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A new policy proposal argues that large load tariffs on their own aren’t enough.
Rob talks with Heatmap’s Emily Pontecorvo about how the data center boom is changing our emissions trajectory.
Everything is getting more expensive — except for government debt.
A bill awaiting Governor Gavin Newsom’s signature would require utilities to at least offer to subsidize home electrification.
Going into this final stretch of the summer, I’m keeping an eye on California. Today is the last day for the state legislature to pass bills as part of its 2026 session, and lawmakers have already sent some interesting clean energy proposals to Governor Gavin Newsom’s desk.
On Friday, the legislature passed the Home Energy Choice Act, a bill supporting the transition to all-electric homes in the state, which builds on a growing set of policies and programs I’ve been writing about called “non-pipeline alternatives.”
Natural gas companies are constantly replacing and expanding the pipelines that deliver gas to people’s homes, but these kinds of investments are starting to look less prudent in states that are trying to transition off of fossil fuels. Utilities recover the costs of pipelines over decades through the rates their customers pay; but as people start to electrify their homes, there will be fewer customers to absorb those expenses, risking ballooning energy bills. Non-pipeline alternative programs typically require utilities to consider options for deferring or even avoiding these investments.
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Several states have created pilot programs that enable utilities to take the money they would have spent replacing an aging pipeline and instead use it to help customers go electric. Two years ago, California lawmakers authorized such a pilot focused on decarbonizing entire neighborhoods, but the implementation has been slow. The deadline for utilities to submit proposals for the first round of pilot projects isn’t until next April.
The Home Energy Choice Act would complement that program. Whereas the pilots are designed to work around replacing gas mains, the larger pipes that run down the middle of streets, the new bill would target gas service lines, the smaller pipes that connect individual homes to the mains.
In some ways, the new bill is more aggressive than the existing pilot program. In the case of the pilots, the utility has to get 67% of a neighborhood onboard before seeking approval from the utility commission to decarbonize. The new program would set no such threshold. Every time a utility identifies a service line that needs to be replaced, it will have to offer the customer at the end of the line a financial incentive to electrify instead. If Governor Newsom signs the bill, it will be the first law in the country to require investor-owned utilities to offer their customers non-pipeline alternatives.
Still, it’s entirely up to the customer whether or not to accept the incentive, so it’s unclear how effective it will be. The bill doesn’t specify how much money the utility has to offer, punting that decision to the state’s regulators. But it does say the incentive has to be lower than the average cost of a service line replacement so that it creates net savings for the utility — and therefore for the utility’s ratepayers. Service line replacements average $35,000 to $55,000 in California, according to an evaluation of the Home Energy Choice Act by University of California, Los Angeles, researchers. Earthjustice and the Natural Resources Defense Council, the environmental groups that backed the bill, propose a base incentive of $15,000 per home, with a bump to $20,000 for homes in disadvantaged communities.
While that might sound substantial, it’s not going to be enough, in many cases, to cover the entire cost of heat pumps, an electric water heater, an electric or induction stove, and an electric clothes dryer. The UCLA study pins average costs for whole-home electrification in California at upwards of $25,000.
Homeowners will be able to combine the incentive with other state subsidies, but that can get complicated. One of the biggest challenges with these kinds of programs is that planning a whole-home electrification project is essentially a full time job.
Last fall, I wrote about an incentive program run by the utility Con Edison in New York State called Electric Advantage. It’s similar to California’s neighborhood pilots, in that it targets gas mains instead of service lines. If all the homeowners served by a main agree to go electric, ConEd will cover 100% of the cost of replacing their gas-powered appliances with electric versions, plus installing insulation and air sealing. My story was about Julie Liu, a contractor the utility hires to manage these projects. Liu fronts the cost of the retrofit and handles all of the scheduling and coordination between electricians, plumbers, insulation specialists, and other building professionals. She braids together various incentives to get the job done for as little money as possible. And what I learned in writing about her is that she was basically one of a kind — ConEd hadn’t been able to find anyone else to do what she did.
That leads me to one of my big questions about this California bill: Will the gas companies manage the retrofits themselves, contract with third parties like Liu, or just give the money directly to homeowners? The bill doesn't specify, so that’s something utility regulators will have to work out if Newsom signs it into law.
I also wonder about relying on utilities to sell the idea of electrification to customers, especially since not all natural gas companies in California offer electricity service. How hard will they try to lose business? The bill does contain some safeguards to ensure the companies make a concerted effort, such as requiring that they notify customers of the climate and health benefits of going electric and of additional incentives they might be eligible for. The UCLA report recommends that regulators create additional incentives to get utilities on board, such as giving them a generous rate of return on the cost of the program.
Despite these questions, the bill looks well-suited for this moment of concerns about energy affordability, with its focus on reducing capital spending and maintaining customer choice. Newsom has until September 30 to veto it or sign it into law.
With wars going on in Ukraine and the Middle East, margins for fuel producers have gotten “insane.”
It’s never been a better time to turn oil into gasoline and diesel, and the United States refining industry is processing every drop it can.
America’s refineries are currently running at over 97% utilization, up slightly from the week prior, according to the Energy Information Administration, and at their highest rate since 2018. In the Gulf Coast refining complex specifically, refining capacity has been above 95% for 19 straight weeks, well surpassing the previous record of 15 weeks in 2022, according to Gulf Oil advisor Tom Kloza.
Meanwhile, refiners are putting off whatever maintenance they can. But refineries may have to undertake the large-scale, prescheduled “turnaround” operations that happen in the fall, and can take facilities offline for months.
The reason? It pays to wait. The “crack spread” — which measures the margin of refining three barrels of oil into two barrels of gasoline and one of diesel — sits at over $72.
“This is historically unprecedented,” Kloza told me, referring to both the continuously high levels of utilization for American refiners and the margins they’re receiving for running so continuously. “It’s insane.”
The insanity is the result of not one but two overlapping crises in the global fossil fuel industry. And while one (the protracted closure of the Strait of Hormuz) is in superposition between deterioration and resolution, the other (the relentless Ukrainian drone attacks on Russian refineries) shows no sign of letting up. Both crises contribute to the increasing unavailability of refined products like gasoline, jet fuel, and diesel, the scarcity of which has sent prices soaring.
Russia has banned diesel exports at least through September, leaving a hole that can be filled, at least in part, by American exports to the rest of the world. Diesel exports stand at around 1.8 million barrels per day, up from around 1.2 million a year ago.
One major refinery in New Brunswick, Canada that helps supply the Northeastern U.S. — which relies on diesel as a heating fuel in winter — is due to shut down for maintenance for over two months starting in September. Other refineries, however, have “basically every incentive right now to defer maintenance as long as they can,” considering the high profits they can get, Patrick DeHaan, head of petroleum analysis at GasBuddy, told me.
While refineries are designed to run up to (and maybe even slightly above) 100% utilization, “occasionally when you do run really hard, there can be some issues that come up from time to time,” DeHaan said. “Not all maintenance can be pushed.”
Even if U.S. refineries are operating as, uh, well-oiled machines, there’s another risk at this time of year beside mechanical issues: hurricanes.
While meteorologists expect this to be a below average hurricane season due to the above average El Niño stalking the Pacific, big storms can still knock out refining capacity on the Gulf Coast, where around half of the U.S. refining industry is located.
“If there’s a hurricane, they’re going to have to throttle back, and that will push the prices right up even more,” DeHaan said. A “perfect storm,” he said, could send those crack spreads up by another $20 to $30 a barrel. And yet he also noted that “it’s looking less and less likely that we’re going to see a perfect storm. El Niño is doing a great job mitigating risk for us.”
Even without adding a hurricane to the mix, fuel prices are high enough for anyone who uses diesel or heating oil — including truckers, farmers, and, eventually, New Englanders — to constitute a predicament.
“What we’re seeing now is extraordinarily rare to see,” DeHaan said, referring to the high level of output from U.S. refineries.
Nationwide, average diesel prices are $5.62 a gallon, according to AAA, up from $5.30 a month ago and $3.71 a year ago. In California, the number one agricultural exporter among the 50 states, diesel is $7.21 a gallon, hitting farmers (and eventually consumers) hard, as grapefruit, peaches, plums, apricots, avocadoes, tomatoes, cucumbers, apples, and figs (to name just a portion of the state’s bounty) are harvested in August and September.
The high level of exports has helped drive down inventories of distillate fuel, which are at their lowest level for this time of year since the EIA started keeping records in 1982.
The tightness of the market means that refineries are likely to be pushed near their limit. If any one goes off line — whether for maintenance or weather or anything else — it will likely mean a windfall for everyone else who can stay online.
