Is It Time for an Essential California Energy Code to Get a Climate Edit?

Reducing gas use in buildings is tricky for lots of reasons. One of them is a California public utility code that you’ve probably never given much thought to. It’s referred to as the “obligation to serve.”

California requires that its public utilities provide service — whether that’s gas or electricity — to every customer who wants it at rates regulated by the California Public Utilities Commission.

The crux of the code is only a few words: “Every public utility shall furnish and maintain such adequate, efficient, just, and reasonable service.”

But it’s important because even if you live far from other homes, in a high-wildfire-risk area, for example, utilities must serve you, despite how much it will cost them. In turn, the state grants utilities a monopoly in a specific region.

But as the state races to cut greenhouse gas emissions from homes and commercial buildings, this code — born of good intention — has become a roadblock.

For the simple reason of the holdout, if nearly an entire neighborhood wants to go electric and swap their gas appliances for equivalent electric ones, but one person does not, utilities will maintain the entire gas line for this community.

That’s because utilities worry courts will interpret the obligation to serve to mean that they must offer both gas and electricity.

Stanford legal scholars wrote, “Precedent in California has not precisely outlined whether and how utilities can substitute electricity service for natural gas service.”

“[The obligation to serve] is a major impediment to electrification, or at least trying to do it in an orderly way that avoids unneeded new investments in gas pipelines,” Matt Vespa, senior attorney at Earthjustice, told KQED in an email.

How do we address this challenge?

“The legislature probably needs to pass a law to clarify it,” said lawyer Michael Wara, Director of the Climate and Energy Policy Program at Stanford, “to create the kind of certainty that you’re going to need for companies to be okay abandoning [gas] infrastructure in the way that they’re going to have to.”

For the past two years, Senator Dave Min (D-Irvine) has introduced legislation to do just that. The bill he introduced last year started broadly but narrowed its scope as it went through the legislature and ultimately died.

This year’s newly introduced bill, in its current form, would add a specific line to the state’s public utility code saying that a gas corporation could “cease providing service if adequate substitute energy service is reasonably available” that would support the end use the customer wants, like heating or cooling their home or cooking.

“It phases out some of the regulatory obstacles of switching to all-electric,” Min said.

“This basically allows us to start shifting over,” Min said. “It allows utilities, when reasonable, to phase out natural gas provision and switch over to all-electric when that makes economic sense when most of the residents want that. But it addresses the holdout problem.”

The background

California homes and buildings are typically powered in two ways: by electricity and gas.

But those systems are increasingly duplicative. Electric heat pumps can replace gas-powered space and water heaters. Electric clothes dryers can do the job of gas-powered ones. And electric and induction stoves, though wrapped up in the whirlwind of a culture war, are an alternative to their gas counterparts.

A quarter of California’s carbon emissions come from homes, businesses and the energy used to power them.

As the state moves towards its goal of carbon neutrality by 2045, researchers and advocates are advising policymakers, regulators and utilities to facilitate significant reductions in the use of gas to power buildings.

A haphazard approach to electrification will lead to higher gas bills… mostly for low-income people

Building electrification is mostly happening disjointedly right now. It’s based on the desires and finances of building owners. There have been a few projects where communities have tried to ditch gas altogether, but these efforts are nascent.

As more people electrify, fewer people use the gas system, which operates at a high, fixed cost that consumers pay. A high cost spread across fewer people means more enormous bills, largely for low-income people who rent or cannot afford to electrify their homes.

One approach to managing costs for ratepayers on the gas system is to strategically retire gas lines.

“If every other home in California is electrified, you would still have to have the same size gas system,” said Mike Florio, former CPUC Commissioner and current energy consultant.

“But if you can electrify an entire neighborhood or community, then those pipes can be retired and you shrink the system and lower the cost of the system,” he said.

Each year, hundreds of miles of gas pipelines must be replaced for safety. And in some cases, it would be cheaper for the utility to pay the full cost of electrifying homes along that line rather than spend millions to replace it.

Sound like something that will never happen? PG&E has quietly executed more than a hundred of these projects since 2018. The idea is called “targeted electrification” and has been mostly limited to a small number of homes or businesses in rural locations at the end of long gas lines in need of repair. In most cases, it is cheaper for PG&E, and therefore their ratepayers, if the company pays to fully electrify customers on these lines and retire rather than replace them.