California utility regulators moved this month to prepare for the state’s transition away from natural gas.
The California Public Utilities Commission passed new rules that require utilities to seek approval for individual natural gas projects that are worth more than $75 million or that have significant impacts on air quality.
The extra scrutiny allows regulators to invest in necessary projects with a long lifespan, instead of upgrades that could be obsolete in a few years.
CPUC Commissioner Cliff Rechtschaffen said the change gives regulators the chance to consider, on a project by project basis, if the spending is needed as California moves away from natural gas.
“We want to make sure that as we transition, we’re only investing in new gas projects that are critical for safety or reliability and we’re not throwing good money after bad,” Rechtschaffen said. “We’re not investing in new projects that could shortly become stranded assets that ratepayers are saddled with.”
Before the rule change, natural gas projects were primarily approved or rejected as part of a utility’s general rate increase request.
Those rate requests are sweeping documents that cover all the upgrades a utility expects to make and the rates that pay for those upgrade costs.
“We don’t want to spend money on assets that you might want to have, or it might be nice to have, when down the road they’ll be stranded, there won’t be any need for them,” Rechtschaffen said.
In the past many large natural gas projects did not get the individual attention regulators are now asking for.
“For significant new gas infrastructure projects, either ones that are above a certain monetary threshold or that have certain environmental triggers, utilities have to come to the CPUC and seek individual approval and go through environmental review before the projects can go forward,” Rechtschaffen said.
Utilities will have to demonstrate the need for the projects and justify the impact on rates in order to get approval.
Emergency projects would be exempt.
