- Department of Public Utilities
Media Contact for Department of Public Utilities Issues Order 20-80
Alanna Kelly, Communications Director
BOSTON — Today, the Massachusetts Department of Public Utilities (DPU) issued an order announcing a new regulatory strategy for natural gas in Massachusetts. Order 20-80 sets forth a new strategy to guide the evolution of the natural gas distribution industry to clean energy. This new strategy reflects DPU’s focus on helping the Commonwealth achieve its greenhouse gas (GHG) emissions reduction requirements through decarbonization, electrification, and the adoption of pilot programs for new technologies while minimizing additional investment and costs to protect ratepayers. Notably, Order 20-80 will require gas distribution companies (LDCs) to consider non-gas alternatives to gas expansion projects. Additionally, the LDCs will no longer be able to recover costs for the promotion of natural gas use. The LDCs also will be required to file Climate Compliance Plans every 5 years to ensure compliance with the state’s emissions limits. In a future proceeding, the DPU will investigate solutions to the energy burden, experienced particularly by low- and moderate-income ratepayers and environmental justice populations.
“As Massachusetts moves towards net zero emissions by 2050, the DPU must develop a regulatory structure for the gas sector befitting that requirement,” said Chair James Van Nostrand. “We are pleased to unveil a forward-thinking framework that charts a path for moving toward clean energy and enhancing the state’s ability to achieve its climate goals while ensuring a fair, equitable, and orderly process.”
A Roadmap to Decarbonization
In this Order, the DPU’s objective is to create and promote a regulatory framework that is fair to consumers, equitable, flexible, and provides consideration of the current and future technologies required to meet the state’s clean energy objectives. To that extent, the DPU seeks to dissuade gas customer expansion and to align the process for setting rates with the climate goals of the Commonwealth. The DPU found that to achieve climate goals, the use of electrified and decarbonized heating technologies must be significantly increased.
To that end, the DPU is imposing a new requirement that LDCs evaluate whether non-gas alternatives are available that would make additional investment in gas infrastructure unnecessary. This requirement will only apply to new infrastructure. These alternatives could include electrification, networked geothermal, and targeted energy efficiency. Additionally, the Order requires gas companies to deploy targeted electrification pilot projects in addition to the networked geothermal demonstration projects currently underway in Framingham and Lowell. Cost recovery and marketing for the promotion of natural gas will no longer be permitted in future proceedings.
Noting that the LDCs currently each have their own mechanism for calculating the cost of line extension, Order 20-80 calls for a new standardized mechanism, which will be explored in future proceedings.
LDCs will now need to submit individual Climate Compliance Plans every five years to the DPU, starting in 2025. These Climate Compliance Plans will outline how the LDCs intend to transition to clean energy, their pilot programs, and their proposals to climate compliance performance metrics in upcoming performance-based regulation filings. The DPU received significant stakeholder feedback encouraging greater coordination between the LDCs and the Electric Distribution Companies (EDCs). Order 20-80 asserts that thoughtful coordination between LDCs and Electric Distribution Companies is required to achieve the Commonwealth’s clean energy transition.
The DPU rejected the recommendation to change the current gas supply procurement policy to enable inclusion of renewable natural gas (RNG) due to cost and availability concerns, as well as the uncertain status of RNG as a zero-emissions fuel. The Order found that, while hydrogen may play a role in some hard-to-decarbonize sectors of the economy, it is unlikely to be considered as a primary fuel source for home heating also due to its uncertainty.
Addressing Affordability and Workforce Transitions
During the investigation process for Order 20-80, the DPU gathered information and input from a wide range of institutional and individual stakeholders as well as reports and analyses produced by the LDCs and their consultants.
The Department observes that there are numerous concerns regarding affordability for customers, including the upfront costs required for customers to convert appliances and heating systems from natural gas to electricity and higher rates for customers who remain on the system. Cost shifting between migrating and nonmigrating customers and between rate classes, and potential disproportionate impacts on low-income customers and customers from environmental justice populations present equity challenges, as well. Order 20-80 emphasizes that the transition to clean energy must be cost-effective and equitable and plans to investigate solutions to the energy burden experienced by low- and moderate-income ratepayers, in a separate proceeding. The DPU also plans to pay special attention to opportunities for environmental justice populations to move beyond gas. As part of this transition, the DPU is prioritizing opportunities for environmental justice populations through its Environmental Justice Strategy, the final version of which will be released soon.
Order 20-80 acknowledges labor workforce concerns, both for existing workers in the natural gas industry and those that have thus far been left out of the clean energy transition. The Department encourages the LDCs to work with the Massachusetts Clean Energy Center, labor unions, and other relevant stakeholders on a just transition for the workforce during the decarbonization process. This includes adoption of workforce development initiatives, policies, and training for gas industry workers and steelworkers. Additionally, the Department emphasizes that the clean energy transition is an opportunity to create job prospects for individuals who historically have been underrepresented in the workforce (e.g., people of color, Indigenous Peoples, women, veterans, people living with disabilities, immigrants, and people affected by the justice system).
Background on the Investigation
In the fall of 2020, the DPU voted to open an investigation into potential strategies that would enable the Commonwealth to move into its net-zero GHG emissions energy future while simultaneously safeguarding ratepayer interests; ensuring safe, reliable, and cost-effective natural gas service; and potentially recasting the role of LDCs in the Commonwealth. 20-80 is an investigation, not an adjudication. Therefore, this Order serves as an impartial, fact-finding process with forward-looking policy recommendations.
The opening of the investigation directed the LDCs to initiate a joint request for proposals for an independent consultant to conduct a study and prepare a report within the parameters discussed in the Order. Subsequently, separate proposals from each LDC were submitted in March of 2022 and were followed by a series of public hearings, technical sessions, and a written comment period ending on August 10, 2022, for stakeholders to share input. The DPU appreciates the thoughtful comments and participation of the interested stakeholders that helped to determine its findings and final set of recommendations and requirements in this Order.