BCSEA Supports RNG Blend; Opposes RNG Connections

BCSEA Supports RNG Blend; Opposes RNG Connections

December 4, 2023

By Bill Andrews and Tom Hackney

In its November 16, 2023 final argument in the BCUC’s two-year proceeding regarding FortisBC Energy’s Renewable Natural Gas (RNG) Program, BCSEA strongly supported FEI’s proposed RNG Blend service that would provide an initially small but growing blend of RNG to all sales gas customers, to be paid for by the same sales gas customers. However, BCSEA opposed approval of FEI’s proposed Connections service that would provide all new residential customers with 100% RNG, permanent for the life of the building, at the same price other customers pay for Blend natural gas. BCSEA said that RNG that would otherwise have gone to the Connections Program should be re-directed to the Blend Program.

BCSEA objected to the Connections proposal on the following grounds:

  • It would be better for FEI customers and for the Province’s decarbonization objectives to reject the Connections Program and to apply the RNG to all existing and new customers through the Blend Program.
  • The Connections Program would not promote economic efficiency. One-hundred percent RNG is not more cost-effective than electricity for zero-carbon heating in new residential single family homes in BC. The Connections Program would distort the competitive marketplace for new BC home heating solutions by intentionally undercutting the cost-competitiveness of electric heat-pump solutions.
  • The Connections Program involves material cross-subsidization by non-Connections customers, contrary to fundamental cost-causation principles of rate making.
  • The Connections Program would distort the competitive market for low carbon new home heating solutions in BC.
  • The Connections Program states that the rate is permanent for the life of the building, in order to try to meet local government’s low-carbon residential heating requirements. However, the BCUC has no legal authority to purport to make a rate immune from change by future BCUC decision-makers.
  • The Connections Program cannot be justified on affordability grounds.
  • Approval of the Connections Program would not be just and reasonable, would not be in the public interest, would not be consistent with ratemaking principles and practice, and would not be ‘not unduly discriminatory.’

 

BCSEA supported retention of the existing premium ($7/GJ) for Voluntary RNG purchased by sales customers other than Natural Gas for Vehicles (NGV) customers. For NGV customers, e.g., purchasers of compressed natural gas (CNG) for trucks and vessels and liquefied natural gas (LNG) for large vessels, BCSEA supported an increase in the Voluntary RNG price to the average cost of RNG supply. BCSEA noted that the GHG reductions from NGV customers’ use of RNG will not contribute to meeting the emissions cap for natural gas utilities applicable to FEI’s other customers.

The evidence in the proceeding indicated sufficient RNG supply within the cost and quantity cap under the Greenhouse Gas Reduction (Clean Energy) Regulation (GGRR) to serve FEI’s RNG Program over the short term, which was the limit of the scope of the proceeding. However, BCSEA expressed significant concerns about the intermediate-term and the long-term viability of RNG and clean hydrogen as defined in the GGRR as a feasible and cost-effective mechanism to achieve stringent GHG-reductions from the BC sectors that currently rely on natural gas delivered by FEI. However, these concerns were beyond the scope of the proceeding.

BCSEA filed intervener evidence by Energy Futures Group (EFG) in the BCUC proceeding. EFG compared the combined capital and operating costs of providing space heating, hot water, cooking, and clothes drying for an average new residential dwelling in BC with 100% RNG versus electricity, over a 20-year period, assuming FEI’s average cost of acquiring RNG and excluding incentives for electric heat pumps.  The purpose was to analyze whether and to what extent electric heat pumps have become a cost effective alternative to gas fired equipment for new residential space and water heating, addressing the degree to which gas connections and equipment could be considered a necessity for new residential construction. EFG concluded that FEI’s proposed Connections service would be a more costly zero-carbon solution than electricity for heating new residential homes in BC.

BCSEA has strongly supported FEI’s RNG Program since it began in 2010, because RNG used in substitution for conventional (fossil) natural gas in FEI’s distribution system provides a simple and effective method of reducing GHG emissions in BC.

FEI’s final written reply argument is due by December 8, 2023. A decision by the BCUC proceeding panel is expected in 2024.