The race to phase out natural gas appears to be shifting into lower gear as regulators, policymakers and the public sharpen their focus on energy affordability and reliability, according to gas utility leaders.
Gas utilities and their regulators are still prioritizing sustainability and emissions reduction, the companies said at the American Gas Association (AGA) Financial Forum in Palm Desert, Calif. But company leaders and industry representatives perceived a rebalancing of priorities after several years of intense focus on decarbonizing the gas grid and electrifying buildings in parts of North America.
"The future needs to be more evolutionary than it needs to be revolutionary," Enbridge Inc. President and CEO Greg Ebel said during a May 20 presentation to equity analysts and money managers. "I think the public, politicians, policymakers are starting to realize you've got to do this in a deliberate manner that actually assures affordability, reliability, sustainability."
Gas utilities pointed to several reasons for the renewed focus on affordability and reliability: Concern over customer bills amid persistent inflation, a US manufacturing revival that depends on cheap energy, and a growing recognition that intermittent renewable power requires a dispatchable backstop.
Most recently, datacenters that support energy-hungry artificial intelligence models have turned to the gas industry for reliable baseload power, companies and AGA analysts said.
One Gas Inc. President and CEO Sid McAnnally had another view. Several years ago, conversations around how the energy system should work were largely philosophical, but as policymakers implement decarbonization measures, the real-world impacts are coming into focus, he said.
"While there are some people who are agnostic to the price of energy, that's not most people," McAnnally told S&P Global Commodity Insights in an interview. "And so I think we're having a more meaningful conversation at this point about the evolution of the energy system that will be more productive in the long run."
Narratives versus growth trends
To be sure, policies to restrict gas use and promote electrification continue to evolve across the US and at the federal level under President Joe Biden.
But even in California, the birthplace of the gas ban, the narratives around the demise of gas use do not square neatly with growth trends, Southern California Gas Co. CEO Scott Drury said. Despite a suite of local and state policies aimed at electrifying heating, only Texas and Ohio added more residential gas customers than California in 2022, according to the AGA.
To understand this apparent mismatch, Drury said it was important to recall that California regulators remain equally focused on safety, reliability and carbon management. These priorities give SoCalGas ample opportunity to invest in its gas system, he said.
In recent years, the California Public Utilities Commission has ended subsidies for gas line extensions and incentivized building electrification. But it has also required gas utilities to procure biomethane and approved an increase to working gas capacity at SoCalGas' Aliso Canyon gas storage facility to preserve reliability and guard against commodity price shocks, Drury noted.
"We feel very good about the actual growth that we've experienced based on decisions that policymakers and regulators have made in California over the last five years, six years," Drury said during a May 19 panel.
Polling the electorate
In Ebel's view, jurisdictions that maintain energy choice will win out. In explaining Enbridge's rationale for acquiring gas utilities in Idaho, North Carolina, Ohio, Utah and Wyoming, he said laws prohibiting restrictions on gas use in those states were "really key."
In its legacy Canadian gas utility business, Enbridge recently faced a regulatory decision that signaled the end of the gas system, according to Michele Harradence, president of gas distribution and storage at Enbridge. In December 2023, the Ontario Energy Board voted to require homes and small businesses to pay the full upfront costs of connecting to the gas grid.
But Ontario lawmakers stepped in to overturn the decision, temporarily restoring a policy of spreading new hookup costs over a 40-year period. The Ontario government dubbed the legislation the Keeping Energy Costs Down Act.
"That government was very much polling its electorate and they knew that the story was about affordability right now," Harradence said during a May 19 panel.
Opportunity in 'future of gas' proceedings
In the US, at least 14 states have opened future of gas proceedings, according to the AGA. These regulatory proceedings seek to align gas system planning with state climate goals, often through reduced investment in fossil fuel infrastructure.
The early proceedings tended to take a negative view on the gas industry, but companies have lately sought to turn these venues to their advantage, said Daniel Lapato, AGA's associate vice president for state affairs. Gas utilities highlight their safety records, as well as their role in keeping energy costs low, supporting economic development and maintaining reliable service during periods of peak demand, he said during a May 19 panel.
The proceedings also allow industries that depend on the gas industry to share their experience, Lapato said.
"What these proceedings have done from an energy landscape perspective is invited a wider audience into the conversation," he said. "And that wider audience is now adding context to what energy policy does and more specifically how natural gas utilities are serving their needs and their wants."