New Jersey gas distributors warned that policymakers are too narrowly focused on building electrification as state regulators ramp up a review of the gas industry's future in the Garden State.

The companies raised their concerns in public filings following a technical conference hosted by the New Jersey Board of Public Utilities (BPU) in August, where stakeholders convened to discuss aligning gas utility regulation with state climate goals. In the companies' view, the event programming undercut assurances that the state would explore a range of solutions to decarbonize heating and reduce emissions from homes and businesses.

According to New Jersey Natural Gas Co. (NJNG), the conference agenda and guest list "created a prominent platform to push full electrification of the building sector as a sole solution, while downplaying any meaningful role New Jersey's underground infrastructure assets may have in a clean energy future."

In a Sept. 7 filing, NJNG asked the BPU to acknowledge that it intends to leverage both the gas and electric systems to ensure an affordable, reliable clean energy transition. The New Jersey Resources Corp. subsidiary also asked the BPU to confirm that achieving the state's climate goals will require investments across multiple technologies and a thorough, honest dialogue about consumer choice, costs and potential supply disruptions.

Focus on electrification

New Jersey Gov. Phil Murphy declared in February that the state's policy is "to advance the electrification of commercial and residential buildings," which are the second-largest source of New Jersey's greenhouse gas emissions. In a pair of executive orders, he set a goal of installing zero-emissions heating systems in about 10% of the state's building stock by 2030 and directed the BPU to open a proceeding into the future of gas utilities.

That proceeding, launched in March, will lay the groundwork for gas utilities to create plans to cut sector emissions to levels consistent with the state's goal of reducing statewide greenhouse gas emissions 50% below 2006 levels by 2030. (Docket No. GO23020099)

The BPU additionally proposed a program in June that would facilitate conversions from fossil fuel heating to electric heat pumps.

Despite their focus on electrification, the Murphy administration and BPU have indicated that they will not pursue a mandate. South Jersey Industries Inc. (SJI) called on the BPU to reemphasize that mandates are off the table, noting that several speakers at the technical conference on Aug. 2-3 discussed building electrification requirements.

"Continued calls for mandates and/or presumptions that mandates will be forthcoming in the future will only serve to constrain access to capital that is needed by utilities to make the proper investments in furtherance of our collective clean energy goals," SJI said in a Sept. 6 filing.

The companies, along with multi-utility Public Service Enterprise Group Inc. (PSEG), highlighted the potential for renewable natural gas and low-carbon hydrogen to decarbonize the existing gas grid. They also urged the BPU to consider hybrid heating systems, which use electricity for primary heating and gas for backup.

Utilities stress integrated electric-gas grid planning

According to NJNG and SJI, the technical conference also failed to substantially address Murphy's directive in February to consider the electric grid's capacity to accommodate increased electrification. NJNG asked the BPU to host another technical conference to discuss grid readiness and reliability.

The board should additionally undertake "a comprehensive integrated planning analysis between electric and natural gas distribution systems," NJNG said.

Consolidated Edison Inc. subsidiary Rockland Electric Co. also supported increased collaboration on gas system planning across electric, gas and combination utilities. "Developing a mechanism to balance the allocation of investments, costs and benefits across a mixed service territory is a new challenge for the industry," Rockland said in a Sept. 6 filing.

PSEG urged the BPU to require utilities to file integrated resource plans outlining future supply and demand as the state shifts toward greater electrification. Meanwhile, integrated distribution plans would help the BPU consider distribution system solutions that improve efficiency, reduce costs and ensure safe, reliable and resilient service, PSEG said in a Sept. 6 filing.

Environmental groups also recommended that the BPU implement a long-term planning framework that facilitates "careful public scrutiny of gas utility programs and investments, to avoid overinvestment or inappropriate expansion of the state's gas distribution system."

As part of that framework, the BPU should propose specific targets for 2030 and 2050 that are consistent with the state's climate goals and policies, the groups said in a Sept. 6 filing. They recommended requiring a 75% reduction in delivered gas from 2020 levels by 2050, consistent with the 2019 New Jersey Energy Master Plan's finding that a gas throughput decline on that scale would support statewide emission reduction targets.

Clean heat standard

Colorado's clean heat standard provides an example of target-based long-term planning, the groups said. Both Murphy and the BPU have signaled that New Jersey would focus on developing a clean heat standard, which requires fossil fuel distributors to take actions to lower Scope 3 emissions, which cover gas combustion by customers.

Murphy appeared to recommit to that pathway during Climate Week NYC. Out of six potential building decarbonization policies put forward by the US Climate Alliance, Murphy only committed to exploring a clean heat standard and aligning utility planning with state climate goals.

PSEG said a New Jersey clean heat standard should be part of a suite of decarbonization solutions. The company said utilities should have flexibility to invest in different solutions and demonstrate their emissions reduction potential.

Among the key questions are what actions or fuels would qualify under a New Jersey standard and whether certain fuels would be excluded or promoted, SJI said. "To be sure, a hastily imposed [clean heat standard] that compels electrification will foist substantial equipment costs on New Jersey residents and businesses," the company said.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.