NW Natural Has Not Shown it Can Meet Climate Regulations
Posted on May 18, 2023 by Charlotte Shuff
Tags, Energy, General Interest
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. NW Natural has failed to meet both of these expectations.
In late 2022, NW Natural 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 major impacts 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 NW Natural 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 NW Natural has answered this question at all.
Instead, NW Natural uses completely unrealistic assumptions to suggest it can continue to grow its system while slashing its carbon emissions. CUB disagrees with this assumption because growing its customer base increases carbon emissions. (Read CUB’s full comments to the Public Utility Commission.)
CUB’s Concerns:
- NW Natural is not minimizing costs to customers
- Alternatives to expensive renewable natural gas must be considered
- The utility falls short on analysis that prioritizes customer impacts
- Meeting climate regulation is not fully addressed
- More needs to be done to minimize long-term risk impacts on customers
The staff of the Public Utility Commission also raised significant concerns about NW Natural’s plan. Commission Staff criticized the gas utility’s plans for expanding renewable natural gas because it is expensive for customers. They also noted NW Natural’s disregard for lower-cost options. And they criticized NW Natural for its refusal to examine electrification as an alternative to renewable natural gas.
A coalition of eight climate and community-based organizations also took issue with NW Natural’s plan. These groups echoed CUB and regulator concerns. Additionally, the groups opposed the gas utility’s proposal to expand the gas system in Forest Grove, OR.
NW Natural Has Not Shown it Can Meet Climate Regulations
CUB agrees with regulators that NW Natural has not shown how it can meet the requirements for the Climate Protection Program. This mandatory program for Oregon gas utilities plans to cut emissions by 90% by 2050.
In their resource planning, NW Natural has failed to show a feasible plan for reducing emissions.
In their resource planning, NW Natural has failed to show a feasible plan for reducing emissions. It relies on new technology being developed that reduces emissions. Technology that currently does not exist or is not readily available. This includes new appliances that use less gas and new forms of gas that are cheap, unlimited, and clean. If these “magic bullets” aren’t developed, it is unclear what actions they plan to take.
NW Natural’s failure to plan for climate regulation is dangerous for customers. The utility’s plan relies on analysis that is biased toward increasing profits. It’s proposing expensive investments that center on making more money for shareholders. And, most importantly, the plan could be incredibly costly for customers.
CUB’s Recommendation: Utility regulators should not approve NW Natural’s plan to comply with the Climate Protection Plan.
NW Natural is Not Minimizing Cost to Customers
CUB’s biggest concern is that NW Natural’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.
Buying renewable natural gas on the market is incredibly expensive and not widely available. In recent years, fossil gas has been $2 to $4 per unit. The current price in the market for renewable natural gas is between $20 and $25 per unit, according to regulators. Ultimately, this would greatly increase customers’ bills.
Building a new facility is also very costly. NW Natural says its recent Dakota City Project with Tyson Foods will cost $12.5 million. And it will only meet 0.14% of customer needs. To meet emissions reduction goals, the utility would have to build 71 similar projects. This doesn’t include the additional projects they’d need as they continue to add more customers. The capital costs alone from these projects will add about $100 million to rates in the first year alone. The impact on customers could be drastic.
CUB’s Recommendation: Utility regulators should require NW Natural to provide 10-year cost projections that show the true impact on customers.
NW Natural Must Find Alternatives to Expensive Renewable Natural Gas
NW Natural is all in on renewable natural gas. The utility’s focus on this resource ignores lower-cost options at the risk of customers. Community Climate Investments, an option to comply with the Clean Power Program, are known to be lower cost. But NW Natural prefers more expensive renewable gas.
Electrification is likely to be cheaper but was not analyzed as an option by the company. By favoring building new gas infrastructure, NW Natural is proposing options that benefit shareholders over customers.
When a utility builds new infrastructure, like a gas facility, it is allowed to make a profit off of the investment.
This profit incentive influences NW Natural’s proposal for heavily investing in renewable natural gas over other options for reducing emissions. Moving customer energy use from gas to electricity (electrification) is not profitable. Buying Community Climate Investments is not profitable and encourages electrification.
Gas utilities are allowed to invest in renewable natural gas, though. In 2019, the Oregon Legislature passed Senate Bill 98, which sets voluntary targets for renewable natural gas for utilities. However, NW Natural is looking to overshoot those targets. This will only continue to add costs to customers when less expensive options are available.
Further, NW Natural should have to show that renewable natural gas is part of a least-cost way to comply with climate regulations and meet customers’ energy needs. NW Natural has failed to do so.
CUB’s Recommendation: Utility regulators should reject NW Natural’s plan to acquire renewable natural gas.
NW Natural’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, NW Natural presented a biased analysis that supports its corporate interests.
In their analysis, NW Natural laid out nine different scenarios to look at their long-term resource needs. In selecting these scenarios, the utility selected options that helped support its end goal – generating profit for shareholders. Options it did not prefer, such as electrification, were underrepresented. As a result, the utility came out with an analysis that does not present the best option for customers. It presents the best option for shareholders.
A third-party consultant hired by the Public Utility Commission agreed. Synapse Energy Economics concluded, “This sampling bias reduces the credibility of the resulting resource outcomes.” In other words, NW Natural’s analysis is unreliable and self-serving.
“This sampling bias reduces the credibility of the resulting resource outcomes.” - Synapse Energy Economics
Through their selective projections, the utility has been able to downplay the risk to customers. NW Natural’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’s Recommendation: Utility regulators should reject NW Natural’s analysis and direct the utility to prioritize customer impacts in future resource planning.
NW Natural Must Limit Long-Term Consequences for Customers
Although NW Natural has not provided a reasonable or well-reasoned long-term plan, customers still need consistent gas service. CUB recognizes that some investments are needed to keep safe and reliable natural gas in peoples’ homes. However, we do not think customers should be on the hook for costs for decades without a clear path to meeting climate regulations.
Customers need safety and reliability now. But we also need the flexibility to respond to changing energy needs as we tackle climate change.
In its plan, the utility is requesting multiple investments such as storage centers and system improvements. Customers will be paying for these costs for 30-50 years if regulators approve them. CUB is recommending that regulators only support these investments as reasonable in the short term (5-10 years).
By keeping that timeframe short, it would be more difficult for NW Natural to charge customers for these investments decades down the line. If the investments still make sense in the long term, the utility might be able to add them to bills. If the upgrades turn out to be only short-term solutions, customers are protected from added costs.
CUB’s Recommendation: Utility regulators should only recognize investments as sensible for the next 5-10 years. For long-term investments, NW Natural should have to prove they are good for customers and meet climate regulations.
The Public Utility Commission Will Make a Decision on June 1
As of May 5, regulators have wrapped up the analysis and input part of the resource planning process. NW Natural, CUB and other advocates, and Public Utility Commission analysts have all weighed in.
On June 1, Commissioners will discuss the plans and make a decision. They will look at the analysis and official comments from all groups. Following a discussion, Commissioners will decide what parts of NW Natural’s plan they will approve.
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. NW Natural 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.
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05/31/23 | 1 Comment | NW Natural Has Not Shown it Can Meet Climate Regulations