It’s not often that a major company asks the state to halt the growth of one of its largest lines of business. But that’s exactly what Puget Sound Energy is doing in the form of House Bill 1589, which would ban most extensions¹ of the company’s natural gas network as of June 30.
PSE², the state’s largest gas company with nearly 840,000 customers, faces a variety of state mandates to decarbonize its energy mix, including the Clean Energy Transformation Act — mandating a greener power supply — and the Climate Commitment Act, which established a cap-and-trade system for major carbon emitters.
Meanwhile, the state and some local governments have been tweaking building codes to ban the use of gas furnaces and water heaters in favor of heat pumps in new construction. There are also pushes from local, state, and federal governments to replace existing gas-fired appliances with electrical alternatives. All that limits the number of potential future gas customers.
However, PSE is also the state’s largest supplier of electricity, with 1.1 million customers on that side of its business. So it’s looking to come out a net winner as folks shift their energy use from fossil fuels to clean electricity. For example, it figures to take a boatload of customers from oil companies as drivers switch to electric vehicles.
The problem is how to pay for the cost of the transition, including the cost of the existing gas infrastructure, which is currently baked into natural gas rates. Under the current system, that cost could fall heavily on a shrinking base of gas ratepayers in the form of escalating rates. Meanwhile, the shift away from gas envisions a much larger supply of electricity that does not currently exist. Power plants, green or otherwise, are very, very expensive.
This gets us to the parts of the bill, sponsored by House Environment & Energy Chair Beth Doglio, that would actually benefit PSE: Gas and electric rates would eventually get rolled into one rate, spreading the cost across the company’s customers. New mandates for the company to own more of its own generation and how much it should pay others for power would also benefit the company.
Exactly how those costs get passed on to the ratepayers figures to be the real sticking point. PSE says something close to 40 percent of its customers are already “energy-burdened” meaning they struggle to pay the bills. Protecting those folks from big spikes raises some interesting questions.
For example, PSE gas customers in Seattle, Tacoma, and Snohomish County get their electricity from Seattle City Light, Tacoma Power, and the Snohomish Public Utilities District. As they electrify, who gets their share of PSE’s gas infrastructure costs? Conversely, here at my office on the edge of Vashon Island, we get electricity from PSE but not gas, a situation³ we share with a big swath of rural King County and all of Whatcom, Skagit, Island, and Kitsap counties. Do we get to assume the legacy costs of a system that never reached us?
The bill has enthusiastic support from major labor unions, who see decarbonization as decades of work for electricians and other trades. Independent power producers, which currently make money supplying PSE with electricity, are at a hard “no” on the company owning more of its own generation. Although the bill’s carefully written to apply only to PSE, other gas companies and Spokane-based Avista, which provides both gas and electricity east of the Cascades, are looking askance.
PSE is among the biggest and most free-spending bipartisan players in Washington politics, both in terms of campaign money and lobbying spending. A bill of this sweep and complexity is a heavy lift. The bill cleared Environment & Energy on a party-line vote last Monday. Its Senate companion, Senate Bill 5562, cleared the Environment, Energy & Technology Committee on Tuesday.
Footnotes:
1. Pending applications as of that date would still be honored.
2. PSE was a sponsor of the Observer’s Re-Wire Policy Conference in December.
3. While Vashon is marked as “combined” on PSE’s service map, large chunks of the island have no gas infrastructure, presumably because not enough people wanted to pay for it.
This article first appeared on the author’s website, The Washington Observer.
Excellent story and info. Thanks.