Utilities can’t be for the Paris Agreement and against building electrification

Lila Holzman is the senior energy program manager at As You Sow, and Daniel Stewart is senior research associate at As You Sow. As You Sow represents investors in corporate engagements focused on environmental, social and governance risks including climate change. This contributed content represents the views of the authors, not those of Canary Media.

In the global transition away from fossil fuels, there will be two types of companies: those that leverage their innovative spirit, flexibility and nimbleness to thrive in a clean energy economy, and those that cling to antiquated and polluting energy systems.

For companies clinging to fossil fuels, the economic consequences may be dire. This is especially true for energy companies. When companies pass up opportunities to invest in clean energy technologies that will power the future while continuing to invest in fossil fuels, the risks of stranded assets and missed opportunities grow.

To protect their financial interests, a growing number of shareholders and investor groups — including Climate Action 100+, a coalition of 575 global investors with $54 trillion in assets under management — are pushing companies to align their business and lobbying practices with the decarbonization targets laid out in the Paris Agreement. For gas and electric utilities, that means addressing the enormous climate impact stemming from natural gas delivered to homes and buildings for furnaces, water heaters, dryers and stoves.

Many stakeholders have landed on a solution for addressing pollution from natural-gas use in buildings: phasing out the fuel entirely. By equipping homes with modern, highly-efficient electric appliances that can run on 100 percent renewable energy, it is possible to nearly eliminate climate pollution from buildings, while improving air quality in homes and even lowering building and utility costs.

Yet instead of embracing this solution and preparing for a future in which homes are powered fully by clean energy, many major utilities have dug in their heels on gas — doubling down on what is at best a short-term strategy that lacks a clear pathway to affordable decarbonization.

Gas and electric companies around the country have directed their powerful lobbying efforts to oppose local policies to reduce pollution from gas use in homes. Sometimes, customer money funds these efforts — as with payments to the American Gas Association, which is pushing bills in more than a dozen states to prevent local governments from restricting the use of gas in homes and buildings.

This week, more details emerged on the now nationwide effort to combat state and local government efforts to restrict natural gas and shift to electrification. E&E News revealed details of presentations made by a nonprofit called the Energy Solutions Center asking its 14 utility members to lobby lawmakers, regulators and utility customers with ​“effective, customizable marketing materials to fight the electrification/anti-natural gas movement.” The utilities listed as members of this ​“Consortium to Combat Electrification” include electricity and natural gas utilities such as Eversource, Atmos Energy, DTE Energy, Exelon and FortisBC, as well as natural-gas-only utilities such as Atmos, Enbridge, Southern California Gas, Summit Utilities, UGI Corp. and Washington Gas.

Anti-climate lobbying from the gas industry has not succeeded in stemming the tide of local and state policies to transition to all-electric homes and buildings. In the span of less than two years, more than 40 cities in California and around the nation have passed policies to phase out gas in new construction. Over the last year, multiple states have opened investigations into the long-term future of their gas distribution systems.

While utility-based opposition may be slowing the transition away from gas in homes, it certainly is not stopping it. Assuming that a clean energy future for buildings is inevitable, continuing to invest in natural-gas infrastructure and technologies, while putting off investments in clean solutions, is a financial liability. This approach will not only leave most ratepayers with higher long-term energy costs but also puts them on the hook for billions of dollars in stranded assets when pipelines must be retired decades ahead of schedule to achieve global climate goals.

Sempra Energy’s anti-electrification battle in California

No other entity has more actively opposed the transition to all-electric buildings than Sempra Energy. Sempra is the parent company of Southern California Gas and San Diego Gas & Electric, two California-based utilities that have forcefully opposed local climate policies for buildings. Documents show that SoCalGas used customer money to create and fund a front group, Californians for Balanced Energy Solutions, which has pressured local leaders in jurisdictions with upcoming votes on climate issues. California’s utility watchdog, the Public Advocates Office, recommended that SoCalGas pay more than $370 million in fines for undermining energy efficiency rules by using customer money to lobby against climate policies. In a controversial decision, the California Public Utilities Commission opted not to enforce the fine, but SoCalGas was ordered to return the ratepayer funds used.

Last fall, concerned shareholders from investor representative As You Sow, as well as Calvert Research and Management and the Office of the Illinois State Treasurer, filed a resolution asking Sempra Energy to explain how its lobbying activities — both direct and through trade associations including the American Gas Association — align with the Paris Agreement’s goal to limit temperature rise to 1.5 degrees Celsius.

Sempra Energy attempted to block the resolution, but the Securities and Exchange Commission ruled that the resolution must be allowed to go forward. The resolution will be presented and voted on by shareholders in the company’s annual general meeting on May 14.

By requesting that Sempra Energy align its lobbying activities with the goals of the Paris Agreement, shareholders hope that they can avoid the risk of stranded assets and failed investments that have plagued energy companies in recent years — and avoid the much more catastrophic financial implications of global temperatures rising more than 1.5 degrees Celsius.

In the end, it is bad business for energy companies to attempt to stall the inevitable transition to clean energy that is already in motion. The financially responsible decision is to embrace it.

(Lead photo: Kwon Junho)