End of PSE’s obligation to provide natural gas service closer to passing legislature

Feb 17, 2024, 7:39 AM

pse gas service...

PSE installing an extra high voltage (EHV) transformer, shipped to Washington from Tennessee. (Photo courtesy of KIRO 7)

(Photo courtesy of KIRO 7)

A bill that would impact the offering of natural gas service in Western Washington cleared another hurdle Friday, with the Senate Committee on Environment, Energy & Technology approving it in an executive session.

House Bill 1589, if passed by both chambers, would change the legal requirement of Puget Sound Energy (PSE) to provide natural gas service to customers when requested. It would impact nearly 800,000 households across six counties in Washington. (A PDF of the engrossed substitute bill can be viewed here.)

One part of the bill is particularly contentious, spurring intense debate in Olympia in recent weeks:

(PSE’s) obligation to serve may be met by providing a customer with non-emitting energy including, but not limited to, renewable natural gas, green hydrogen, thermal energy networks, electricity or other sources.

More on PSE: Could Puget Sound Energy customers soon lose access to natural gas service?

In other words, PSE does not have to offer natural gas service to new and existing customers if it determines it is no longer financially beneficial for the company to do so. PSE can instead offer alternative options in the place of natural gas. Right now, the company cannot do that under the current law, passed more than a century ago.

The Senate version of the bill, ESHB 1589, does contain significant changes from the version that has already passed the House floor. Namely, it removes the ban on natural gas line hookups in new construction. (A PDF of the Senate Bill report for ESHB 1589 can be viewed here.)

Rep. Beth Doglio, D-Olympia, first introduced a version of this bill during last year’s session. She called this amended version an improvement, and she believes it will help PSE plan for a greener energy future. (A PDF of the bill analysis from the 2023 bill can be viewed here.)

“This bill doesn’t remove that obligation to provide natural gas,” she told lawmakers. “But it does include newer energy resources like RNG and green hydrogen. And it lets the Washington Utilities and Transportation Commission evaluate and approve the utilities’ use of these technologies to meet customers’ energy needs.”

Critics fighting changes to natural gas service

Republican lawmakers and some builders and developers fiercely oppose the idea.

House Republican leader Drew Stokesbary, R-Auburn, said earlier this week the legislation would, “effectively ban natural gas for for Washingtonians.”

“I think that is the wrong direction,” Stokesbary added during a GOP conference. “We need to make life better for Washingtonians, not worse.”

The Building Industry Association of Washington (BIAW), one of the bill’s most vocal critics, said the change could mean an increase of up to $206 per month above current electrical and natural gas rates for homeowners.

“The rate increases from this bill would be financially devastating to working families, especially those on fixed incomes,” BIAW Executive Vice President Greg Lane said. “Many would be forced to choose between paying for heat or paying for groceries.”

BIAW claimed the legislation also burdens homeowners with natural gas stoves, fireplaces, dryers, hot water heaters and furnaces with costly upgrades to all electric appliances.

Sen. Drew MacEwen, R-Shelton, warned of potential hidden costs as the bill passed during Friday’s executive session.

“It’s not looking at what the cost is going to be when this bill becomes fully implemented with our state owned facilities and buildings,” he said. “Not only to private institutions, but also public institutions as well. And that is a significant cost that will be borne by taxpayers across the state.”

Supporters argue change is necessary

Committee chair Joe Nguyen, D-White Center, disagreed. He pointed out the transition away from natural gas is necessary as Washington moves to meet its climate goals, which are already enshrined in state law.

“We need to have the flexibility and authority to thoughtfully plan as we make this transition that’s happening with or without these policies in the bill,” he said.

The state’s legal mandates are not just limited to the controversial Climate Commitment Act (CCA) that took effect last year — and which faces a citizen-backed repeal initiative in November. The separate Clean Energy Transformation Act (CETA), passed two years before the CCA, requires Washington’s electric utilities like PSE to create an electricity supply free of greenhouse gas emissions by 2045. The CCA additionally requires the state become carbon-neutral by 2050. Those ambitious goals have PSE under pressure put changes in place for the future as quickly as possible — including electrification.

Natural gas changes already moving forward

The Senate amendments include language prohibiting PSE from offering customers rebates to purchase any natural gas appliance or equipment starting in 2025. Commercial and industrial gas customers can still get rebates until 2031. Additionally, companies may offer rebates and incentives for electric heat pumps, including natural gas backups until January 1, 2031.

Some of these restrictions are already being implemented outside the legislature. BIAW has been in a legal fight with the State Building Code Council (SBCC) for more than a year over natural gas regulations.

Last February, BIAW and other trade associations, union representatives, businesses and homeowners filed a lawsuit in Thurston County Superior Court. The suit argues the SBCC violated rulemaking laws in approving energy codes restricting natural gas and propane in new construction. (A PDF of the lawsuit can be viewed here.)

“The rules effectively eliminate all but electric heating for both residential interiors and water due to the lack of commercially available natural gas heat pumps,” according to the court filing.

The SBCC’s rules also face a separate federal legal challenge. Because of that, the council voted to delay the codes’ implementation, originally scheduled for last October. It now starts March 15, unless a court ruling alters it yet again.

Puget Sound Energy weighs in

PSE has repeatedly emphasized it does not plan to leave existing natural gas customers out in the cold.

“We think the gas business is vital to meeting our customers’ current energy needs,” a spokesperson told KIRO Newsradio. “We’re approaching decarbonization of our system in a measured, thoughtful way. One that considers the impact to our customers and our energy delivery systems.”

PSE said the most important part of this legislation is being buried amid the heated debate. The bill removes some red tape to allow the company to combine its plan for electrical service and natural gas service into one cohesive utility strategy.

“This bill will allow us to figure out how to plan for a future,” Matt Steuerwalt, PSE’s senior vice president for external affairs, said. “We have these really ambitious climate targets. And we have customers who want safe, affordable, reliable and green energy supplies.”

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What happens now

ESHB 1589 has a few more steps to go before potentially landing on Gov. Jay Inslee’s desk. It now heads to the Senate Rules committee. If passed through there, the bill would be eligible for a vote on the Senate floor.

If a majority approves it there, it will be kicked back to the House to reconcile the two versions. House leadership will then decide if the measure deserves a vote in that chamber — the final step in the process.

And time is ticking away. There are now less than three weeks left in the legislative session, which ends March 7.

You can read more of Kate Stone’s stories here. Follow Kate on X, formerly known as Twitter, or email her here.

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End of PSE’s obligation to provide natural gas service closer to passing legislature