How to phase out residential gas equitably

[Music] Hello, hi, greetings everyone. This is Volts for May 22nd, 2026. How to phase out natural gas, equitably. I'm your host, David Roberts. Some US homeowners might be surprised to learn that approximately two-thirds of the average residential gas bill now goes not to gas, but to infrastructure costs, i.e. maintaining and replacing bits of the sprawling network of pipes that serves natural gas in the US. Those costs have tripled over the last decade, despite the fact that the total customer base grew just 8.5%, per customer consumption is falling and heat pumps have outsold gas furnaces for four years running now. All that new infrastructure is designed to last for decades, long past the point by which many states aim to be decarbonized. We'll either use all those repaired and replaced pipelines for their lifetime, or strand them, both of which seem like bad options. Utilities are, stop me if you've heard this one before, incentivized to do more of this kind of spending, since every dollar they spend comes with a guaranteed return. But if electrification really takes hold and affluent homeowners begin defecting from the gas system in numbers, those infrastructure costs will be shared over a shrinking base of the customers who can afford at least. This is, shout out to previous Vultgeist Emily Grubert, a classic mid-transition problem. As electrification grows and the gas network peaks and declines, how can we prevent a stumbling, expensive, and unjust handoff? My guests today have given that subject a great deal of thought. Kristen George, Bagdonough, and Panama Bartholome work for the Building Decarbonization Coalition, an alliance of utilities, businesses, and nonprofits working to get fossil fuels out of American buildings. They have spent the last several years doing the research and policy groundwork, figuring out what a managed transition requires. We are going to talk all about it. With no further ado, Kristen George, Bagdonough, and Panama Bartholome, welcome to Vultz. Thank you so much for coming. Hey David, it's great to be here. Great to be here David. Good to see you. Welcome back, technically, Panama. Kristen, I've got a bunch of nerdy specific questions for you, but I want to start with Panama with a bit of a broader kind of framing question, because I kind of a little bit want to question the premise of this whole thing that we're doing here. Which is all of this work in guidance is about how to do this transition, how to do it well, and we're going to talk about the details, some of the details of that. But that sort of presumes that there is a transition that we're doing a transition. And I look around at the evidence, I don't see a ton of evidence that we're doing that. There is some movement on new construction. That's why the heat pump numbers are starting to look good. But you know, the 70 million houses are so that already got the gas in them. I don't see that number changing and furthermore politically seems like insofar as anybody's trying to get at this issue. It kind of blew up in everyone's collective face with the gas bands, you know, we're not popular. So I could imagine if you are say a natural gas executive or someone who works at a natural gas utility saying, sure, if we do a transition, I will take your counsel into advisement. But no thanks. We don't want to do one and we're not doing one. So I guess convince us that this is actually happening. If only major transitions were linear, it would be so wonderful. Indeed, we are seeing evidence that a transition's underway. If you look at it from a market perspective, as you said in the introduction, some subanout selling furnaces for the last four years, we're seeing heat pump water heaters really accelerate. If you look at things like Forbes Magazine recently did a survey with kitchen and bath experts looking at what they expect from induction stoves and it's the leading technology they expect to be sold over the next few years. Increasingly, the market is really showing signs that a transition's underway. You mentioned politics, the politics of it. You know, we would have expected after the election in 2024, we would have really seen a drop off in pieces of legislation around building decarbonization. But in fact, in 2025, we saw the same number of legislation, piece of legislation introduced at the state level around building decarbonization standards and center programs, education programs, as we did in 2024. And we now have 14 states that have instituted future of gas proceedings at their public utilities commissions or their public service commissions. And these are proceedings there where you're actually designing the energy system of the future. You're trying to balance a state's climate law with their, how do they manage a gas system they're trying to decline with their electricity system as well. Those 14 states you have just about 47% just under half of all residential gas customers in the country are in those 14 states. I think this all sounds like we're gearing up for a transition. We're early in the mid, I would say if you look at Dr. Emily Gruber, the messy middle. Yeah, signs are pointing in the right direction. And the question now is, are we going to continue the momentum and is there the political will to now carry out these future of gas proceedings to continue this program work is the market going to continue on the rate that it has been. Kristen, you've been leading this research, been writing these reports. Tell us a little bit about how we got here. It's so two thirds of the average gas bills going to these repair and replace programs. That's unusually high as I understand it in recent history, maybe in all of history. You know, I mentioned the perverse incentives, utilities of very familiar subject on this show, but those utilities have always had these same perverse incentives. And yet this kind of spending seems to be on a real uptick. So what is going on? How did we get to this place where two thirds of our bill is going to this. Yeah, so compared to historical proportions, we look back at the 80s and it's actually more like the reverse where about two thirds is going to the commodity cost and one third is going to the infrastructure. And if you look at the AGA, so the American Gas Association, if you look at their own numbers, which they're very proud of, they show this uptick in infrastructure building, capital expenditures. And it's around 2010 that you see it really take off and previous to that it's pretty stagnant. And what I would consider like a business as usual infrastructure period. And so we're really in this accelerated spending era, where as you have said in your intro, that spending has tripled since 2010. We're at about 49 billion a year that gas utilities are spending on their systems and about 28 billion of that is just on the distribution system. So the pipes, services and meters essentially. And this is an unsustainable trajectory because gas demand is declining and buildings and it's forecasted to continue to decline. But wait, let me pause you before before we go into the future. Why is it rising? Is it because all this infrastructure is reaching end of life like with electricity, same deal. Yeah, so there are a lot of different potential causes. There's no single reason. One reason that people look to is around that same era when spending took off. We have some high profile gas incidents such as in San Bruno. And soon after you have FIMZA, which is basically the federal entity responsible for monitoring pipeline safety. They put out this call to action a year after that telling utilities to step it up with checking the safety of their pipes. And so this gave birth to 44 different programs across the US where utilities were allowed to accelerate their spending and accelerate their cost recovery on pipeline replacements if it was for a safety reason. And so this has meant that rather than doing these investments and then getting them checked out at the rate case a few years later and getting those costs approved. that utilities can spend and recover costs along the way typically through surcharges on customer bills. This is at least my leading theory on one of the primary reasons that we saw this uptick, but I also think it's an interesting coincidence where we also have a lot of climate activity and climate laws and executive orders around that same time. So it's making hay while the sun shines and the ice caps melt. So that's my working theory as one of the primary drivers, as well as what you said, just the kind of the stock of turnover of pipelines needing to be replaced at end of life. - Now, tell us why it's unsustainable, because this gets to my question. As I was trying to get out with Panama, why couldn't, if you're a gas utility executive, just say, I'm fine with the way things are. Like, are there forcing mechanisms that are going to push this into crisis because climate concern, obviously. Isn't going to do it. So why is it that this is unsustainable? - Well, it's already a crisis for gas customers. Electric bills are really grabbing headlines, but if you look at the consumer price index from 2025, we see that gas bills outpaced electric bills by 60%. And as noted, most of that is infrastructure. So it already is a crisis and it already is unsustainable for customers. And basically what we have right now is this top heavy system. So it's like this spinning top that has started to wobble and it's the inertia of the past that's keeping it going. But we have too much investment up top and not enough utilization at the bottom. And so that's going to continue to wobble. And once the momentum runs out, the costs aren't going to disappear. Instead, the people left on the system the longest are going to be shouldering those accelerating costs. And so that's the importance of managing their transition so it doesn't happen that way. - But is there evidence? Is it true that, I mean, 'cause like I said, we looked into it in the customer base is still growing slowly as of recently, it grew 8.5% over the last decade. That's slow stagnant growth. But what evidence do we have that there's actual shrinkage on the horizon? - Well, the EIA does show that demand. So actual use of gas is declining and forecasted to decline. And so there's slow customer growth, but the actual use is declining. So you're paying more for the pipes but you're using the product less. It's like all packaging, which nobody likes that. And so that's the problem we're trying to solve. It's like a basic math problem is that you're spending people call it gold plating. They're gold plating these pipes by making them cost more but you're getting the same amount of use out of them. And in fact, people are utilizing them less. And the reason that we see customer growth on the residential sector is largely because we still have a lot of incentives. Like gas utilities can essentially pay people to join the gas system by giving them free gas hookups and charging it to the existing. - We're gonna get into those details in a minute. I'm just trying to establish that there is some forcing mechanism here that gas utility other gas companies don't have the option of simply resisting change altogether. - Well, that's why we regulate them because monopolies don't do anything out of the goodness of their hearts. I hate to say it, nor do corporations. And most of our, you know, over a thousand gas utilities are investor-owned utilities and every dollar they spend in capital expenditures yields two to three dollars in customer costs because of those shareholder returns and financing costs. So that's why we have this regulatory framework which does need to be revised to keep them in check and to force them in the places where they don't want to act out of the goodness of their hearts. - About utilities, how much easier is all of this with gas and electric utilities that at least have the option of shifting, you know, existing customers from one product to another versus exclusively gas utilities, which are, at least I think from their perspective, just facing being told to shrink and die. Do we see progress faster in places where there are those combined utilities? - We do, as you would imagine, it is much easier on executives and also the unions to work for those utilities to be able to think about, okay, internally, how do we start to transition more and more of our customers off of our gas system and onto our electric system? How do we start to bring in more electrical workers and less pipeline workers over time as well? And that, of course, then makes it easier on the politicians within those states. Also, I think for gas utility, gas only utilities, it's a bit more existential. It's not out of the question and we have conversations with gas utilities about, come on. Let's be frank, we all see where this is going. What's the long-term future for you guys here? And when we ask them that, they talk about, well, we think there are still gonna be hard-to-electrify sectors that we're gonna be able to provide fuel for through different kinds of pipes, different kinds of fuels. We think there will still be need for resiliency within certain micro-grid opportunities into the future and we think we'll still be there for power generation. And so it seems like there is some planning just by having that conversation with it. We see that there's some planning going on and gas only utilities about what a future could look like. - But they're not deluded though about the macro sort of direction of travel toward electrification, generally speaking. I guess I'm trying to figure out to what extent are they convinced that electrification is an inevitable macro trend? - Well, I think the political activity that you described in your intro as far as the backlash to phase outs of gas, gas and new construction is a good indication of their belief in the danger of this movement and the types of activity that they're actually seeing from it. When you talk to the manufacturers of gas appliances, universally they say this transition is inevitable. And I think that if you have such a key part of the gas system, the actual appliances at the end of the pipe, saying that you know that that goes up through the gas companies as well in that sense of inevitability. - Is there an example yet of a gas utility that is planning to become a thermal utility? In other words, an exclusively gas utility that actually has plans or prospects of becoming the manager of a different kind of thermal system. Is there such a case? - You know, I don't know if any gas utility has yet signed their soul over to the thermal utilities, but we do have a lot of legislation that is helping gas utilities get comfortable with that idea. And the way that they get comfortable with that is through thermal energy networks, which I know you've talked about on this show. And there are quite a few pilots that are getting off the ground in New York. Obviously there are some in Massachusetts, California is looking at neighborhood-scale pilots and one in four states actually have legislation that is related to thermal energy networks. - This is what I'm curious about. Are those existing thermal energy networks happening in places governed by gas only utilities and being put in the hands of a gas only utility? - Some definitely are. And I think Colorado in Washington, I have to check for sure have legislation that is having these gas utilities try out thermal energy networks and some of the utilities in New York through the utility thermal energy network and jobs acts are right now developing pilots that are going through the regulatory process and some of those are gasoline. - This gets to another political economy question because sort of technologically speaking, if you're running on gas and you're contemplating a transition, you have two basic choices. You can go kind of all electric with air source heat pumps and electric appliances or you can do these thermal energy networks, which are, you know, I guess just geothermal. And I can see if you're in an area with a gas only utility why they might have a strong preference for the latter over the former since the latter means they still have a job and things to do and the former means they're going away. Entirely, I wonder could you end up in a political scenario where gas utilities become advocates for thermal energy networks or is that too hopeful? - That is what we'd love to see and I love how so much of your conversation is centered in 2040 right now. (laughing) As opposed to the late 20s, where so much of what we are trying to do is begin to really prove out these models. I mean, if you look at the full suite of stakeholders here, utilities, unions, customers, ratepayers, politicians, installers, like, everybody needs it to be proven right now. This neighborhood scale, thermal energy network, prove that it's cost effective, prove that it's functional, prove that it's safe, all these different proof points. And so I think we all, particularly as we get older and we get deeper and we get closer to retirement, we want this to be done, we want this transition to be over. And we also, I think, have to sit in the reality of where we're at and the transition and play our role in it. And right now where the politics are and where the proof points are, we need to have a few hundred really successful projects over the next five years. Right. Right. In a bunch of different climate zones and a bunch of different service territories to be able to prove out this model so that as unfortunately climate change gets worse into the early 2030s, we're able to point to this new model to be able to say, let's go to scale. We've proved it. The political weight has now come back due to the direness of the climate situation and let's go with it to scale. One more thing on the death spiral, Chris in the so-called death spiral, where people defect from the gas system, the costs are shared in a smaller group that costs pressure, then causes more people to defect, etc, etc. Just one thing I wanted to emphasize and I sort of picked this up from watching the webinar is, and I'm not sure people appreciate this, it doesn't take a high level of defection to trigger this. It does not have to be a mass, it doesn't have to be a majority. Like I think one of the people on the webinar said in her model about a 2% defection rate causes prices to rise by like 50% over a decade. We have this scattered landscape of utilities and laws and regulations and we don't want these utilities to be moving at different paces and some people, if you live in one state, your gas bill is going to be astronomical while another state, maybe it's manageable. That's part of the need for not only this state regulator led managed gas transition, but it really needs to be a national effort. That's the exciting thing that we actually, I said national, not federal. That would be great. We're not in 2040 right now, it's panellos. But what is real? It's roughly optimistic about 2040. I know. It's like when everyone wrote their climate loss for 2030 and now we're almost there. I know. It's what year? Yeah. But what I'm trying to make is that a lot of our regulators are looking to each other at different states. That's what's cool about the future of gas proceeding. I remember when Illinois opened, there's a couple years ago. They had done their homework. They had checked what was in scope in all the other states. Then they had come up with a great scope for themselves, same with Maryland, which just opened last year. It just shows that these regulators and policy makers and communities and advocates are there paying attention to what's happening. We're not starting at zero in every state. We're actually leapfrogging. Yeah. Okay. So the way we have tried to decarbonize US residences to date is basically house by house. And it's really not working very well for a bunch of reasons. Maybe you can, one of you or both of you can get into all of the many reasons. It doesn't work. I'm particularly interested in the sort of experience in California where they really plow a bunch of money into this and put a lot of work into this and still are way behind their goals just because persuading one homeowner at a time is not great. Talk about the house by house model that's sort of rained so far. So what we've done with building decarbonization in this country is we basically put our values around why we want to decarbonize clean energy, clean air, dealing with climate. On the back of 200 year old plus industries of plumbing and HVAC installations and said, like, please save us. Please adopt all of our values and do everything in line with what we as environmental advocates would do as well. And as you can imagine, there are challenges to that. We don't need to go into a lot of detail about the challenges of getting a heat pump or getting a water heater. There's all sorts of characters out there in that industry. But from a climate perspective, because we're here on vaults, it's incredibly hard to plan for reaching your climate goals if you're just basing it off of an appliance by appliance or a building by buildings approach. Like, how will you ever know if a neighborhood is ready to be taken off of a gas system if you have no visibility into any of the appliances and any of the buildings within that neighborhood at all. And so you need to have a better way to be able to see inside those buildings, be able to understand, okay, this whole neighborhood is ready. We've gotten this neighborhood ready to leave the gas system. It's also really expensive the way that we're doing it right now because of that lack of visibility when a pipeline's coming up for replacement. If a utility doesn't know and a regulator doesn't know anything about that neighborhood or any of the appliances, from a safety perspective, they're compelled to go ahead and the regulator approve it and the utility be happy to put it in. And so, right as we're trying to really expand the electric system and upgrade it, we're also gold plating the gas system in a seven-year investment in a system we want to be off of in 20 years. And so it's really from a societal perspective, one of the most expensive ways we can do building decarbonization as well. You know, I would push back some on your assertion that it's not going well, like five years ago, America was number three in heat pump sales in the world. We're now the top market for heat pump sales in the world. So some of it new construction, but when we started this movement eight years ago with a bunch of others, you know, New York Times would be doing articles about what's a heat pump? And now you got articles from them, AP and others about how to choose the right heat pump for your house. And so the vibes have really changed. And I think that you look at what's happened over the last few years, you know, the election, the IRA, you have a whole bunch of headwinds and yet you continue to see the market trends heading in the right direction here. So as you alluded to just there, the sort of key move in doing this in a more rational and cost effective way is some kind of chunking. You need to take groups of buildings off the gas system at roughly the same time. Just for all kinds of cost reasons that should be sort of obvious, like for your workforce, for your, you know, blah, on and on and on. But like, what does that mean? Who chunks? Who decides the size of the chunk? Who manages that process? What is the entity? Is it the utility? Is it the PC? Is it like who's chunking? Is it the legislature? Who and who locates and chooses the chunk? Walk us through how this is supposed to work. Yeah, absolutely. And you coined a new turn to add into the lexicon, the chunky decarbonization. We'll see if it sticks. Absolutely. So this is being called a number of different things right now. You may hear it called zonal electrification. You may hear it called any number of different intentional electrification. At our organization, we like to call it neighborhood scale building decarbonization because it suggests whether it's a small neighborhood or a large neighborhood, you're basically taking a whole bunch of buildings off of the gas grid at the same time. And it really provides climate planning, rate payer protection, and equity protections that just aren't there from like a building by building our approach. It allows you to really prioritize lower income or vulnerable communities at the front end of the transition, rather than leaving them there as some of the last buildings on the gas grid. But it also has a real benefit for what you brought up before around like educated consumers. Like the last thing that a consumer wants is to really become an expert in air conditioning. Like when they're air conditioner breaks, they just want their air conditioner back. Like they don't want to all of a sudden become an expert in like efficiency levels and rebates. And they just want somebody to come and help them out with it. And they want to also make sure that there's a good contract that's going to make a good installation. And this neighborhood scale approach, besides like the climate equity and rate payer backstop, it also ensures that we're going to be able to bring good contractors to provide just enough education to consumers and getting them a really good product put in their house. And because you're taking a programmatic approach, you're going to have good quality control on the back end and actual commissioning of all these units. So you don't have a bad HVAC company coming in, making an installation and then take off and you have a customer just suffering through it. Panama, you keep saying you who is who is you? Is you the city government? Yeah. Is you the gas utility? Yeah, with regard to who chunks and how chunky is it? I mean, there are a lot of options actually. So I mean, the impetus, honestly, it could even be organic in grassroots. A neighborhood can up and take themselves off of the gas system. Raise their hands and then you just like do it, cap your gas line. That's the harder route because it really requires you to be fronting all the costs. But the way we see this happening right now in the way that it makes the most rational sense in terms of declining and decommissioning the gas system at the same rate as we're scaling clean alternatives is you look at the map of the gas system, which is very hard to do. A lot of commissions don't even have basic access to the mapping of the gas lines. Like California just got it and you need to sign an NDA to see the full set of plans. Anyways, so you need that map and then you need to know which pipes are set to be retired, just even according to their age in 10, 15, 20 years. And then you look at those neighborhoods, you start to educate them about switching off of gas to electrical alternatives. And instead of paying two to $7 million to put in that new gas pipeline, which is the range that we see across the US, you're gonna buy everyone the appliances they need with that money and cap that gas main. And so that's the utility-led approach. And that's what is gonna be piloted essentially in California, which is required to do 30 of these neighborhood-scale pilots in the near-term future. - But to be clear, the utility is buying and installing the electrified equipment in the houses necessary to pull this off. - That's what's being discussed and proposed in these pilots. It's still the details are getting ironed out, but it's like if you have $50 per customer, that would otherwise be going into a new pipeline. Like that should be used for the transition for this project. - Yeah, you asked like who's doing this, who's overseeing it. So really this should be done at the regulator of a utility. A regulatory utility is looking at the overall system in front of them. They know what laws are governing that state. The climate laws, the other energy laws, and other things that they have to take into consideration. And they're the ones that should be setting up the rules for this, like what's the rate of return on a project like this? Like what kind of labor should be used? Should this be union labor? Should this be non-union labor? What types of efficiency levels, all these different things, what sort of consumer protections are going to be put into this as well, this should be done at the regulator later. Unfortunately, right now in a lot of America, regulators are really afraid to step out without legislative direction. And so you need legislatures and a lot of times to be able to provide direction and provide some of this detail broadly and then give direction to the public service commissions, the public utilities commissions, to then provide the detail to the utilities, to then go ahead and carry it out. Well, let me ask a direct question about that, because this is what breaks my brain over and over again. Like the logic of chunking, I totally get. But either you persuade everyone, and I'm trying to imagine in America a large chunk of people who come to a unanimous decision and I'm struggling, or someone somewhere has some power to force someone to do it. And I can't imagine in America who is going to come force a homeowner to change their HVAC system without producing weeks of Fox News headlines. So how do you get around that dilemma? You either got to push and force some people or you have to wait for unanimity and both those seem difficult for me. Yeah. You want to talk about obligation to spend or obligation to serve. I can talk about some of our experiences in California where this is actually happening. Yeah, for sure. So I can zoom out a little bit with the history. We wrote a report on this a few years ago. But yeah, basically what you're referring to, David, is that we have in every state, every public utility code, a law that essentially says every public utility shall provide just in reasonable service. That's not what I'm referring to. Although I do want to discuss that. I'm saying, even if there was no legal obligation to serve, going and telling them they have to do it, never mind legally, just PR-wise, optics-wise, every right wing journalist in the country interviewing that person the next day wise, that's the problem. We'll get to the legal thing in a minute. But just like, how do you get around that problem where you ultimately have to make someone do this? [MUSIC PLAYING] Hey there, everybody. Don't worry. I'm not going to tell you about a new mattress or push a credit card on you. This isn't an ad. There are no ads on volts. It is supported entirely by listeners like you. If you'll indulge me for a second, I'd like to ask for your support. 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Leave a review on Apple or Spotify or just tell a friend about volts. I am grateful for any and all support. If you're already a paid subscriber, thank you. And now, back to the show. Yeah, at this point in the transition indeed, this is one of the bigger challenges and one of the things that you're seeing a lot of experimentation around. And so from a utility perspective, particularly a dual fuel utility in a state that has climate laws, they're seeing the writing on the wall, and that's why you have experimentation happening around a bunch of these utilities, actually trying to pilot these projects. And so some of the early ones you're seeing are outreach that looks like, hi there, we have a pipeline replacement coming up in your neighborhood. It's going to cost this amount of money. We'd prefer to not do that and instead give you a $35,000 check to make upgrades to your house. And haven't you ever got a better deal from your utility than a $35,000 offer? As long as you and all your neighbors can agree to take this check, then we'll be shutting off the gas to this neighborhood in two, three years once we get this done. I would feel better if I had a live example of that working to look at. Oh, it's happening right now. Like you're getting neighborhood level unanimity in real life examples today. Yes, so Pacific Gas and Electric has the Zonal Electrification Equity Pilot Program. It's the first public RFP that's been released by a utility to bring in consultants to help them across their entire service territory actually go out and do neighborhood scale electrification of it. And you have individuals doing digital outreach, mail-or-out outreach, and door-to-door knocking to recruit people. You then have analysis of every single home being done, checks being cut out and the very first ones are actually just going in this month because you had neighborhoods that agreed to be able to have it happen. So you have the very first examples of it actually working and happening. Now, this is the first public ones we know of. This has actually been happening for years now behind the scenes in PG Neaterratory as they've been doing kind of onesy twosies, learning about this, and studying it to be able to eventually be ready to release an RFP to actually expand it across their service territory. Now, I'm not here telling you this is easy. You're dealing with a group of humans. Yeah. And so you can imagine, and that's why one of the laws that passed in California to set up this pilot program actually reduced the threshold for approval for a project like this from 100% of building owners down to only two thirds of building owners within that neighborhood in order to allow it to go forward. Interesting. That'll make for a very interesting next door conversations. [LAUGHTER] No kidding. No kidding. I'm trying to imagine the next word conversations about Jack Booted Thugs coming and jamming heat pumps in your home. Dammit Janet. Yeah, exactly. OK, Kristen, let's talk about the legal stuff. Now, there are two sort of nerdy regulatory concepts that are highly relevant here. First one first is this obligation to serve. And that basically, as I understand it, is just in exchange for getting a monopoly over a territory, the gas utility is obliged to provide service to anyone who wants it, which makes sense on the surface. But then when you're talking about phasing out gas, you're imagining like, oh, there's like one gas user left, in the neighborhood, but the utility is legally obligated to maintain the entire gas network to provide for that one, you know, so you get into weird paradoxical stuff So how do you get around this or how do you address it? How do you reform it? What do you do about it? Yeah, the in the caveat with obligation to serve is they're required to provide service You know if it makes sense economically for them, which is why you don't have gas lines necessarily going deep into rural areas and my rural customers are on propane That seems like a pretty important Proviso then that you squeeze a lot through they have a backdoor out of it and What's interesting as I said you know some of these Statutes there one short sentence some like California. It's like four paragraphs But the legal scholars I've spoken with about the obligation to serve say you know in a lot of these states the way It's written it isn't saying you have to continue providing gas service It's saying right to provide the service for basically the end uses that the Building wants to use and we know that every Residential and commercial building end use can be served now by Electricity and so what we have is a regulation written for non-competing monopolies, but in reality what we have are competing monopolies Yeah, and so that's an issue that we need to address by updating that regulation and Make it fuel neutral even like you know obligation to have all of the energy sources you need to power your iPad and Cool heater so but do you think in places where it's already written? I mean maybe accidentally but already written Already written without the word guess in it. Yeah, that you could legally get away with just Interpreting it as fuel neutral already This is where I want to like tell regulators like you've got it you go regular like you do it like I believe in you You know because yeah like I said the legal scholars I talked to said like there's nothing legally Stopping this other than the fear of litigation, you know There would be litigation. You know there would be yeah, and obviously you don't be ripping out you know someone's Gaswater heater overnight and whatever, but There should already be a pathway, but like we live in the world we live in and so what a lot of States are doing are passing even more legislation to be even more directive and we see this in Massachusetts They like thought that they passed a bill that solved this issue and then now there's a debate in the Wait, what did they say? This is the stuff I love Tell me what did they put in the bill? Yeah, I don't know the exact language in the bill But basically it was interpreted as like this allows the utility to do that swap of gas for electric to serve the end use and There's a proceeding open right now debating whether it actually said that and so utilities are pushing back on the Supposed clarification, so it is we're really at a sticking point right now with that So ideally you get a state legislature to just say Unequivocally, there's a fuel neutral obligation to serve that would be the easiest solution and that's what most regulators need nowadays They need the backing of a legislature to really move forward on it. Yeah, yeah, is there a real World case where this where the obligation to serve in particular is the actual sticking point is the thing in the way or is this just a problem we anticipate? Well, it's not like customers are citing this statue But you know as as Panama said like in I'm sure with PG&E's Attempts on their own to do this work in California if they knocked on a house and someone was like get off my lawn You know, I love my guest stove. They're you know, that's the end of that conversation. So right Yeah, we just had a series of filings last week at the California Public Utilities Commission around Some of these early pilots under this program that was approved by the legislature and Gas-only utility in southern California very clearly said the obligation to serve needs to be preserved and protected and respected within this program So it is absolutely real world around the country continually brought up Mm-hmm. So you need clarity on that. That's one of the two big things The other are these line extension allowances And this is like I love this because it's like this sort of obscure wonky little footnoty thing in the regs But it's a lever that can change things quite a bit. So Kristen, what is a line extension allowance? Line extension allowance is basically allowing new customers to join the system for free And charging existing customers for that new gas line and so it may so that means if I don't have gas service in my house And they come and install a pipe from the main line to my house that costs money I don't have to pay that yeah, and the idea is like you're Gonna pay back that loan that the existing customers gave you over time through your use of the system And that was true at a certain point when the system was growing But what we have is a mature system that is stagnant or declining And so there have been a lot of deliberations about the economics of this and every utility uses a different little formula Some of them calculate it by feet. So New York just got rid of their hundred foot rule which was You know fairly arbitrary like you can get a hundred feet of Service line for free when you Is very arbitrary like it's a nice round number. Yeah, and then others use kind of you know Complex formulas to kind of calculate what the payback period and all that is and the point is that like Why are we it's kind of like we're luring people onto the sinking ship? It's like Instead like just show them where the other ship is that's not sinking and it's making Everyone's gaspills go up that are already on the system. So it's aggravating that cost escalation So the I mean the obvious alternative here is if you want a service you have to pay for it What does that translate to like what is the typical cost of like how much would it raise the cost for me to get gas to my house Utility math is special and unique to every single utility so like you know, I want to say it's like In the singular version I don't know what exact figure it's and you know the thousands, but we looked at You know how much would ratepayers save if every state in the US stopped giving gas line extension allowances and the range was from Three to seven billion a year and it's such a range because There's such a lack of transparency about these costs that you have to use a very small data pool and then extrapolate from that So in bulk it is significant and you know it it varies widely. Yeah, I was just trying to figure out like what level of Disincentive are we talking about here when enough for a builder to be like Why am I running gas to this new development and California has gone one step further where they have removed Electric line extension allowances. So electric side has these two They've removed them if it's to a mixed-fuel building. So if you say I'm actually going to pay for that gas line And you're obviously running your electric line as well Then this data California is going to say well you don't get the incentive for the electric line because you're It's a mixed-fuel development. So they really hit on both sides to disincentivize So you only get the line extension the electric line extension. Hey if you're doing all electric Yeah, it's yeah to carry it in this and so this is mostly about new build I would guess this is mostly about trying to nudge developers away from gas for new build Yeah, and it's like right sizing the economics It's like why are we pretending that we're still living in the fifties where you know growth was abundant and sprawling instead let's like contend with the fact that we've met the saturation point And we need to start to think about what's next right and this is not some new thing and this is not really sort of Kansas gas is just like you should pay for whatever you get whatever whatever service you want you should pay for it People can still have gas. It's just like you just have to pay your share properly But let's talk about the political economy of this because as fair and obvious as it seems to us For the person who wants to do gas it is in fact going to be a bunch of new costs So I mean New York is going to the case in point they got rid of their 100-foot rule But then like a couple months later suspended implementation of that rule out through the end of 2027 Because they were beset by a giant torrent of industry opposition. So I'm just curious like are the gas people aware of this and on it and against it? Yes, my favorite report to read is by the American Gas Association on Linux and the allowances and they called the act of removing gas line extension and allowances to be an act of government imposed inequality because it was making it harder for new customers to join the gas system And so they're saying oh, it's inequitable to remove these incentives when we're saying no, it's more equitable because you're probably protecting people from these accelerating costs by not letting them walk down that path. - I mean, if you're gonna say getting rid of a subsidy to customers is unfair because we gave the subsidy to previous customers, that's just a argument for all subsidies to customers being permanent. Like, you could think you could never get rid of any subsidy to customers by that logic. - Yeah. Yeah. Election years are tough on candidates and all sorts of decisions are made in election years. That suddenly get reversed as soon as the elections over. And so-- - Yeah, funny about that. - It was a torrent of opposition, but it was also a lawsuit that was filed. And the delay was in reaction to the lawsuit, to let the lawsuit play out before the implementation of it took place. It happened to coincide with an election year and we'll see if anything changes after November. - Interesting. And Kristen, would you say that this line service allowance is this what you would choose as kind of a first foray, a first shot fired in this battle? Is this kind of the, it seems like kind of a sneaky way 'cause I mean, one of the things I meant to mention is when they did this in California, it really showed up in new build. When they got rid of these line service allowances, like it shifted new build, markedly in the direction of electrification. So it's a pre-potent reform. Is this kind of what you would advise people to go after first? - Yeah, I think of it as pretty low hanging fruit for regulators because it's well within their purview of debating which costs are prudent and which cost should be recovered. And that's like their bread and butter. They don't have to talk about climate for it. It's just like literally the formula that the utilities using, like it's punishing existing customers and rewarding new customers. So we need to just adjust it so the economic signals are, you know, that they match across the board. - Yes, at least we shouldn't be actively subsidizing this the expansion of the gas system. Seems like a baseline argument there. This is another political economy question. I notice in a lot of the materials y'all refer to the thermal workforce, which I think is very clever, very clever terminology, trying to convince all these gas workers that they could, you know, that they are part of a larger family than they might think. But are they buying it? What is the valence of the sort of workforce the utilities toward this stuff? I know we have at least like one or two concrete examples of unions supporting these thermal energy networks when they happen, but I don't know how bespoke or individual that is, like what is the larger sort of mood or disposition of labor toward this transition? - Yeah, I can speak to a couple of aspects of that and Panama can as well. We started using this term thermal workforce 'cause we got kind of tired of that binary of like fossil fuel workers and clean energy workers, which I don't think is doing anyone any favors. And we also were learning from the implementation of things like thermal energy networks that like, oh, maybe someone today who is spending 90% of their time laying gas pipes, maybe in 2040 or beyond, they might spend 90% of their time laying water pipes for thermal energy network. And so why categorize them as one or the other? And when we talk about the workforce, we're typically thinking of two categories. We're thinking of independent businesses or contractors and we're thinking of union workers. And it really varies a lot by state and by local union chapter where what their mood is, I will say we wrote a book about the transition with a couple locals in California who were very excited about the possibilities of the transition and wanted to think about where their union showed up in the neighborhood scale decarbs scene. So I think there is a lot of goodwill there. - I mean, one thing that occurs, and I sort of gestured it this earlier, which is like transitioning from laying gas pipe to laying water pipe plausible, transitioning from laying gas pipe to being an electrician or installing a heat pump, not really plausible. So again, it seems to really matter what transition you're talking about, where you're transitioning to in terms of the labor piece of the equation. - Yeah, a managed approach to this would be that you actually changed the goals of the gas system. Right now our entire regulatory structure for these management opales are one built on growth and just perpetual growth out into the future. And so you would think that once you change that, once you have the political will to actually follow out through with what we need for our climate future, you look at a managed decline and that's not gonna happen in five years and I'm sorry, it's not gonna happen in 10 years, this is gonna be a process. And many of the current workers that are working on the gas system are gonna be going through retirements, just natural retirements over the next 20 years. And so what this should be is really a management of how many people do you need to bring in? What's the minimum viable workforce that you need to be able to manage the wind down to the system? And then you're bringing in folks and training folks based on that approach. - A question a bunch of people have, you know, I think when people find out that gas companies are coming in and replacing these pipes with new pipes that are built and designed to last for decades. Often in a state that explicitly says it is going to decarbonize before that. So in other words, like I said in my intro, either you're gonna use that through your lifetime and blow through your carbon target or it's gonna be stranded. And it just seems like we're doing this all over the place right now. It just seems like we're building up a lot of assets that are gonna be stranded. And so part of my question is just like who, right now, it seems like gas customers. Insofar as anyone pays the cost of all those stranded assets, it's gas customers. And it seems like maybe one thing we could do to discourage the building of destined to be stranded assets is putting a little bit more of the consequence and accountability on executives or shareholders or investors or, you know, not customers. Is anybody talking about that? - They are. There's actually a piece of legislation just introduced in the past few weeks. In California again, by Senator Stern that would put in place a retirement fund paid for by shareholders of the utilities in order to really force this conversation forward. And I think what you're gonna see is a lot more advocates and legislators across the country looking at this scenario and making shareholders more responsible for the end of life of these systems rather than ratepayers. - Right, it's just like if you wanna make a bunch of profit off building these things, you also need to know that you're gonna pay when we shut them down. That seems like a sensible thing to tell people. - Well, we're near the end of time. So I kinda wanted to finish with all these future of gas proceedings that are going on like as we were saying, we're gearing up for a transition. So 14 states I think or something like that have these things going on. I kinda wonder like, are you watching them? What's happening in them? Are there any consensus alignment, convergence among the different PCs about how to do this? Is there any like, are any of them getting genuinely ambitious? You know, it's contemplating big things. - Spicey. - Spicey, are there any spicy future of gas proceedings? Just give us a little like, like what's going on out there? - Yeah, let's see how many chili peppers would you rank Massachusetts? I know you had Jamie Van Nostran on the pod and he told you quite a bit about theirs and it continues to be pretty spicy in terms of, you know, they're having these debates about obligation to serve. They're, you know, an inch away from hopefully removing gas line extension allowances officially. And it's kind of like the closer they get to like, doing that you see more pushback, but they, you know. - Yes, this is always the thing about these meetings. Like, everyone loves a meeting, but this is what I want to know. Like, who's moving into action? - Yeah, and I mean, I have faith that a law is going to happen this year. There's quite a few actually where line extension allowances are up for debate. And Maryland is getting close as well. Minnesota is looking at it. Illinois is looking at it. It's actually, I think there's about six states in DC that are currently deliberating line extension allowances through these proceedings. And so we're hopeful there. And then California is focusing more on this kind of neighborhood scale solution side in what's kind of their part two of their future of gas proceeding. And they've just identified over 150 priority zones. So places where the utilities could be piloting these neighborhood scale projects. - Is that the only state that's actively chunking? - No. - Currently chunking. - New York is chunking as well. They have, I think right now, 10 thermal energy network pilots led by utilities that are getting close to being green lit for that construction phase, but the engineering plans are still being looked at by regulators and others. But they have gone really far in these neighborhood scale projects there. I think it's actually eight states in total, I think are working on utility led thermal energy networks right now. And so there is a lot of activity there. But in future of gas, we had two new proceedings open last year, Maryland and Maine. Maryland, they've been trying to open it for like, I think over two years, they've been petitioning. And so they, I feel like, are gonna hit the ground running because they've been scoping this for a long time and the advocates are ready. So I think that is definitely one to watch in terms of spiciness. - Interesting. - Yeah, you can't run for president on the Democratic ticket without a future of gas proceeding in your-- (laughing) - We declare it, we declare it. So, and I'm wondering how many of these future of gas proceedings in how many cases is a state saying explicitly, gas is going away. We're moving off of gas. You know, like, I see everybody like edging, kind of holding hands and backing slowly to it, looking over their shoulder, and obviously, like, is anyone turned and faced the actual thing and said, yes, world, we're doing this. Is that part of any of these? - I feel like in regulator speak that looks something like what happened in Massachusetts, which was like, they were like, okay, when you're gonna evaluate new gas pipeline projects, you have to also evaluate non-pipeline alternatives to see which is the better option, like, which is the most cost effective. That to me is basically saying, like, hey, you can't just default to the status quo of expansion. You actually have to look at alternatives. - Well, you can't default to the status quo is still a far cry from it. We're explicitly-- - We're not from these people. - I just, this leadership-- - Yeah, I just want someone to say it out loud, you know? - Four regulators. - Everybody knows it. - Yeah. - I think the legislature says that then the regulators feel feel empowered to say it. - Just say it and take the heat, 'cause it's always like, you know, my pod with Emily Gruber, I mean, half the pods I do come back to the basic conclusion that gosh, we should plan this and do it on purpose rather than stumbling backward into it. But like, you can't do that if you won't admit what you're doing, you know, if you won't acknowledge that that is what you're doing. So, I don't-- Once again, maybe I'm hoping for 2040 here in a moment. - Well, it gets back to, you know, we're big lovers of denelementos over here, the systems thinker. And when you look at her leverage points, it's like the goals of the system. What are the goals of the system? And that's what you're talking about right there. It's one of the most powerful leverage points. And until we change that goal by these regulators, we can expect to see the wholesale change that we need in order to meet our climate targets. And I would say the hardest and the most important job in this energy transition is that of the public utilities commissioner. And what they're going to have to do over the next few years are responsible for all of it. They have no precedent. And quite often, they don't even have the backing of their boss. And it's going to take them to really step up for the rest of us to be able to make this possible. - And I mean, Panama, like half of them are just rindos that are like cousin of the gas exec or whatever, like these are-- - This sounds like random. (laughing) - Yeah, I know. These are not necessarily the army that one would recruit if one were starting from a blank sheet of paper, but-- - Hey, they get 160,000 a year. What more do you want? - Geez. - All right, so we got a wrap up. So I thought I would just finish since in my mind, this task specifically getting the 70 million American homes that are heating with natural gas to electrify is one of just the most difficult and thorny, like logistically thorny, technologically thorny, politically thorny, regulatory thorny, pick your poison. This is some of the hardest work, and I love that you guys are out doing it. So I just thought it in on a positive note, maybe each of you could tell me in this world of endless struggle, of your cypheon struggles. Where are you finding optimism? Like what is surprising you? What do you think is going faster? What's better than what's giving you hope? - So we as an industry, I mentioned it before, we're now the global leader for heat pump sales in the world. And there's not a lot of sectors where America can stand up and say we're leading on clean energy, or the clean energy transition. It's not happening in electric vehicles. It's not happening in batteries. It's not happening in renewable energy. It's not happening in carbon capture and sequestration. This is an area where it's not just like 51%, we're talking 63% market share, where we can proudly stand up and say, we were a third place five years ago, we're now number one and continuing to move forward. And that's a market transition that you just haven't seen from many technologies ever. And it's incredibly encouraging. And I think we're going to see it continue. - Cool. - Yeah. And just like on the social side of things, it's like we see that people are learning about the threats to their health caused by, you know, combusting fuels in your house. Like who would have thought? And it seems like it's just clicking on a large scale that people are realizing like life doesn't have to be this way. Like it could be better. It's like when the pandemic hit and you didn't have to commute two hours to your job, and you're like, oh, wait, like my life could be different. It's kind of like, okay, I could pay less and I could not be aggravating my asthma and my community could be healthier. And it's like, I just see that kind of showing up in different parts of whether it's like pop culture or community showing up to like public utility commission proceedings, like these tiny little rooms that are getting packed with people with signs. Like I think that just we're hitting like a level of awareness socially, where the people want this, a lot of people do. And we just need to make sure it's accessible to the people who need it most. - Amen to that. Thank you both so much. This has been delightful. I love hearing about this. I love that all this work is going on and maybe we'll have you back in 2040 and we'll shut back in and see if all are-- - Well, nothing to talk about. It'll be all I've done. - It'll be like, we're boring. The electrification got done. - Done and tested. Thank you for listening to Voltz. It takes a village to make this podcast work. Shout out especially to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So if you value conversations like this, please consider joining our community of paid subscribers at Voltz.wtf or leaving a nice review or telling a friend about Voltz or all three. Thanks so much, and I'll see you next time.