Switching California from gas to electricity, one neighborhood at a time

SB 1221 also requires that zonal decarbonization projects be cost-effective, she said: Whatever the utility spends on the project must be less than the cost of the pipeline investments they’re avoiding.

At the same time, the customers being asked to commit to switching to all-electric heating and appliances have to be compensated for the extra cost of making that switch and paying the electric bills that will result, she said. And the law requires utilities to target communities that are most likely to face economic harm from being stuck paying for increasingly expensive gas service.

Under the bill, the California Public Utilities Commission has until July 2026 to establish the program. That gives some time to work through these details, Velez said. But the first step in identifying the likely targets of the program will come in mid-2025, when California’s major gas utilities — PG&E, Southern California Edison, and San Diego Gas & Electric — must provide maps to the CPUC with the location and cost of planned gas-distribution investments overlaid with information on ​“disadvantaged communities, tribes, and other priority decarbonization zones,” she said.

Southern California Gas and SDG&E, which are both owned by Sempra, haven’t yet developed those maps, she noted. But PG&E has created one as part of its ongoing work on gas-to-electric switching, which includes its first ​“zonal electrification” pilot that will electrify about 1,200 state university–owned housing units.

“In theory, then, PG&E can hit the ground running with proposing larger-scale pilots,” Velez said. Menten agreed that PG&E has ​“literally hundreds of projects they could move forward that hit that cost-effectiveness criteria.”

But Menten cited one provision of SB 1221 that she fears might dissuade utilities from bringing pilot projects forward: the way it treats the cost of heat pumps and other electric-powered equipment that utilities will likely need to subsidize for participants. Under the bill, utilities are barred from treating these costs as a capital expenditure on which they earn guaranteed rates of profit.

An early version of the bill would have authorized the CPUC to use its discretion in determining ​“where capitalization makes sense and where it doesn’t,” Menten said. But in a legislative session dominated by attempts to pass regulations to contain rising utility rates, that language was stripped from the bill before its passage.

“Ultimately it’s better for ratepayers to not have that capitalization,” she said. But by asking a utility to forgo the profits it would have earned from pipeline investments in exchange for a zonal electrification alternative, ​“you’re asking the utility to choose to not make money.”

Menten noted that these pilot projects are small in scope — SB 1221 limits them to no more than 1 percent of a utility’s customers — and that any larger-scale policies that emerge from them would be able to revisit the question of how gas utilities might recover foregone profits.

On the other hand, SB 1221 makes it possible for utilities to propose pilot projects but doesn’t require them to do so, she noted. The absence of a capital-recovery structure for the equipment going into homes and businesses could be ​“a disincentive under the current regulations for utilities to bring this forward.”

Another challenge lies in working with residents of targeted neighborhoods to make sure they’re willing partners in electrification, she said. At her previous job with community energy provider Ava Community Energy, Menten worked on a California Energy Commission–funded project that engaged with communities in the San Francisco Bay Area to gauge their interest in and capacity for switching from gas to electric.

The final report from that project noted that ​“residents have concerns regarding home electrification including upfront costs, lack of familiarity with electric equipment, and increases in electricity costs. Significant outreach and education, along with upfront funding and potentially bill guarantees, will be key to project success.” Only one project ended up going forward as part of that program.

Menten highlighted other issues, ranging from how to handle ​“ghost homes” — homes that are either vacant or occupied by people who decline to engage in the process — to forming partnerships with ​“trusted messengers” like community and faith groups.

“These are block-by-block projects,” she said. ​“You really need to understand the dynamics of each block.”