California Natural Gas Utilities Propose New GHG Emissions Reduction Calculation Methodology for Biomethane Projects

January 31, 2022

Energy Law

On January 26, 2022, Pacific Gas and Electric Company, Southern California Gas Company, San Diego Gas & Electric Company and Southwest Gas Corporation (“Joint Utilities”) submitted to the California Public Utilities Commission (“CPUC”) an Advice Letter entitled Second Supplemental: Proposed Methodology for Estimating Greenhouse Gas Emissions Reductions for Certain Biomethane Projects Eligible Incentives. This submittal would define how greenhouse gas emissions reductions from biomethane injection projects associated with dairy digester and other projects are calculated and reported to the California Air Resources Board.


On December 17, 2020, the CPUC approved Decision 20-12-031, which adopted the Standard Renewable Gas Interconnection Agreement and required the Joint Utilities to report to CARB on the Cap-and-Trade auction proceeds for the $80 million biomethane monetary incentive fund. The incentive fund was created in 2015 to encourage biomethane producers to build and operate projects in California that interconnect with the Utilities’ systems. Decision 20-12-031 requires the Joint Utilities to establish a mutually acceptable method for estimating greenhouse gas emission reductions resulting from the projects receiving funds to interconnect to gas pipeline systems operated by the Joint Utilities.

On March 17, 2021, the Joint Utilities submitted their Advice Letter adopting CARB and U.S. EPA recognized methods for calculating greenhouse gas emission reductions from dairy digester projects, landfills, and water resource recovery facilities. On April 6, 2021, the Sierra Club and Leadership Council for Justice and Accountability protested the Joint Utilities’ Advice Letter arguing that the proposed methodologies would lead to double claiming of greenhouse gas reductions between biomethane interconnection incentives and upstream methane capture projects, such as dairy digester projects. The CPUC also determined, independently of the protests, that the Joint Utilities’ proposed calculation methodologies were not appropriate for reporting the greenhouse gas benefits of expenditures of Cap-and-Trade auction proceeds under section 95893(e)(4)(B) of the Cap-and-Trade Regulation.

Current Action

In response to the protest, the Joint Utilities consulted with CARB and prepared this supplemental Advice Letter. In this submittal, the Joint Utilities propose to limit reporting the greenhouse gas emissions reductions associated with facilities used to condition and transport biogas downstream for injection into a utility pipeline. Thus, this would include biogas collection lines; biogas conditioning and upgrading facilities; pipeline lateral; compression; and the utility interconnection receipt point. The Joint Utilities’ reporting would exclude biogas production facilities, and any emissions from the utility pipeline extension downstream of the interconnection point.

For a biomethane pipeline interconnection incentive, the reported greenhouse gas benefits would only include those associated with reduced on-site combustion emissions and displaced fossil fuel use by biomethane end users. The reporting would exclude upstream methane emissions captured by the dairy digesters or other technologies.

Next Steps

Interested stakeholders have until February 15, 2022, to submit protests of the supplemental Advice Letter, after which the Joint Utilities will have the opportunity to respond. The CPUC’s Energy Division will then consider the submittals and, if the Joint Utilities’ proposed methodologies are acceptable, will approve the Advice Letter. The Joint Utilities’ calculation methodologies will go into effect on the date of CPUC approval or as of the Utilities’ requested date of February 25, 2022, at the CPUC’s discretion.