California regulators rejected several methane leak abatement programs proposed by Sempra gas utilities, finding that the strategies would not produce enough emissions reductions to justify their costs.

Monitoring for methane leaks with aircraft, improving an algorithm to identify high-risk excavations, and reducing planned gas releases at storage facilities were among the programs partly or wholly disapproved by the California Public Utilities Commission in June 29 resolutions. The decisions led to disapprovals of $75 million in requested funding for Southern California Gas Co. and about $5 million for SoCalGas' smaller peer, San Diego Gas & Electric Co.

More broadly, commissioners gave utilities and PUC staff directions to improve the cost effectiveness of the programs, which are universally expensive when measured against the PUC's internal benchmark.

The resolutions capped the companies' 2022 Natural Gas Leak Abatement (NGLA) Compliance Plan and ratemaking forecast filings. The companies filed the plans to propose pathways for meeting methane emissions reduction targets, chiefly through 26 previously established best practices for leak abatement.

A 2016 California law required utilities to reduce fugitive methane emissions from gas infrastructure 40% from 2013 levels by 2030. The California Air Resources Board (CARB) increased the target to 50% in its 2022 scoping plan for achieving statewide carbon neutrality.

High cost of cutting fugitive emissions

The CPUC approved $429.5 million of the $504.5 million that SoCalGas requested in its 2022 NGLA funding proposal. Commissioners approved $19.3 million of San Diego Gas & Electric's $24.3 million request.

In fact, none of the individual programs proposed by the companies met the PUC's cost-effectiveness threshold, calculated by dividing a program's total cost by its total emissions reduction. PUC staff then compares that figure — the program's standard cost effectiveness — against the avoided costs of complying with the state's cap-and-trade program and the avoided social cost of methane, which together equal about $22/Mcf.

While none of the programs cleared that benchmark, and the overall plans would increase customer rates, they still delivered necessary emission reductions. However, some endeavors remained too costly, particularly in light of revenue requirement increases of 55% at SoCalGas and 63% at San Diego Gas & Electric since 2016, the PUC said.

Commissioners disapproved spending to continue developing a risk-prevention algorithm that would support the 811 call-before-you-dig program by proactively identifying contractors with a history of pipeline strikes. PUC staff found that the program would generate relatively small forecast emission reductions despite a high standard cost effectiveness: $73/Mcf for SDG&E and $357/Mcf for SoCalGas.

The PUC disapproved a "significant expansion" of San Diego Gas & Electric's aerial-based methane sensing technology, which uses aircraft to spot fugitive emissions. The program could be cost effective if it reduced emissions from both utility and nonutility sources, staff found. But when used solely to tackle San Diego Gas & Electric emissions, its standard cost effectiveness soared to $244/Mcf, staff found.

The PUC denied a requested expansion of SoCalGas' aerial methane mapping program, resulting in a nearly $4.9 million revenue requirement reduction.

Commissioners disapproved $65.2 million in requested funding for projects to reduce gas storage facility blowdowns, or intentional methane releases during maintenance and operations. SoCalGas has already achieved significant storage facility emission reductions since 2015 by installing new components and improving blowdown planning procedures, the PUC said.

Future steps to cut costs

However, commissioners directed SoCalGas to consider developing a way to track blowdown emissions as part of its research and development program. The findings could support future equipment investments, it said.

The PUC directed SoCalGas and San Diego Gas & Electric to focus their research and development programs on improving the cost effectiveness of their leak abatement programs. The commission also recommended that CARB and CPUC staff identify options for independently verifying emissions estimates from NGLA programs.

Citing concerns about increasing rate pressure, commissioners directed staff and the CARB to begin convening work groups Sept. 30. The focus should be finding ways to balance the NGLA program's dual priorities of "achieving maximum methane emission reductions and cost-effectiveness," the PUC said.

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