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Must a gas utility pay its own customers to unhook in the name of climate change? Colorado is about to find out

Atmos Energy, which provides only natural gas, is protesting environmental group demands that it help customers switch to clean electricity
Texas-based Atmos Energy has an office in Salida, seen here Feb. 8, 2024, and serves about 127,000 gas-only customers in Colorado. Many of Atmos’s customers in Colorado get their electricity from local nonprofit co-op electric associations. (David Krause, The Colorado Sun)

Atmos Energy is a utility serving natural gas at a profit to 127,000 Colorado customers. By design, Atmos doesn’t generate electricity.

So should Colorado in effect demand that Atmos start paying for its own funeral? By requiring the gas-only utility to offer rebates and other incentives to customers who spurn natural gas for clean electric heat in the name of fighting climate change?

That’s what the Public Utilities Commission must decide in coming days as it considers Atmos’s management plans for the next few years. The plans are required by state law, for natural gas utilities to lay out how they will join electric utilities in fighting climate change by cutting energy use and lowering greenhouse emissions caused by natural gas burning and leaky pipes.

For-profit utilities like giant Xcel Energy, which serves both gas and electricity to customers, are required by state law to clean up fossil fuel emissions through a number of strategies. They must gradually retire coal and gas-fired electric plants in favor of renewables like solar and wind, for example. They must also provide incentives for customers to switch from gas-burning appliances like furnaces and hot water heaters to clean electric heat pumps and tankless instant-electric water heaters.

Many of Atmos’s Colorado gas customers in mountain and plains communities such as Greeley, Craig, Salida and Canon City get their electricity from local nonprofit co-op electric associations.

A coalition of environmental groups says gas-only utilities like Atmos should fall under the same climate-friendly rules – other states have pushed them to comply. Colorado needs statewide electrification to meet its climate goals, the groups say. Plus, customers captive to a monopoly utility should have equitable access to cleaner, more climate-friendly appliances as their Denver counterparts.

“Electrification is a key pillar of Colorado’s decarbonization strategy and all of Colorado’s gas utilities must implement beneficial electrification” as part of the state’s strategy to cut carbon, the groups argue, in Earthjustice legal filings on behalf of the nonprofit Southwest Energy Efficiency Project. Greenhouse gas goals set by the state call for decarbonization of the energy used for all buildings by 2050, Earthjustice attorney Michael Hiatt said in an interview Thursday.

“It’s a long journey to get there, but we need to take those first steps now,” Hiatt said. “Unfortunately some of the gas-only utilities are refusing to even begin to take these first steps.”

Atmos did not return messages seeking comment on the PUC review. The company had 2023 revenues of about $4.3 billion, and is a gas-only distributor to more than 3 million customers in eight southern and southwestern states. But the Texas-based utility’s position is clear from briefs filed with the commission. It would be “unlawful and unfair” to force Atmos to promote electrification, the company’s attorneys argue.

  • For an electric or a combined gas-and-electric utility, requiring electrification incentives is an “opportunity for growth,” Holland & Hart attorneys said in the filings. For Atmos, it’s a revenue cut. Atmos cites the state’s utility consumer advocate in saying a gas utility “should not be forced to pay to put themselves out of business.”
  • Such a mandate would in effect make Atmos’s remaining gas customers subsidize electricity purchases by Atmos customers who cut their gas use with clean appliances. That’s not only unfair, it goes against state rules saying consumers can only be charged for services or facilities actually used by the customer.
  • State law may encourage electrification for the purpose of slowing climate change, but it doesn’t require gas-only utilities to shoot themselves in the foot with electric incentives, they argue. In fact, Colorado law expressly prohibits the PUC from mandating removal of gas appliances, or blocking natural gas connections to new development, as some communities have considered.
  • Finally, there’s no guarantee as Colorado’s energy market stands now that switching to electricity is good for the environment, Atmos argues. Xcel and other electric utilities still generate a good portion of their supply from coal- or gas-fired power plants, which still pump significant greenhouse gases into the atmosphere.

SWEEP and Earthjustice contend PUC backing would not force Atmos to start making appliance payouts right away. It would simply require the company to start designing an electrification incentive system and come back later with the details.

Besides, they argue, most Atmos customers won’t be giving up gas entirely even if they do electrify. Many will still want gas-fired backups for their home heating, or they won’t electrify all appliances at once – they’ll still want gas for one or more of a list including a furnace, hot water heating, ovens or stovetops.

Gas-only utilities in Vermont and Utah are offering electrification incentives, SWEEP and Earthjustice point out, though both parties in the dispute agree it’s not clear if state regulators there required the incentives or the companies volunteered them.

“Beneficial electrification programs will decrease the company’s revenues,” Earthjustice attorneys wrote. But electrification incentives offered by other parties already cut into gas-only utility revenues, they add. Federal, state and city governments already have a wide array of appliance rebates or tax credits in place.

The PUC will likely address the dispute at one of its next two weekly meetings, Hiatt said. SWEEP and Earthjustice are asking the PUC to overrule parts of an approval of Atmos’s required “demand-side management plan,” and direct the company to start planning electrification incentives.

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