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Washington State voted against gas bans. But was it misled?

The United States is rapidly dividing into two camps: those that are trying to move away from using natural gas in buildings to fight climate change, and those passing “fuel choice” laws that protect consumers’ rights to keep burning it. On election day, Washington State flipped from the former to the latter as voters narrowly approved a ballot measure that overturned some of the most ambitious decarbonization policies in the country.
Now, a coalition of local governments, environmental groups, and public health advocates are challenging that ballot measure in court, arguing that voters didn’t understand what they were signing up for, and thus that the measure violates parts of the Washington State constitution designed to prevent abuse at the ballot box.
“Among its far-reaching impacts,” the opening of the claim filed at the King County Superior Court on Wednesday reads, “the Initiative jeopardizes the ability of local governments and other entities to establish energy-efficiency standards and reduce greenhouse gas emissions; it threatens programs that require the construction of energy efficient buildings; and it would make the clean energy transition chaotic and more expensive for Washingtonians.”
Initiative 2066 was pitched by its sponsor, the Building Industry Association of Washington, as simply a measure to protect consumer access to natural gas, according to Kai Smith, a lawyer from Pacifica Law Group who is representing the plaintiffs. But the text of the measure goes much further, he said, affecting several state laws and codes designed to reduce carbon emissions and regulate air pollution.
“I don’t think voters would have been aware of that broad of an impact when they looked at the ballot title and they heard the campaign messaging,” Smith told me.
Though Washington has long been a leading state for climate policy, it began taking bigger swings at decarbonizing buildings, in particular, in 2022. That year, the state’s building code council enacted energy codes that required newly constructed buildings to be outfitted with all-electric space heating and hot water systems. The council later amended the rules so that they strongly encouraged — but did not necessarily require — electric appliances after a similar policy in Berkeley, California was overturned by a federal court.
Initiative 2066 invalidates those codes. It also repeals key parts of a law the state legislature passed earlier this year that requires Washington’s biggest utility, Puget Sound Energy, to consider alternatives before replacing aging gas infrastructure or building new gas pipelines. The utility would have had to analyze whether electrifying the homes served by that infrastructure instead would ultimately save ratepayers money.
That’s not all: In a more forward-looking section, the initiative bans counties and local governments from passing any local ordinances that “prohibit, penalize, or discourage” the use of gas in buildings. It also adds a new clause to the Clean Air Act barring state officials from doing the same.
The lawsuit was brought by Climate Solutions, a local climate advocacy group, as well as Washington Conservation Action, Front and Centered, the Washington Solar Energy Industries Association, King County, and the City Of Seattle. It alleges that the measure violates the state’s “single subject” and “subject-in-title” rules, which say that an act can only concern one topic and that the ballot title has to fairly and accurately apprise voters of the content of the initiative.
Although all the pieces of Initiative 2066 are related to protecting consumers’ access to natural gas as an energy source, Smith argued that some of the changes it makes are more broad — for example, sticking a clause in the Clean Air Act to protect natural gas use. The Clean Air Act is about pollution regulations, he said. “While those are tied to natural gas, conceptually and legally, I think they are distinct.” The Initiative also struck a provision in Washington law that required the state’s building code council, as it updates energy codes periodically, to work toward a goal of all new construction being “zero fossil-fuel greenhouse gas emission” by 2031. That strike-out would impact the full range of fossil fuels, not just natural gas, Smith said.
Climate policy in Washington is popular. The majority of voters rejected another measure on the ballot which would have repealed the state’s big umbrella climate law that puts a declining cap on emissions. But perhaps some of those voters haven’t yet made the connection that cutting carbon includes the emissions that come from their homes. The natural gas burned in homes and buildings are responsible for 25% of the state’s carbon footprint. Clearly, the “yes on I-2066” campaign’s messaging — summed up as “stop the gas ban” — resonated.
Smith argued that the message was misleading. “That’s not what these laws are,” he said. “It’s to help facilitate movement towards clean energy in a way that’s thoughtful and methodical, and that doesn’t lead to increased costs for customers.”
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It starts — but doesn’t end — with the Strait of Hormuz.
For the second time in a year, the United States and Israel have launched a major aerial assault on Iran. Strikes were reported across the country early Saturday, targeting Iranian leadership and military infrastructure. In retaliation, Iran has launched attacks on Israel and Gulf nations allied with the U.S., with several of the targets appearing to be American military installations. “The United States military is undertaking a massive and ongoing operation,” President Trump said in a video posted to Truth Social explaining his rationale for launching the war.
While the conflict has quickly metastasized across the region, it has the potential to affect the entire world by disrupting the production and shipment of oil and natural gas.
Iran and its neighbors on the Persian Gulf are some of the largest oil and gas producers in the world and the country has long threatened to disrupt oil exports as an act of self-defense or retaliation from attack.
That may be already happening. According to data from Bloomberg, some oil tankers are pausing or turning around outside the vital Strait of Hormuz, a narrow, deep channel between Iran and Oman that connects the Persian Gulf to the Arabian Sea and thus to global markets in and bordering the Indian Ocean.
The strait has been “effectively closed,” according to a report from Tasnim, a semi-official news agency linked to the Iran Revolutionary Guard Corps. British naval officials also said they had “received multiple reports” of broadcasts that “have claimed that the Strait of Hormuz (SoH) has been closed.” And a European Union naval official told Reuters that the Iranian Revolutionary Guard had been broadcasting “no ship is allowed to pass the Strait of Hormuz” to ships in the area. Some tankers are still navigating the strait, according to marine tracking data from Kpler.
But it’s questionable whether Iran can actually maintain any attempted closure of the strait, whether by laying mines or directly threatening and attacking ships.
So far, U.S. attacks are “targeting, fairly heavily, naval assets and assets that are close to the Gulf,” Greg Brew, an analyst at the Eurasia Group, told me, which “suggests that they are trying to degrade Iran’s ability to disrupt energy traffic through the Strait of Hormuz.”
The U.S. is “trying to reduce the risks of Iranian effort to close the strait as part of this operation, rather than waiting to see if the Iranians escalate in that direction. The Iranians have responded by claiming that the strait has been closed. The problem for them now, though, is that they’ll have to enforce that threat.”
Closing the strait was a “tail risk” that had been roiling the oil market in the lead-up to Trump’s decision to launch the attack, Rory Johnston, petroleum analyst and author of Commodity Context, told me.
Global oil prices had gotten skittish over the past weeks, with the Brent crude benchmark getting as low at $66.30 per barrel in early February and getting near $73 per barrel on Friday. Brent prices approached $80 per barrel last June during the 12 Day War between Iran and Israel.
While the market could likely weather disruption to Iran’s own exports, jumpy behavior in the market was due to pricing in an enhanced risk of a region-wide calamity. Options traders especially were “attempting to hedge that enormous tail risk,” Johnston said, and “that was really moving the market.”
And even if the strait is not directly closed off by the Iranian military, ships may find it financially onerous to attempt the passage. “Insurers told ship owners on Saturday they would cancel policies and raise coverage prices for vessels travelling through the Gulf and Strait of Hormuz after the U.S. and Israel attacked Iran,” the Financial Times reported Saturday.
Another risk to the region’s oil sector is that Iran could retaliate by striking oil production and exporting infrastructure in neighboring countries, Johnston told me. “Right next door, you’ve got Iraq, you’ve got Saudi Arabia, and you’ve got the Emirates and others who collectively are more like 20 million barrels per day. And that is obviously a much bigger deal,” Johnston said, comparing their production to Iran’s own oil industry.
Of course, Iran is still a major exporter despite U.S. sanctions; in the days running up to the U.S. attack, it was shipping out around 3 million barrels per day from Kharg Island in the Strait of Hormuz, according to data from Bloomberg, almost triple its exports from equivalent dates in January and nearly its entire daily production.
Iran’s exports “had actually surged immediately ahead of what’s gone down over the past 24 hours,” Johnston told me. “In the past couple days, you’d seen a large surge of tankers departing Kharg Island, and the inventories on Kharg Island being drawn down, which is kind of what you would do if you expected that your exports were about to get disrupted.”
To the extent Iranian oil exports are cut off, that could be a big deal for China, which has become the number one destination for Middle East oil shipments. Beijing has been building up stockpiles of oil, likely preparing for the risk that sanctioned exporters like Iran and Venezuela would go off the market, as well as wider risks to exports from the Middle East.
“China is highly concerned over the military strikes against Iran,” the Chinese foreign ministry wrote on X. “China calls for an immediate stop of the military actions, no further escalation of the tense situation, resumption of dialogue and negotiation, and efforts to uphold peace and stability in the Middle East.”
Last year, China began to substantially increase its stockpiling of oil, going from 84,000 barrels per day to 430,000 barrels per day, some 83% of the growth of its imports, according to data and estimates from Rystad Energy and Erica Downs, a senior research scholar at the Columbia University Center on Global Energy Policy.
While the U.S. is now far less reliant on oil exports from the Middle East, oil and gas is still a global market. If Middle Eastern oil and gas exports are disrupted, that will likely increase the price of energy — whether it’s gasoline, electricity, or even home heating — as American energy producers can sell their barrels and BTUs at higher prices globally.
It’s either reassure investors now or reassure voters later.
Investor-owned utilities are a funny type of company. On the one hand, they answer to their shareholders, who expect growing returns and steady dividends. But those returns are the outcome of an explicitly political process — negotiations with state regulators who approve the utilities’ requests to raise rates and to make investments, on which utilities earn a rate of return that also must be approved by regulators.
Utilities have been requesting a lot of rate increases — some $31 billion in 2025, according to the energy policy group PowerLines, more than double the amount requested the year before. At the same time, those rate increases have helped push electricity prices up over 6% in the last year, while overall prices rose just 2.4%.
Unsurprisingly, people have noticed, and unsurprisingly, politicians have responded. (After all, voters are most likely to blame electric utilities and state governments for rising electricity prices, Heatmap polling has found.) Democrat Mikie Sherrill, for instance, won the New Jersey governorship on the back of her proposal to freeze rates in the state, which has seen some of the country’s largest rate increases.
This puts utilities in an awkward position. They need to boast about earnings growth to their shareholders while also convincing Wall Street that they can avoid becoming punching bags in state capitols.
Make no mistake, the past year has been good for these companies and their shareholders. Utilities in the S&P 500 outperformed the market as a whole, and had largely good news to tell investors in the past few weeks as they reported their fourth quarter and full-year earnings. Still, many utility executives spent quite a bit of time on their most recent earnings calls talking about how committed they are to affordability.
When Exelon — which owns several utilities in PJM Interconnection, the country’s largest grid and ground zero for upset over the influx data centers and rising rates — trumpeted its growing rate base, CEO Calvin Butler argued that this “steady performance is a direct result of a continued focus on affordability.”
But, a Wells Fargo analyst cautioned, there is a growing number of “affordability things out there,” as they put it, “whether you are looking at Maryland, New Jersey, Pennsylvania, Delaware.” To name just one, Pennsylvania Governor Josh Shapiro said in a speech earlier this month that investor-owned utilities “make billions of dollars every year … with too little public accountability or transparency.” Pennsylvania’s Exelon-owned utility, PECO, won approval at the end of 2024 to hike rates by 10%.
When asked specifically about its regulatory strategy in Pennsylvania and when it intended to file a new rate case, Butler said that, “with affordability front and center in all of our jurisdictions, we lean into that first,” but cautioned that “we also recognize that we have to maintain a reliable and resilient grid.” In other words, Exelon knows that it’s under the microscope from the public.
Butler went on to neatly lay out the dilemma for utilities: “Everything centers on affordability and maintaining a reliable system,” he said. Or to put it slightly differently: Rate increases are justified by bolstering reliability, but they’re often opposed by the public because of how they impact affordability.
Of the large investor-owned utilities, it was probably Duke Energy, which owns electrical utilities in the Carolinas, Florida, Kentucky, Indiana, and Ohio, that had to most carefully navigate the politics of higher rates, assuring Wall Street over and over how committed it was to affordability. “We will never waver on our commitment to value and affordability,” Duke chief executive Harry Sideris said on the company’s February 10 earnings call.
In November, Duke requested a $1.7 billion revenue increase over the course of 2027 and 2028 for two North Carolina utilities, Duke Energy Carolinas and Duke Energy Progress — a 15% hike. The typical residential customer Duke Energy Carolinas customer would see $17.22 added onto their monthly bill in 2027, while Duke Energy Progress ratepayers would be responsible for $23.11 more, with smaller increases in 2028.
These rate cases come “amid acute affordability scrutiny, making regulatory outcomes the decisive variable for the earnings trajectory,” Julien Dumoulin-Smith, an analyst at Jefferies, wrote in a note to clients. In other words, in order to continue to grow earnings, Duke needs to convince regulators and a skeptical public that the rate increases are necessary.
“Our customers remain our top priority, and we will never waver on our commitment to value and affordability,” Sideris told investors. “We continue to challenge ourselves to find new ways to deliver affordable energy for our customers.”
All in all, “affordability” and “affordable” came up 15 times on the call. A year earlier, they came up just three times.
When asked by a Jefferies analyst about how Duke could hit its forecasted earnings growth through 2029, Sideris zeroed in on the regulatory side: “We are very confident in our regulatory outcomes,” he said.
At the same time, Duke told investors that it planned to increase its five-year capital spending plan to $103 billion — “the largest fully regulated capital plan in the industry,” Sideris said.
As far as utilities are concerned, with their multiyear planning and spending cycles, we are only at the beginning of the affordability story.
“The 2026 utility narrative is shifting from ‘capex growth at all costs’ to ‘capex growth with a customer permission slip,’” Dumoulin-Smith wrote in a separate note on Thursday. “We believe it is no longer enough for utilities to say they care about affordability; regulators and investors are demanding proof of proactive behavior.”
If they can’t come up with answers that satisfy their investors, ultimately they’ll have to answer to the voters. Last fall, two Republican utility regulators in Georgia lost their reelection bids by huge margins thanks in part to a backlash over years of rate increases they’d approved.
“Especially as the November 2026 elections approach, utilities that fail to demonstrate concrete mitigants face political and reputational risk and may warrant a credibility discount in valuations, in our view,” Dumoulin wrote.
At the same time, utilities are dealing with increased demand for electricity, which almost necessarily means making more investments to better serve that new load, which can in the short turn translate to higher prices. While large technology companies and the White House are making public commitments to shield existing customers from higher costs, utility rates are determined in rate cases, not in press releases.
“As the issue of rising utility bills has become a greater economic and political concern, investors are paying attention,” Charles Hua, the founder and executive director of PowerLines, told me. “Rising utility bills are impacting the investor landscape just as they have reshaped the political landscape.”
Plus more of the week’s top fights in data centers and clean energy.
1. Osage County, Kansas – A wind project years in the making is dead — finally.
2. Franklin County, Missouri – Hundreds of Franklin County residents showed up to a public meeting this week to hear about a $16 billion data center proposed in Pacific, Missouri, only for the city’s planning commission to announce that the issue had been tabled because the developer still hadn’t finalized its funding agreement.
3. Hood County, Texas – Officials in this Texas County voted for the second time this month to reject a moratorium on data centers, citing the risk of litigation.
4. Nantucket County, Massachusetts – On the bright side, one of the nation’s most beleaguered wind projects appears ready to be completed any day now.