The Secret Fee on Your Utility Bill That's Helping Fund the Climate Crisis

A new report lays out how a common practice of subsidizing new natural gas lines needs to be phased out.

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Photo: Marijan Murat/picture-alliance/dpa (AP)

Your boring, dry utility bill is helping fuel the climate crisis. For many customers across the U.S., a chunk of the money paid to utilities each month goes towards building more natural gas infrastructure. Now, as New York City moves this week towards voting on a bill that would ban new natural gas hookups, a report released by the Rocky Mountain Institute (RMI) lays out why customers need to stop footing the bill—to protect people’s wallets and the planet.

Each year, utilities install thousands of new customer gas lines. They’re being put in the ground at a rate of around one new line every minute in the U.S., locking in the use of gas for years to come. The costs of these new gas lines aren’t paid for by contractors building homes and apartments or the utility itself. Instead, customers subsidize them.

This made a lot of sense in the past. New customers got help connecting buildings to the natural gas line, helping to expand access to energy and keep housing costs down. In return, existing utility customers could reap some of the benefits of having more people contribute financially to the system.

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“The premise is that this is an important and useful service that should be universal,” said Sherri Billimoria, a manager in RMI’s Carbon-Free Buildings program and a co-author of the report. “It was also considered a good investment. The utility, aka all customers and ratepayers, will front this money for a line extension. Then, this customer will be a gas customer forever, so over the course of their bills, they will pay back this amount.”

But that calculus is changing given the risks natural gas poses to the climate as a potent source of methane emissions. An increasing number of cities and states are working on phasing out natural gas; in August, California passed a new set of building codes intended to incentivize electric appliances and wind down gas hookups, while the New York City council is set to vote on a similar measure on Wednesday. The future without natural gas is coming into view, and it’s getting harder and harder to make the argument that utilities should keep charging ratepayers to lock in more gas infrastructure that could become obsolete as more states and cities set decarbonization targets.

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“We don’t expect to use gas in the future in the same ways that we have in the past,” Billimoria said.

Billimoria explained that the current system also serves to incentivize people building new homes and buildings to choose an option that may not, in the longer term, be in the consumer’s best interest.

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“It creates incentives for the developer to choose gas because the line—at least a portion of it, often all of it—is free to the developer,” she said. “In fact, in the absence of that allowance, or even sometimes with that allowance, it would actually be cheaper to build all-electric. We know that all-electric new construction is cost-effective in many, many scenarios. The developer might be choosing the thing that is cheapest to them, but as we look to the future, we can expect that gas prices increase as customers leave the system but the fixed cost of the system remains the same. The customer who chooses gas today because that’s what their developer tells them to do doesn’t know that they might be saddled with pretty hefty gas bills in the future.”

Among this backdrop of change has also come a steep increase in money being spent on gas hookups. The money U.S. utilities spent on construction expenditures tripled, ballooning from around $5 billion in 2009 to more than $20 billion between 2011 and 2019. (Before this, expenditures had remained pretty constantly hovering above or below $5 billion since 1987.) Part of this expansion is thanks to aging infrastructure that needs additional maintenance—but expansion of physical infrastructure like gas lines is also built into how public utilities turn a profit.

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The issue of challenging the allowance of utility money for gas hookups is a pretty new one: only Washington and California have made minor proposals or changes. However, gas utilities have been some of the vocal opponents of building electrification while also working behind the scenes. It’s not out of the question to assume that they’d be opposed to any move that would make it harder for more people to pay for more natural gas. It remains to be seen if the industry will see the writing on the wall and work to ensure a gas-free future—or keep fighting to maintain the status quo, regardless of the cost to consumers.