NW Natural plan to reduce emissions deemed insufficient by Oregon utility regulators

Oregon’s utility regulators on Tuesday told the state’s largest gas supplier, NW Natural, that its long term plan to reduce greenhouse gas emissions in coming years is insufficient to meet state climate goals.

Tuesday’s meeting of the Oregon Public Utility Commission reviewed NW Natural’s integrated resource plan, which all utilities are required to submit every two years. The 2022 resource plan essentially operates as a roadmap for how NW Natural plans to meet Oregon’s climate goals while still keeping rates reasonable for its customers.

The utility commission board voted unanimously to acknowledge short-term plans with some tweaks, but the three-member board opted not to acknowledge the long-term plan. The commissioners broadly described it as a sign NW Natural needs to make more realistic efforts toward clean energy.

Despite the ruling, board members repeatedly acknowledged a fossil fuel company like NW Natural faces many challenges in the years ahead as Oregon’s climate goals require strict reductions in greenhouse gas emissions.

“Our job here is to balance the change that we need to see with the stability that we also need to see,” board chair Megan Decker said. “That is very difficult.”

The decision comes as NW Natural has faced increasing pressure over its business from climate activists, who believe Oregon should increasingly move away from natural gas as a fuel source. Adding to the pressure are state climate goals adopted under former Oregon Gov. Kate Brown and the state Department of Environmental Quality’s subsequent Climate Protection Program, which require utilities to reduce greenhouse gas emissions by 90% by 2050.

The 2022 integrated resource plan was NW Natural’s first since the Climate Protection Program came into place.

Carra Sahler, a staff attorney with Lewis and Clark Law School’s Green Energy Institute, said Tuesday’s hearing was unlike integrated resource plans the utility has faced before.

“Because this is a 20-year, forward-looking plan, there’s a lot the company doesn’t know about what the future looks like. There’s a lot the commissioners don’t know,” Sahler said. “It is, I would say, not typical for commissioners to express the kinds of concerns that they did today.”

A costly transition

While Oregon’s electricity providers have faced challenges getting the Public Utility Commission to acknowledge their own resource plans, NW Natural has faced even more scrutiny given that its business is almost entirely dependent on the use of fossil fuels.

The commissioners said that NW Natural has been a national gas industry leader in trying to reduce its greenhouse emissions, but they implored the company to move faster given the urgency of the climate crisis.

“The fact that NW Natural has been a leader, and also has to do more to meet this moment is real,” commissioner Letha Tawney said.

Staff for the Oregon Public Utility Commission had previously critiqued NW Natural’s integrated resource plan because of its reliance on renewable natural gas, a type of biogas made from decomposing organic matter. Renewable natural gas is often produced by capturing byproducts from landfills, livestock operations or wastewater treatment. NW Natural has pointed to this gas as a way it can start to substantially reduce its greenhouse gas emissions without turning to electrification.

But renewable natural gas isn’t currently available in Oregon, which means NW Natural would need to invest in states as far away as New York. That type of investment could end up being costly to NW Natural’s customers in the future if the gas proves more expensive than projected.

Further, the staffers said, NW Natural’s long term plan did not adequately consider that Oregon’s Community Climate Investment program would allow the company to buy greenhouse gas credits at a cheaper rate than renewable natural gas — a move that would likely save money for gas customers on their monthly bills.

According to Oregon’s Citizens Utility Board, an organization that advocates for customers in the state, renewable natural gas can cost up to $25 per unit compared to up to $4 a unit for natural gas.

“We’re real concerned about the cost of that,” said Bob Jenks, CUB’s executive director. “Customers should have some warning of how costs are going to flow in the system over the next few years.”

The Public Utility Commission board members also chastised NW Natural for having a long term plan that relied on the state developing hydrogen based fuels to replace methane gas. Staffers for the commission described the plan as a gamble on an undeveloped technology.

In a written statement, NW Natural said it views renewable natural gas as an “important and necessary part of a decarbonization path for our region and our country.” The company also said it acknowledge the questions raised about its compliance with the state’s Climate Protection Program.

“We will work with the commission to answer their questions under the law as we move forward with our CPP compliance plans,” the company statement reads.

A signal to NW Natural

Following Tuesday’s decision, NW Natural will need to revise its short term plans to meet a number of recommendations by the Public Utility Commission staff.

Some of those questions revolved around the necessity of a planned facility upgrade to a gas distribution system in Forest Grove. Opponents have said the expansion would result in ratepayers footing the bill for fossil fuel infrastructure at a time when the state needs to reduce emissions. They have also said it’s unclear if these investments will be needed in the future as more people switch from gas appliances to electric counterparts.

Commissioners gave their blessing to the planned upgrade, but said they felt forced to do so by the way NW Natural presented its plan. Greer Ryan with the nonprofit advocacy group Climate Solutions said she hopes the commissioners continue to question NW Natural’s gas infrastructure investments.

“We cannot afford to let the gas utilities, and NW Natural in particular, dig themselves into a deeper hole — put us all on the hook for millions and millions in investments that will likely become stranded assets,” Ryan said.

The Public Utility Commission also heard concerns about a proposed replacement for a liquified natural gas “cold box” that would store fuel in Portland. That site has faced criticism as being at risk of damage during a major earthquake.

Decker described the back-and-forth over NW Natural’s integrated resource plan as a “healthy process” that is trying to find a path forward for a major Oregon utility as the changing climate demands aggressive reductions in greenhouse gas emissions.

Environmental and climate advocates have been less sympathetic with NW Natural. They’ve pointed out the company’s efforts to stop natural gas regulation in the state.

Earlier this year, NW Natural contributed more than $1 million to overturn the city of Eugene’s ordinance banning natural gas in new low-rise residential construction. The utility, along with Oregon’s other two gas providers — Avista and Cascade Natural Gas — has also filed a lawsuit to roll back the state’s Climate Protection Program.

Sahler, the Green Energy Institute attorney, said ultimately the Public Utility Commission and NW Natural will have to find a long term plan for the fossil fuel company.

“We do need to make sure the company is incentivized not to continue growing its gas business because that’s exactly the worst thing they could be doing,” Sahler said.

NW Natural’s next chance to gain the Public Utility Commission’s approval for its long term efforts will come with its 2024 integrated resource plan.