Aligning Gas Regulation Climate Goals A Road Map

Aligning Gas Regulation & Climate Goals A Road Map for State Regulators Michael Colvin Director, California Energy Program February 12, 2021

About Environmental Defense Fund Guided by science and economics, we tackle urgent threats with practical solutions EDF is a 501(c)(3) nonprofit organization. Our people: We’re one of the world’s largest environmental organizations, with more than two million members and a staff of over 700 scientists, economists, policy experts, and other professionals around the world. We have over 400, 000 active members in California. Our values: We believe prosperity and environmental stewardship must go hand in hand. We’re optimists, because we have seen our ideas make a huge difference. And we build strong partnerships across interests to ensure lasting success. See more on our mission and values. Our focus: We achieve results by finding solutions that benefit people while protecting natural systems.

Landscape • Natural Gas = GHG Emissions – Methane (via leakage in pipeline/production) – Carbon dioxide (via combustion) • Natural gas combustion in homes and buildings is responsible for ~10% of U. S. carbon emissions • 25 states, DC, & Puerto Rico have set GHG emission targets, and President Biden is committed to net zero emissions and a 100% clean energy economy by 2050 • Many regulators continue to rely on the gas utilities’ business-as-usual scenarios in considering both planning and infrastructure investments

A Path Forward Step 1: Establish Inclusive and Transparent Decision Making Step 2: Require Rigorous Long-Term Planning Step 3: Coordinate Near-Term Decisions and Long-Term Goals

1. Establish Inclusive & Transparent Decision Making • Review and Clarify Existing Processes – Identify links between near-term (rate cases, cost recovery) and long-term processes – The “used and useful” standard should include consideration of climate goals – thinks about depreciation schedules, other financial matters • Ensure Utilities Provide Sufficient Information – Deficiencies in utility filings unfairly shift the burden to customers and stakeholders. • Encourage Broader Stakeholder Engagement • Consider Equity Input and Impacts

2. Require Rigorous Long-Term Planning Establish a holistic gas planning docket, then: • Require Utilities to Articulate a Long-Term Vision Aligned with Climate Targets • Define the True Needs of the System – Demand projections must consider climate targets, including electrification planning – Plan for projected utilization changes – Acknowledge transition will be different for residential and non-residential gas customers

2. Require Rigorous Long-Term Planning Robust, Transparent Gas Supply Planning is Needed 1. Utilities submit long-range plans with detailed demand projections and corresponding planned resources 2. Utilities provide historic & forecasted demand curves, resource stacks (including fixed and variable costs, projected load factor utilization, NPAs considered and not considered) 3. Annual, open cost reconciliation proceeding • Integrate Non-Pipeline Alternatives into planning • Establish a Gas Priority Investment Order • Evaluate Resources Using the All-In Cost Metric • Robust life-cycle GHG Emissions Analysis Required to Compare All Supply Options

3. Coordinate Near-Term Decisions and Long-Term Goals • “Bright line” for new investments • Identify Changes to Existing Programs that Incent Gas Use and Expansion • Link Shareholder & Societal Value • Consider Pilots to Test Innovation Principles: 1. 2. 3. 4. Accountability Scalability Equity Reducing GHG Emissions

https: //www. edf. org/Gas. Reg. Steps

Michael Colvin Director, California Energy Program mcolvin@edf. org (415) 293 -6122