Oregon’s three natural gas providers need to move faster to cut greenhouse emissions or risk incurring significant fines and stalling the state’s efforts to combat climate change, a two-year investigation from the state’s Public Utilities Commission found.
The investigation began shortly after the Oregon Environmental Quality Commission approved the Climate Protection Program in 2021, mandating a 50% cut in Oregon’s overall greenhouse gas emissions by 2035 and a 90% cut by 2050. At least 26% of that reduction will have to come from the state’s three natural gas utilities: NW Natural, Avista and Cascade Natural Gas. Together they supply over 650,000 customers in Oregon with natural gas.
The Public Utilities Commission — charged with regulating natural gas rates — published its findings Wednesday. Commission staff found that costs are likely to rise for customers across the state during the next decade as the companies attempt to come into compliance with the Climate Protection Program, and that the natural gas utilities are not on track to meet state targets.
“Gas utilities will need to take significant near-term action to decarbonize,” commission staff wrote. “‘Business as usual’ growth and operations of the system result in emissions exceeding the 2035 compliance targets.”
Representatives from NW Natural, the state’s largest natural gas provider with about 80% of the market, were still preparing a response to the report by late Wednesday afternoon. While Oregon’s three natural gas utilities have committed to meeting the state’s emissions targets, they also are challenging the authority of the Oregon Department of Environmental Quality to regulate greenhouse gasses under the Climate Protection Program.
The commission said that regulatory tools would need to be used to protect Oregon’s lowest-income customers from absorbing increased costs.
“In the absence of some form of intervention, the greatest burden from any increased rate payer bills will likely fall to those already experiencing high energy burdens,” the investigators wrote.
The commission asked for input from the utilities in the process of its investigation, collecting plans for how each would meet state targets and reduce emissions, either by becoming more efficient, reducing demand or blending natural gas with green hydrogen made from water or incorporating more so-called “renewable natural gas” into their supplies. Renewable natural gas is made from methane captured from other natural processes or made from biomass, such as animal manure.
Commission staff found that natural gas companies overestimated the amount of renewable natural gas and green hydrogen that would be available to them in the future, as well as costs, given the technology to create both is expensive and not yet widely available.
The utilities will need to submit to their first compliance review with the environmental quality department in 2025. By then, they will collectively have had to cut 1.25 million metric tons of greenhouse gas emissions, equal to taking about 284,000 cars off the road each year. By 2028, they’ll need to cut more than twice that. The cost of not cutting emissions by that first deadline in 2025 and continuing on current emissions trajectories could be up to almost $27 million in fines for NW Natural, according to commission projections.
In the future, the commission recommended that all Climate Protection Program compliance plans be reviewed by an independent third party, which can review data and projections from the utilities, evaluate market trends and any technologies being pitched as part of the utilities’ future compliance.
The commission also acknowledged that continuing to add new natural gas hookups was a net risk to keeping costs low for existing customers and to the goal of reducing emissions to combat climate change.
Natural gas is 80% methane, about 25 times as powerful as carbon dioxide at trapping heat in the atmosphere, according to the Environmental Protection Agency. One-third of global warming today is due to human-caused emissions of methane, according to the agency.
Bob Jenks, executive director of the Citizens Utility Board, said the commission’s final report is an improvement over the last draft he read. The watchdog group raised concerns with an earlier version, claiming the commission had not scrutinized fully the natural gas companies’ plans to rely on technologies and fuels, such as green hydrogen and renewable natural gas, not yet highly accessible and for proposing that adding new customers would lower rates for existing customers. The citizens’ board was established in 1984 by Oregon voters to represent private utility customers in the state. It’s made up of 15 members from each of Oregon’s congressional districts.
“I think there’s a lot to like in this report,” Jenks said.
Jenks was pleased with the commission’s recommendations to prioritize helping already financially overburdened natural gas customers first, ideally by helping them switch to lower-cost electric appliances and electric heat pumps.
“This says very clearly we really need to make an effort to target Inflation Reduction Act incentives and rebates for low-income customers and work with the administrators in Oregon to get low-income customers to the front of the line,” Jenks said.
The second bright spot, Jenks said, was the recommendation for third party verification of data.
“What you really need is somebody independent with expertise on market transformation and other things to be able to say, ‘What’s the real trends on electrification? What’s the real expectation on hydrogen production and the costs of green hydrogen and new technologies?’” he said.
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