We’re still expanding the natural gas system — and there’s a good chance you’re paying for it

This guest essay is by Mike Henchen and Sherri Billimoria of the Carbon-Free Buildings team at RMI. Canary Media is an independent affiliate of RMI.

The natural-gas delivery system is growing across the United States, and gas utilities are adding new customers at a rapid pace — more than one every minute — despite the fact that natural-gas use needs to be slashed dramatically to maintain a livable climate.

There’s a good chance that you’re one of the gas customers subsidizing this expansion to the tune of hundreds of millions of dollars per year. This has to stop.

Today, about 8 trillion cubic feet of natural gas is piped through America’s distribution system to homes and businesses each year, resulting in more than 400 million tons of carbon dioxide emissions. Spending on this system has risen sharply, tripling in the last eight years to more than $21 billion annually, as utilities both expand the system and scramble to replace old pipes across the country. 

We need to start cutting gas use and shrinking this system right away, constructing new all-electric buildings without gas hookups and retrofitting old buildings so they no longer run on gas.

But new buildings continue to be connected to the gas system — and thanks to long-standing policies known as gas line-extension allowances, utilities can pass connection costs on to existing customers. Line-extension allowances are intended to make it easier to access gas, based on the assumption that gas is an essential service. The cost is rationalized on the expectation that a new customer will use gas and pay gas bills in perpetuity — an expectation that is now thoroughly out of date.

These policies incentivize builders to install gas systems in new homes and buildings — exactly what we don’t want. Without the allowances, more builders would find it favorable to build without gas.

Line-extension allowances are no longer justified. The climate crisis demands a rapid cut in fossil fuel use, and these policies both encourage expanded gas use and add to the cost burden of fossil fuel systems. We have the clean replacements we need, such as high-efficiency electric heat pumps.

Building out gas infrastructure isn’t just a climate hazard; it’s a financial hazard. The utility industry is spending billions of dollars on new infrastructure that isn’t needed but will still have to be paid off in the decades to come. As electrification becomes more popular and cost-effective, more customers will leave the gas system, and maintaining that system will then require even higher rates for the remaining customers who aren’t able or can’t afford to electrify. The easiest first step in addressing this challenge is to stop expanding the gas system.

While some assert that this infrastructure will be needed for alternative fuels, such as biogas or hydrogen, supply of these fuels is far too limited to meet existing customers’ gas demand, let alone the demand of the 600,000 new customers joining the gas system in the U.S. each year. Due to their limited supply and high cost, alternative fuels will have only narrow applications in a decarbonized buildings sector; the current supply of alternative fuels meets less than 1% of national gas demand, and even under the rosiest scenarios that only reaches 12%.

A handful of forward-looking states have begun to reexamine their line-extension policies given the significant climate and financial risk associated with maintaining them. Regulators in Washington state recently voted to significantly reduce the state’s gas line-extension allowances, with plans to revisit these policies more broadly in the coming year. And regulators in both California and Colorado have proposed ending these subsidies entirely. In California, commission staff noted that ending them ​“would send a strong signal to the builder community that future building projects should transition away from gas use, thus encouraging all-electric new construction” in line with state climate goals.

These are the first instances of policymakers recommending the elimination of line-extension allowances. Every state in the country should follow suit. Regulators need to rein in this spending while there’s still time to avert climate and financial disaster.