Business groups and environmental advocates expressed divergent views on a proposal by the Massachusetts Department of Public Utilities that would require new gas customers to cover the entire cost of connecting to the system.

The department’s draft policy would end the utility practice of including the costs of connecting new customers into rate base. This is currently allowed if the utility expects to recover the costs through distribution fees from the new customers over an extended period.

The DPU, along with the state Department of Energy Resources and Attorney General’s Office, has expressed concern that the practice is not in line with the state’s climate laws and risks creating stranded costs as the state transitions away from natural gas (DPU 20-80). (See Mass. DPU Proposes Major Shift in Gas Line Extension Policies.)

The department proposed to allow exemptions to the requirement for new customers to cover their entire connection costs if they can prove the project would create a “demonstrable reduction” in carbon emissions, has no “feasible alternatives” to gas service and is consistent with the state’s statutory climate limits.

Climate and consumer advocates have supported the proposal, while the gas utilities, real estate groups and large business associations have voiced their opposition. Many of the arguments raised in the proceeding reflect significant underlying disagreements about the future of the natural gas system as the state decarbonizes. In an earlier phase of the proceeding, the DPU concluded that decarbonization of the state’s gas network should be based on electrification. (See Massachusetts Moves to Limit New Gas Infrastructure.)

In comments submitted in early April, gas distribution companies argued that the proposal would increase the cost of new gas service and push developers to use heating oil in new buildings. Eversource Energy wrote it would create “significant unintended consequences that will work directly against the commonwealth’s ability to reach its 2050 goals.”

National Grid and the Associated Industries of Massachusetts (AIM) — whose membership includes both National Grid and Eversource — both argued that the proposal would hurt economic development in the state.

“We are concerned that this proposal could impede economic growth, contribute to higher energy costs, and hinder vital housing and infrastructure development,” AIM wrote. “This change is likely to impose unreasonably high upfront costs to necessary energy infrastructure for commercial and industrial facilities.”

The Greater Boston Real Estate Board wrote that the draft policy would hurt housing development in the state and said the exemptions included in the proposal “offer no benefit.” It also argued that, in light of recent delays to offshore wind projects, “the department should reconsider the climate impact of this draft policy as more load is added to an already constrained electric grid.”

In contrast, the Massachusetts AGO — which serves as the official ratepayer advocate in the state — expressed support for ending the existing line extension policies, arguing that “such outdated policies encourage expansion of the gas system and increased gas infrastructure investment at a time when the commonwealth has made clear and decisive steps towards decarbonization through electrification by 2050.”

The AGO highlighted the emissions sub-limits in Massachusetts’ 2025-2030 Clean Energy and Climate Plan, which requires a 49% reduction in both the residential and the commercial and industrial heating and cooling sectors by 2030 (relative to 1990 levels).

“The LDCs’ [local gas distribution companies’] current policies are both antithetical to achieving the commonwealth’s climate mandates and inconsistent with the financial interests of ratepayers,” the AGO wrote.

It warned of a “price vortex,” in which customers exiting the gas system would increase distribution costs for the remaining customers. This phenomenon would likely disproportionately affect low- and moderate-income households that cannot afford the upfront costs required to convert to electrified heating, the AGO wrote.

“Line extension allowances exacerbate the price vortex because the new gas investments will become stranded costs as customers reduce natural gas consumption and possibly leave the gas distribution system before the end of the assumed repayment period,” the AGO noted.

Supporters of the DPU’s proposal highlighted a 2024 analysis by Groundwork Data, which found that the costs of all-electric construction have reached near parity with buildings that rely on fossil fuels and concluded that all-electric buildings will likely provide long-term savings for building owners. (See Report Outlines Cost Savings of All-electric Buildings in Mass.)

“Despite claims to the contrary by real estate developers and other similarly aligned industry members, there is a clear trend toward building electrification in Massachusetts and beyond,” the Conservation Law Foundation, Environmental Defense Fund and Sierra Club wrote in joint comments.

The AGO and a range of environmental nonprofits called for the DPU to add language establishing strict criteria for the exemptions that would allow a project’s connection costs to be covered by ratepayers.

“The draft policy should establish a clear and consistent methodology for assessing a demonstrable reduction in GHG emissions for proposed line extensions serving new construction,” wrote a coalition of environmental groups led by Rewiring America and the Acadia Center.

The AGO said the payback periods should be cut in half, which would bring the payback period for residential projects to 10 years and the period for commercial and industrial projects to five years. It recommended that the connecting customer be required “to pay for the remaining balance of outstanding costs of the line extension if the customer leaves the gas distribution system before the end of the assumed repayment period.”

The DOER agreed that utilities’ line extension policies are inconsistent with the state’s climate mandates and fail to account for the risk that line extensions will become stranded assets. But it called on the DPU to convene technical sessions to seek consensus among stakeholders around the best way to update the policies.

The department also noted that it met with a wide range of stakeholders before submitting its comments and found “a broadly shared concern that the language of the proposed policy, specifically of the proposed exceptions, was vague and raised significant questions regarding implementation.”

It said technical sessions could help achieve “alignment and clarity” more efficiently than another round of written comments.