After California, Colorado could become the second state to no longer subsidize natural gas connections

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“The cool thing is you can make this house self-powered,” Myers said. “You don’t have to rely on anything other than electricity from the solar panels on the roof.”

State utility regulators are now considering a proposal to steer other builders away from natural gas. It takes aim at a long-standing financial practice: In Colorado and most other states, anyone who pays a gas bill helps fund incentives to connect new homes to the larger gas system. In effect, this means that ratepayers and developers share the cost of adding people to the gas grid.

Policymakers designed the subsidy decades ago to spread the cost of expanding energy access. Now it’s getting a second look as fossil fuels ravage the atmosphere. California became the first state to eliminate its subsidies earlier this year, citing rising energy prices and its ambitious goals to cut emissions that cause global warming.

Colorado could soon become the second. After releasing the proposal earlier this year, the state’s Public Utilities Commission is expected to make a final decision in early December.

Sam Brasch/CPR News
An all-electric home under construction in the Sonders development in Fort Collins. Thrive Home Builders, the company behind the project, is one of the few developers reconsidering the climate impacts of natural gas-powered homes.

Fueling a fight over housing and energy costs

This plan sparked a debate about the rising cost of living in Colorado. Opponents include the state’s largest utility companies and real estate developers, who argue that eliminating incentives leaves would-be home buyers facing even higher prices.

“All of this just adds cost,” said Ted Leighty, CEO of the Colorado Association of Home Builders. “Right now, housing affordability is one of the biggest challenges we’ve ever seen in Colorado.”

Xcel Energy, Colorado’s largest natural gas and electric company, is currently offering a $741 incentive to developers to connect a new home to the largest natural gas system. It then recovers these costs with taxpayers’ fees. A spokesperson for Xcel said the existing policy “maintains customer choice and affordability in new homes and businesses.”

But environmental groups are skeptical about the impact of the incentives on property prices. Market dynamics play a much bigger role in determining housing prices, said Kiki Velez, a green building advocate for the Natural Resources Defense Council.

Since most people aren’t buying new homes, Velez said rising energy costs are a much more relevant concern. In California, state utility regulators estimated that eliminating incentives would save ratepayers $165 million a year. Colorado regulators don’t have similar estimates, but Xcel Energy spends about $10 million a year to help connect about 14,000 new homes to its gas system.

“It’s bad for customers, it costs them money, and it’s also completely contrary to our climate goals,” Velez said.

Environmental groups have further argued that there is no longer a reason for the incentives, which were originally intended to expand energy access and spread the fixed costs of maintaining the natural gas system. wider.

Those social benefits may have once justified extra costs for all gas customers, said Mike Henchen, who works for the carbon-free build program at RMI, a clean energy think tank previously known as Rocky Mountain Institute.

Now he thinks climate change has changed the equation. If governments follow the advice of scientists, they will adopt policies to encourage residents to switch from gas to electric appliances. The recently signed Inflation Reduction Act could be an early example. Meanwhile, Henchen noted that electrical appliances, such as heat pumps for heating and air conditioning, are improving and their prices are falling.

“If the idea at one point was that natural gas is an essential service to reach as many people as possible, that’s just not true anymore,” Henchen said.

Gene Myers, the sustainability director of Thrive Home Builders, pushed his company to build all-electric homes. He predicts that climate change could lead governments to regulate natural gas out of new developments.

The practical points of selling all-electric homes

During the Sonders development tour, Thrive Builders executives avoided the tense politics around natural gas. Potential buyers wearing hard hats instead heard about the potential consumer benefits of electrical appliances, such as avoiding indoor air pollutants and the potential to lower energy bills.

Lee and Beth Zimmerman didn’t need much convincing. After moving to Fort Collins to be closer to their grandchildren, they rented a house with an electric induction stove. They had to buy new pots and pans that worked with the cooktop but ended up loving it over time.

“I think electric is definitely the path I would go for, whether it’s this builder, this house, or someone else,” Lee Zimmerman said.

The couple agreed they were willing to pay extra to get rid of the natural gas. Whether all-electric homes are more expensive in general is an open question. In their comments to the utility commissioners, KB Home, one of Colorado’s largest builders, estimated that electrical appliances could add $27,000 in construction costs for a standard single-family home. Separate estimates from environmental groups — like RMI and the Southwest Energy Efficiency Project — show they cost less upfront and save thousands of dollars over time through energy savings.

Gene Myers, Thrive’s sustainability director, acknowledged that their all-electric homes are currently expensive. He thinks that’s good since Sonders’ development is aimed at aging baby boomers with disposable income.

Myers doesn’t know what Colorado utility regulators will do about natural gas connections in the short term. In the long term, he suspects that local and state governments will recognize that the construction industry, by one estimate, is responsible for 40% of global warming emissions.

He suspects that regulations requiring a passage of the gas will follow. Myers wants his company to be ready to shape and manage the new rules.

“For me, it’s inevitable,” he said.

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