Reconsider Compensation Policy
Branko Terzic, managing director, Berkeley Research Group LLC, is a former FERC Commissioner, Wisconsin PSC Commissioner, and gas utility CEO. He holds BSE and honorary Sc.D. in Engineering and provides advisory services and expert testimony on regulation and ratemaking.
Many cities and municipal governments, as well as a few states, have determined that the decarbonization policies should include the mandatory shift of residential and commercial natural gas service to electric service.
In practice this means that customers would disconnect from natural gas service and replace gas furnaces, stoves, and water heaters with electric appliances and heating systems. The authority for such government action would come from a combination of new building code rules as well as greenhouse gas and air quality standards.
The abandoned natural gas assets, it is expected, would be subject to regulatory treatments afforded to public utilities in other cases of stranded assets no longer considered used and useful or considered excess capacity.
The problem is that in all prior cases the customers remained customers and assets stranded were later replaced with new investments. In effect a full electrification of gas services would mean the complete demise of the gas services company.
Under such circumstances return of stranded original cost investment may not be adequate compensation for the abolition of the gas business.
Underlying the decisions to decarbonize the natural gas distribution sector of the economy appear to be the following explicit and implicit assumptions: