Avista Gas Has Not Shown it Can Meet Climate Regulations

Posted on September 6, 2023 by Charlotte Shuff and John Garrett
Tags, Energy

Oregon is moving forward in reducing climate pollution from our energy systems. Utilities need clear plans to show how they will meet regulations without skyrocketing costs for customers. Avista has failed to meet both of these expectations. Avista is our state’s second-largest gas utility, serving central and eastern Oregon.

In late 2022, Avista filed its long-term resource plan with state utility regulators. This plan will have long-lasting impacts on meeting state climate goals. It will also have a major impact on future customer bills.

Utilities file these plans every two years. The plans look at projections of future energy use from customers. The utility does an analysis of the best available resources to meet those needs and the activities required to secure those resources. Creating these plans requires vast amounts of economic modeling and analysis.

Editor’s Note: This blog refers to “renewable natural gas,” a term used by utilities for methane gas that comes from sources other than fossil fuels. The term “renewable” is frequently criticized by environmental groups. Although renewable natural gas is not from fossil fuels, it is still methane, which is a powerful greenhouse gas.

CUB, Regulators, and Climate Organizations Share Concerns

The main question Avista needs to address in its plan is how it is going to meet state climate regulations. The Climate Protection Plan requires the utility to reduce emissions by 90% by 2050. CUB does not think Avista has answered this question at all.

Instead, Avista uses unrealistic assumptions to suggest it can continue to grow its system while slashing its carbon emissions. CUB is challenging Avista’s assumptions and argues growing its customer base without a reasonable plan will cause unfair, high costs for customers. (Read CUB’s full comments to the Public Utility Commission.)

CUB’s Concerns:

Avista has not shown how it can realistically meet climate regulations over the next 20 years
Avista is not minimizing costs in its plan to reduce emissions
Avista is unfairly prioritizing highly expensive new fuels and their profit over the best choices for customers
Avista is not fairly considering clean energy options like converting appliances from gas to electric and energy efficiency measures
Customers could face increasingly higher bills as a result of unreasonable and unfair planning

The staff of the Public Utility Commission also raised significant concerns about Avista’s plan. Commission Staff were skeptical of Avista’s new, low-emissions fuel modeling. They argued Avista underestimated costs and risks and assumed these new fuels would be available unrealistically soon. They were also critical of the way Avista modeled converting appliances from gas to electric. The way Avista modeled conversion undermines this option.

A coalition of climate and community-based organizations also took issue with Avista’s plan. These groups echoed CUB and regulator concerns. The coalition includes Climate Solutions, Green Energy Institute, and Sierra Club.

Avista Has Not Shown It Can Reasonably Meet Climate Regulations

CUB and Commission Staff were both critical of Avista’s long-term Climate Protection Program compliance plan. This mandatory program for Oregon gas utilities plans to cut emissions by 90% by 2050.

In their resource planning, Avista has failed to show a feasible plan for reducing emissions.

In their resource planning, Avista has failed to show a feasible plan for reducing emissions. It relies on new technology being developed for new fuels, such as synthetic methane, to reduce emissions. This technology currently does not exist or is not readily available. If these “magic bullets” aren’t developed remarkably fast, Avita’s service will become very expensive and may not meet the required emissions reductions.

Avista’s failure to plan for climate regulation is dangerous for customers. It proposes expensive fuels that are not available either widely or at all. It does not fairly consider options to move customers to high-efficiency electric appliances. And, most importantly, the plan could be incredibly costly for customers.

Avista is Not Minimizing Cost to Customers, Underestimating the Cost of Fuels

CUB’s biggest concern is that Avista’s analysis significantly underestimates the cost of their plan. Their plan relies heavily on renewable natural gas, which is much more expensive than traditional methane.

There are two options the company has for getting this fuel: buying it on the market and building facilities to produce it. Avista is planning on purchasing renewable natural gas on the market, which CUB believes is the better option at this time. However, buying on the market is still incredibly expensive and not widely available. CUB expects renewable natural gas to cost about eight times as much as fossil gas, or more.

CUB raised a similar issue in NW Natural’s resource planning earlier this year. Regulators at the Public Utility Commission ultimately agreed with CUB’s concerns in this case. The Commission rejected NW Natural’s long-term plan finding that the utility did not adequately assess cost and risk to customers. They also found that NW Natural did not provide an accurate analysis of the cost of renewable natural gas or other non-fossil gas options.

Avista’s analysis follows similar pitfalls and unrealistic assumptions. CUB is pushing the utility to provide justification for their price models. Without a reasonable plan, customers could end up paying disastrously high gas bills in the future.

Avista Must Expand Alternatives to Expensive Renewable Natural Gas

Avista greatly overestimates the potential of renewable natural gas and synthetic methane. The utility’s focus on these resources ignores less risky and potentially lower-cost options at the risk of customers.

Electrification, or conversion of gas appliances to high-efficiency electric appliances, was assessed by the Company, but not fairly. The Commission Staff found that the benefits of electrification were not modeled properly. CUB argued that the unrealistically low costs for renewable natural gas and synthetic methane undercut electrification.

Avista is also planning to use the emissions offset program allowed by the Climate Protection Program. These offsets, Community Climate Investments, are expected to be lower cost. These credits are purchased and will be passed on to fund projects in local communities. One example of a project would be installing highly efficient electric heat pumps (home heating/cooling) in low-income households. These projects are meant to save customers money while reducing emissions.

Avista’s Analysis Works Against Customers’ Interests

The process of creating these resource plans is long, complicated, and full of intensive analysis. Analysis methods, however, are not specifically laid out by regulators. This can give utilities an incentive to create analyses that benefit their interests. In their proposal, Avista presented a biased analysis that supports its corporate interests.

In their analysis, Avista laid out many different scenarios to look at their long-term resource needs. In selecting these scenarios, the utility selected options that helped support its end goal –- keeping customers tied to the gas system at any cost. Options it did not prefer, such as electrification, were underrepresented. As a result, the utility came up with an analysis that does not present the best option for customers. It presents the best option for keeping people connected to an increasingly expensive gas system.

Through their selective projections, the utility has been able to downplay the risk to customers. Avista’s analysis is not just risky, it’s dangerous. This could have massive impacts on customers, who will have to pay even higher costs when the utility is wrong.

CUB Continues to Push Back

Avista, CUB, other advocates, and Public Utility Commission analysts have several more months to weigh in on Avista’s plan. The Commission will make a decision in February 2024 based on all of the analyses presented.

This decision is important because anything approved can be more easily put into customers’ bills down the line. It’s worth noting that approval is not a guarantee that customers will pay for investments. Avista will still have to come back to regulators and argue why customers should have to cover costs down the line. When that happens, CUB will continue to advocate for customers’ best interests.

CUB is hopeful that regulators will uphold customers’ best interests. The Commission recently sided with CUB’s analysis of NW Natural’s resource plan that followed similar pitfalls to Avista’s. We will continue to push for strong consumer protections and affordable approaches to addressing climate change.

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