The California Public Utilities Commission (CPUC) issued a proposed decision in response to SoCalGas’ latest request for a rate hike on Friday, rejecting many proposals from the utility to use customer funds for potential lobbying activities and advancing costly false solutions like hydrogen and renewable natural gas. New restrictions on the utility’s political spending is a major win for climate and environmental justice advocates who have long argued that SoCalGas has been abusing customer funds to fight climate policies. However, the approval of a rate hike for expensive gas pipeline replacements highlights the need for better gas system planning as California shifts to all-electric homes. Earthjustice represented the California Environmental Justice Alliance in the rate case.

“The era of SoCalGas deploying customers’ funds for lobbying against climate and clean air action in California needs to end. This proposed decision from the California Public Utilities Commission helps get us there,” said Matt Vespa, senior attorney on Earthjustice’s Right To Zero campaign. “We’re heartened to see regulators put a stop to SoCalGas’s costly boondoggles that would only keep California hooked on dirty fuels for as long as possible.”

The proposed decision finds that SoCalGas and its parent company, Sempra, inappropriately charged customers for political activities, lobbying efforts, and legal fees that primarily served the company’s interests rather than those of its customers. Specifically, regulators found evidence that SoCalGas used ratepayer funds to advocate for policies promoting the use of hydrogen and gas fuels, while opposing electrification measures.

The proposed decision also prevents SoCalGas from using customer funds to pay for its pricey membership in American Gas Association (AGA), a trade association notorious for fighting climate policy at the local, state, and national level, and rejects numerous hydrogen investments “due to a lack of clear benefits to gas service ratepayers” (PD at 914), including a $15 million hydrogen home demonstration project (PD at 601), purchase of hydrogen passenger vehicles (PD at 564), and hydrogen refueling stations (PD at 613).

“SoCalGas has no business spending millions in customer funds on anti-climate lobbying or false solutions like pumping hydrogen into the gas system. Regulators are telling the utility they can’t keep doing business as usual if that means misspent customer funds and more pollution in our communities,” said Mari Rose Taruc, Energy Justice Director at the California Environmental Justice Alliance.

While the decision rejected major rate hikes to fund political lobbying and dues to entities like the American Gas Association, the CPUC still approved close to a 15% increase in spending for the utility even as customers move away from gas in favor of cleaner technologies — highlighting the need for smarter planning to avoid unnecessary gas system investments as the customer base for methane gas shrinks.

An NPR investigation found that AGA has been leading the effort to ban local governments in dozens of states from passing policies to incentivize or require all-electric new buildings through building codes. In the past, the utility was able to use customer funds to cover trade group association dues, even if trade groups used these funds for inappropriate lobbying that runs contrary to California’s clean energy goals. Utilities in California pay more in membership dues to the AGA than any other state.

Citing decreases in gas demand, the proposed decision rejected SoCalGas’ $18 million annual request to fund “pressure betterment” projects to accommodate increases in gas demand (PD at 104). However, the proposed decision continues to approve significant new investments in the gas system, including over $100 million for replacement of gas distribution lines that will likely become stranded assets as California transitions off fossil fuels in buildings. Despite opening a gas planning proceeding over four years ago, the CPUC continues to lack a framework to evaluate alternatives to new investments in the gas system.

“Most of the proposed rate hike would go towards paying for gas pipeline replacements and related infrastructure that may be avoidable, creating a financial burden for gas customers. Instead of continuing to approve millions on new pipelines, California regulators need to focus on solutions like neighborhood-scale electrification projects,” noted Vespa.