California PUC adopts new framework for natural gas infrastructure reviews

The California Public Utilities Commission (CPUC) has adopted a new framework to review utility natural gas infrastructure investments to help the state transition from natural gas-fueled technologies.

Under the new framework, utilities are required to seek CPUC approval for natural gas infrastructure projects of $75 million or more or those with significant air quality impacts. The utility applications must demonstrate the need for the project and provide information on projected financial impacts on customers. Further, it must include a summary of engagement with local communities likely to be impacted. In addition, the applications would trigger a California Environmental Quality Act (CEQA) review by the CPUC.

This new framework is modeled on the current process that CPUC uses to review significant electric infrastructure projects.

Prior to this new approach, all natural gas infrastructure projects were considered in utility General Rate Cases, where individual natural gas projects can get buried in extensive applications without meaningful environmental review.

Also, the decision directs utilities to file annual reports detailing planned long-term infrastructure projects exceeding $50 million over the next 10 years. The reports must include a detailed description of the project, projected capital expenditures, cost drivers, and environmental implications. For projects anticipated to start within five years, utilities must provide information on non-pipeline alternatives, projected operational costs, and reliability benefits from the project.

“This new framework advances our transition away from natural gas by allowing for close review and scrutiny of significant gas investment projects, increasing transparency in utility gas planning, and providing opportunities for meaningful engagement by impacted communities. As we decarbonize, we want to avoid stranded assets and minimize ratepayer impacts,” CPUC Commissioner Clifford Rechtschaffen said.

Emergency projects, routine repair and maintenance projects, and projects expected to be in service by Jan. 1, 2024, are exempt from the new review process. Also, projects for which an application for approval has been filed with a local agency for compliance with an environmental rule before the effective date of the General Order are also exempt.

“As the state transitions away from fossil fuels, we need new tools to manage the transition. This decision creates a smart investment planning process for gas infrastructure and enhances review of facility construction impacts on communities, the environment, and ratepayers,” CPUC President Alice Reynolds said.