilities (DPU) issued Order 20-80-E, closing a decades-old loophole that forced everyday gas customers to subsidize new fossil fuel hookups, costing ratepayers $160 million in 2023 alone ($9,000 per customer). The average cost of adding new customers was rising, specifically, 50 percent between 2020-2021 and another 50 percent in 2022-2023. 

This order was the latest from DPU docket 20-80, the “Future of Gas” docket investigating the future role of natural gas in Massachusetts as the Commonwealth works to achieve its climate mandates and address energy affordability. So far, the DPU has issued a number of impressive orders in this docket that have begun to transform the role of natural gas in Massachusetts and finally curtail its expansion.

This victory is a good example of how coordinated advocacy, grounded in data analysis, can shape precedent-setting regulatory outcomes. In April of this year, Acadia Center and Rewiring America co-authored group coalition comments that were generally supportive of the draft gas line extension policy but also contained specific recommendations for how to make the policy stronger. For example, the draft policy mentioned exception criteria projects would need to meet to receive a line extension subsidy, including one criterion describing how the project must have “….no feasible alternatives to the use of natural gas, including electrification.” In our comments, we argued “feasibility” should be defined as “technical feasibility” (a subtle yet crucial distinction), and the DPU agreed with us in their final decision, limiting allowances to projects that could prove there was no technically feasible alternative to natural gas in their specific building. How do we know we helped shape the outcome? Our letter was cited 18 times throughout the DPU’s decision. 

The order in DPU 20-80-E is about “Practices for Line Extension Allowances and Contributions in Aid of Construction for Gas Local Distribution Companies.” Put simply, it essentially looks at who should pay the costs associated with expanding gas service into new areas. Because the cost of gas infrastructure is extremely expensive, these costs had previously been borne mostly by existing ratepayers, with the understanding that the addition of the customer would pay for itself in the long term. However, forward-looking projections show this would no longer be the case. 

In practice, prior to this most recent decision, existing gas customers paid a disproportionate share of the costs for bringing new gas customers online. Since 2018, existing gas customers have footed the bill for 80 percent of all new gas customer connections — and these subsidies have driven up gas bills for everyone. In terms of projected future costs, according to a recent earnings report from Eversource, the company projects that its gas distribution costs across New England will increase 83 percent between 2023 and 2029, faster than either its electric transmission or distribution subsidiaries. A separate analysis commissioned by the Massachusetts attorney general’s office corroborated that a potentially vast and rapid gas system build-out – and associated impacts to ratepayer bills – could occur without state intervention. According to the AG’s analysis, the path we’re currently on could see the state’s gas rate base – the total value of gas system assets on which utilities are allowed to earn a rate of return – jump from $10 to $20 billion in a short span of roughly 10 years. 

The old system served as a massive subsidy to natural gas service, and incentivized the expansion of natural gas infrastructure. Massachusetts’ climate plans call for reduced reliance on the natural gas distribution system in the coming years, meaning that the old system of spreading the cost of connecting new gas customers across all customers was directly at odds with our climate plans. Further, with the knowledge that the gas system needs to be wound down, the prior “business as usual” policy would have continued to incentivize gas infrastructure expansion that would end up as stranded costs that all gas customers would be on the hook to pay for far into the future.

While the gas utilities, also known as local distribution companies (LDCs), argued in the docket that existing practices are consistent with state policies, most comments came down on the other side. Thankfully, the DPU overwhelmingly sided with the latter. It ordered the discontinuing of line extension allowances, except in certain instances where alternatives to gas service were simply technically infeasible. Based on the language in the order, we expect proposals for new gas hookups that meet this exception criteria to be very few and far between – for example, potentially some niche industrial customers with no technically viable alternative electric- or propane-based equipment available on the market would meet this exception criteria. 

This decision is crucial because the Commonwealth is already facing concerns about energy affordability. Costs associated with the gas system have steadily been rising, and continuing to subsidize new gas hook-ups would have only worsened the situation. This is one more step in reshaping Massachusetts’ energy system, but the fight isn’t over, and other subsidies and misaligned incentives exist for gas infrastructure. 

Now that the much anticipated decision around line extension allowances has been resolved, attention among advocates will turn towards the Climate Compliance Plans — the five-year strategic documents that local gas distribution companies (LDCs) must submit under the Future of Gas docket, showing how they plan to meet greenhouse gas (GHG) sublimits, prioritize affordability and equity, and use pilot projects, among other requirements.