State utility regulators are set to bring an early end to a controversial program that subsidizes customers to connect their homes and businesses to natural gas, finding that there has been far less interest in the program than expected, that the costs have risen dramatically, and that the environmental benefits are limited.
The Public Utilities Regulatory Authority indicated in a draft decision issued last week that it will order the state’s three major natural gas providers – Avangrid-owned Connecticut Natural Gas and Southern Connecticut Gas, and Eversource-owned Yankee Gas – to stop enrolling customers in the System Expansion Plan after April 27, if the PURA Board approves the final decision.
The program to shift customers from heating oil to natural gas by subsidizing the upfront costs of hooking into the gas system was a key part of former Gov. Dan Malloy’s energy strategy. Malloy unveiled the program in 2013, with a goal of converting 280,000 new customers to gas by the end of 2023.
But amid rising costs, actual connections falling well below the program goals, and questions about how the policy fits into Connecticut’s goals to reduce carbon emissions, PURA looks poised to “wind down” the program more than a year early.
A changing landscape for gas
In 2013, shifting customers from heating oil to gas seemed like a good way to save them money – as the price of gas had been falling for years, as the price of oil was rising.
Gas was half the price of oil on the wholesale level at the time, and projections from the U.S. Energy Information Administration forecasted slow increases in the prices of both, with oil steadily becoming more and more expensive than gas.
But the price of gas rose more quickly than expected, and the price of oil was much more volatile, and ended up lower in 2021 than it was in 2014. The prices of each have remained relatively close since 2016, according to EOE.
PURA found that the average cost of subsidizing new gas customers has significantly increased since the program went into effect, as the rate of new customers connecting to gas has decreased.
Even with incentives, the similar costs of oil and gas limited interest in the program, and the companies quickly fell behind on their conversion goals. Instead of re-evaluating the program, the companies instead repeatedly lowered their goals, PURA found.
As a result, with the program scheduled to wrap up at the end of 2023, actual conversions to natural gas are only a fraction of the goals. At the end of 2020, the companies had switched a total of 89,665 customers to gas – about 32 percent of the original goal – according to EOE.
Limited environmental benefits
At the time the program started switching customers from heating oil to natural gas, Malloy hailed it as a way to help the state meet its emission reduction goals. But the program, and other regional policies that promote new natural gas infrastructure, have been a key target for environmental advocates who question the wisdom of building out natural gas infrastructure as the state is trying to eliminate carbon emissions.
“It does not make sense financially or from a climate perspective to continue subsidizing the expansion of gas infrastructure and increasing Connecticut’s reliance on gas when it is increasingly clear that all fossil fuels must be phased out in a rapid but equitable transition to clean energy,” several environmental groups said in a combined letter to PURA, including Save the Sound, Eastern CT Green Action and People’s Action for Clean Energy.
PURA’s Office of Education and Outreach, tasked with providing a report on the state of the program, said that the gas expansion program did appear to reduce emissions from home heating – at least initially.
Natural gas does emit less carbon that oil when it’s burned, and switching from heavier-polluting fossil fuels to natural gas has contributed to lower carbon emissions from both home heating and electricity production, the EOE said.
But at this point, fossil fuels burned for home heating account for about 18 percent of carbon emissions in Connecticut, and fuels other than natural gas account for less than 10 percent of total emissions, EOE found.
Even converting every fossil fuel user to natural gas for home heating would make only a small dent in the state’s total emissions at this point, EOE said. Gas is still an important part of the state’s overall energy strategy – it is cleaner than other fossil fuels, and is still essential for meeting high demand on the electric grid – but the benefits don’t justify continuing to subsidize the effort, EOE said.