Electrify Now, an organization trying to speed the electrification of the U.S., took the counterintuitive step of inviting a natural gas utility to one of its monthly webinars this week, giving it a warm welcome.

Vermont Gas Systems (VGS) serves about 55,000 customers in and near Burlington, the largest city in the state and its only large region with a concentrated population. VGS is the state’s only gas utility but is attempting to reposition itself as a thermal solutions utility offering customers multiple strategies for heating their structures.

VGS is actively marketing electric heat pump water heaters to its customers and planning to offer centrally ducted heat pumps as well. The strategy is to profit from the sale, lease and service of that equipment, even as the revenue from powering them goes instead to the local electric utility.

Eventually, VGS plans to move into ductless heat-pump systems because many of the houses in Vermont currently use hydronic systems, and retrofitting them with ductwork would be a major undertaking.

VGS also is pursuing a renewable natural gas (RNG) strategy that will keep it in the gas-delivery business for some time to come, even if it is not selling as much gas to as many people. Its proposed RNG import contract drew extensive negative public comments to the state Public Utility Commission and led to charges that VGS is attempting to greenwash its image with the electrification effort.

As he opened the online session Wednesday, Brian Stewart of Electrify Now took a swipe at RNG, framing it as expensive non-solution to the imperative for gas utilities to “decarbonize their business without going out of business.”

“So imagine our surprise and delight when we came across this,” he continued. “Could it be that a gas utility is promoting electric heat pump water heaters? What’s going on here? Are they embracing electrification as a way to decarbonize their business, rather than actively resisting it?”

VGS New Product Development Manager Morgan Hood explained that decarbonization is part of the goal, along with maintaining a revenue stream and relevance in a changing marketplace. For multiple reasons, VGS is likely to see its gas customer base shrink rather than grow.

Though its governor is Republican, the Green Mountain State is firmly Democratic in its politics and consistently ranks among the most environmentally conscious states. Gov. Phil Scott vetoed a clean-heat bill last year and has said the version working through the legislature this year looks too similar and too expensive. But there is popular momentum behind it and smaller steps toward the same goal.

There are no bans now on new gas connections or gas-burning equipment in the VGS service area, but the utility views bans as inevitable, Hood said. VGS abandoned a previous attempt to expand geographically amid controversy and has no expansion plans now, she said.

And while natural gas has historically been pitched as cheaper and cleaner than the heating oil that many Vermonters use during their long, cold winters, new heat pump technology can be less expensive to operate than either.

Then there is the climate crisis, which Hood said VGS, and many of its customers, believe is real. Heat pumps generate no emissions of their own, and if the electricity powering them comes from clean sources, the carbon footprint is radically smaller than gas-burning equipment.

“More and more of our customers are looking to decarbonize,” she said. “If we want to continue to serve our customers, if we want to continue to be a thermal solution provider — which we do — significant changes are necessary.”

VGS is one of the few utilities that still installs and services gas-burning equipment in customers’ buildings with its own personnel, Hood said, so adding the new electric equipment to its offerings is not a major stretch.

But swapping out furnaces and water heaters is only part of the solution. VGS began its energy-efficiency program in the 1990s and has in-house engineers and energy auditors to help customers improve their homes.

“Houses in Vermont tend to be older, and many are in desperate need of weatherization,” Hood said. “If we intend for heat pumps to carry the full heating load in this very cold state and displace fossil fuels effectively, affordably and efficiently, we need to set these homes up for success with air sealing and insulation.”

VGS is offering its services to non-customers as well. Hood said the PUC is amenable to this because of the scarcity of private contractors to do the work. But VGS has limited itself geographically to within 5 miles of its gas lines to control transportation costs.

Shortage of skilled labor and supply chain constraints are two potential obstacles to VGS expanding this initiative, Hood said, and both have already cropped up.

Ultimately, Hood said, the possibilities move beyond single-building heat pumps to local ecosystems of shared geothermal energy and recycled waste heat from commercial users.

Stewart asked: “Does VGS imagine a future where they’re a heat provider and not a fossil gas provider?”

“Yes, and it’s daunting,” Hood replied.

It is also early in the process. VGS does not know how it will accomplish its goal of achieving net zero by 2050, Hood said, adding that probably no single strategy — RNG, hydrogen or electrification — will carry it there.

Joe Wachunas of Electrify Now asked if VGS is expecting its income to decrease as it converts customers to electric heating solutions.

“These solutions we’re proposing, although profitable, aren’t profitable in the same way delivering natural gas is profitable,” Hood said. “We are learning to look at that.”

There likely will be a gradual rollout and a bit of a balancing act, as VGS works to reach its goals while keeping investors happy, she added.

Wachunas asked whether other gas utilities perceive VGS as a trailblazer or a turncoat.

“I think the industry in general still regards us as quirky,” Hood replied. “If we can model the business case, the financial case for evolving a gas utility in this way, then I think people’s ears will perk up; maybe we’ll be leaders.”

Stewart and Wachunas raised what may be one of the hardest aspects of electrification: how to engineer a smooth transition at an acceptable cost.

Hood listed several factors at play. One priority is not sticking lower-income customers who cannot electrify with a rapidly increasing share of the gas system’s costs as wealthier customers electrify. Another is not harming large commercial customers.

There may be future efforts to press for electrification of areas where gas service becomes uneconomical because expensive work is needed, or because there are too few ratepayers left. There currently are not any plans for such a shrinkage of the distribution network, but that does not mean there never will be.

On the positive side, VGS was only founded in 1965. Its infrastructure is much younger than many other gas utilities’ and unlikely to need a lot of expensive work any time soon.

“I don’t have any easy answers,” Hood said. “It’s really, really nuanced.”