SB5562 – Requiring steps to transition off natural gas.
Prime Sponsor – Senator Nguyen (D; 34th District; White Center) (Co-sponsor Lovelett – D)
Current status – Had a hearing in the Senate Committee on Environment, Energy & Technology February 1st. Replaced by a substitute to match the changes made in the companion bill by the House and passed out of committee February 14th. Referred to Ways and Means and had a hearing there on February 20th. Still in committee at fiscal cutoff. Reintroduced in Ways & Means for the 2024 session.
Next step would be – Scheduling a hearing.
Legislative tracking page for the bill.
HB1589 is a companion bill in the House.

Substitute –
The changes made in the substitute to match the House’s changes are summarized by staff in a couple of pages at the beginning of it. They include raising the threshold at which projects require labor standards from $1 million to $10 million, and requiring PSE to meet at least 2% of its annual load with conservation and energy efficiency resources, and to achieve “annual demand response” of at least 10% of its peak summer and winter loads, unless the UTC finds that higher percentages would be cost-effective.

Summary –
The bill would prohibit large gas companies serving more than 500,000 customers from providing gas service to new residential and commercial customers after June 30th 2023. (I’m pretty certain that Puget Sound Energy is currently the only company with this many customers.)

Every four years, the bill would require a large gas company to include a gas decarbonization plan for reducing its proportional share of the State’s greenhouse emissions reduction targets as part of its multiyear rate hearings with the Utilities and Transportation Commission. The plan would have to include programs to advance gas decarbonization measures for customers. It would have to prioritize investments that benefited low-income customers, vulnerable populations, and highly impacted communities; programs targeted to them; and outreach plans for engaging with them in every phase of the plan, including through incentives offered to multifamily buildings occupied in full or in part by low-income households. It would be required to include a portfolio of resources using alternative energy to the maximum practicable extent. It would have to meet a cost target which would be 2.5% of its approved revenue for each year of the plan. (It might include leak reductions approved by the commission if they demonstrated emissions reductions, whether or not those would produce the reduction targets in the plan.)

A plan would have to quantify the projected cumulative emissions reductions for each reduction period resulting from each portfolio presented; propose budgets resulting from each of those; quantify the cost of implementing each of them; project the annual emissions reductions that would result if each of them were extended through 2050; and describe the effects of the actions and investments in each one on the safety, reliability, and resilience of the company’s service. A plan would identify potential changes to depreciation schedules or other actions to align the large gas company’s cost recovery with statewide policy goals, including reducing greenhouse emissions, minimizing costs, and minimizing risks to the company and its customers. It would explain the company’s analysis of the costs and benefits of an array of alternatives, including the costs of emissions used in the calculations; describe the monitoring and verification methodology to be used in reporting; and include any other information the UTC required.

Starting in 2026, a combination utility providing both electric service to some customers as well as gas service to over 500,000 customers (ie. PSE) would have to file an electrification plan along with the gas decarbonization plan. It might include demand-side management strategies or transportation electrification plans, but it would have to include programs to advance electrification for customers, programs targeted to low-income customers, vulnerable populations, and highly impacted communities; and outreach plans for engaging with them in every phase of the plan, including through incentives offered to multifamily buildings occupied in full or in part by low-income households. It would have to include budgets; targeted numbers of installations; projected fuel savings; projected cost-effectiveness calculations, including the costs of greenhouse gas emissions and projected reductions in those; and other information deemed relevant by the UTC. It would have to meet the same cost target as the gas decarbonization plan would. It would have to provide documentation and data to show the plan was consistent with maintaining the reliability of the grid; and incentives to facilitate electrification, which might include programs for both new and existing buildings. (Products eligible for incentives would have to be Energy Star certified, if certification for that type of appliance existed.)

The bill would require these companies (ie. PSE) to calculate their reporting to the State about emissions from gas by including methane leaked from its transportation and delivery in distribution and service pipelines from the city gate to customer end use; emissions resulting from the combustion of gas by customers not otherwise subject to federal greenhouse gas emissions reporting (and excluding all transport customers); and emissions of methane resulting from leakage in the delivery of gas to other gas companies. They’d have to show their emissions baseline and projected cumulative emissions for the applicable emissions reduction period separately, and would have to show that the total reductions were projected to make progress toward achieving the reduction targets identified in the applicable decarbonization plan.

The UTC might approve, modify, or reject a proposed plan. It would take into account whether a gas decarbonization or electrification plan achieved reductions for each emissions reduction period; whether a plan demonstrated progress toward meeting its targets through maximizing the use of alternative energy resources; whether its investments prioritized serving low-income customers, vulnerable populations, and highly impacted communities; whether it resulted in a reasonable cost to customers; and whether it maintained system reliability. The commission would have to require a large gas company to achieve the maximum level of greenhouse gas emissions reductions practicable using alternative energy resources at or below the applicable cost target. (It might approve, or amend and approve, a gas or electric plan with greater costs if it found that the plan was in the public interest, costs to customers were reasonable, it included mitigation of rate increases for low-income customers, and its benefits including consideration of the costs of greenhouse gas emissions exceeded its costs.

Any combination utility with an electrification plan approved by the Commission would be required to get 40% of the total capacity and energy it needed to meet the requirements of the Clean Energy Transformation Act (aka the cap and invest bill) through power purchase agreements through which it bought energy, capacity, and environmental attributes from “resources” owned and operated by entities that were not affiliated with the utility, and that gave the utility rights to dispatch, operate, and control the resources in the same ways as the utility’s managing its own. [I think this subsection is supposed to read “renewable resources.] (The rest of the needed capacity and energy would have to come from resources owned and operated by the combination utility or an affiliate. Once the UTC approved a power purchase agreement included in an approved electrification plan, the utility would be allowed to set its rates to recover the operating expense of the purchases of “renewable resources” under the agreement as well as earning a return on those expenses at a rate no less than the authorized cost of its debt and no greater than its authorized rate of return.

The bill would require the UTC to start adopting depreciation schedules for any gas plant a combination utility had in service as part of considering a multiyear rate plan filed by a combination utility. The incremental depreciation for each year of the plan would be 1% of the utility’s gas revenue requirement for the preceding year. If the utility’s rate base for gas operations was less than or equal to 20% of the rate base for its electrical operations, and the utility chose to request the change, the Commission would merge the rate bases supporting gas and electric service in the next multiyear plan and adopt rates supporting recovery of the merged rate base. [I think this last provision means that if PSE’s gas business got small enough it could spread the costs of maintaining the gas system’s infrastructure over all its customers, not just the ones who were still using gas, and including the customers for electricity in the areas where it’s never sold gas.]

The bill would require a large gas company, with over 500,000 customers, to include community workforce agreements or project labor agreements, the payment of area prevailing wages, and apprenticeship utilization requirements in contracts with competitive bidding for projects costing over $1 million. It would encourage any entities providing retail electric service in the state to work with a large gas company providing service within their areas to identify opportunities for electrification and the provision of energy peaking service by the large gas company; to account for the costs of greenhouse gas emissions, set total energy savings and greenhouse gas emissions reduction goals; develop and implement electrification programs in collaboration with large gas companies providing service in their area; and to include an electrification plan or transportation electrification program as part of a clean energy plan.