Report: Natural Gas Bans Will Disproportionately Impact Low Income Californians
Natural gas bans will hit California hard, disproportionately impacting the poorest of Californians, according to a new Foundation for Research on Equal Opportunity report.
Despite natural gas rates being at their lowest levels since 1999, several municipalities across California have proposed or implemented bans on the use of the resource in homes and businesses. As report author Robert Bryce explains:
“Restrictions and bans on natural gas are being labeled as essential elements of that climate policy. But those bans are, in fact, regressive taxes that will have an almost undetectable impact on global climate. If California wants to avoid increasing the number of its people living in poverty, it must strive to keep energy affordable.” (emphasis added) A Net Price Increase
Californians pay one of the highest electricity rates in the United States. In 2015, the average resident spent 2.7 percent of their salary on electricity and paid approximately $1,700 annually to keep their lights on. This percentage has been increasing since 2008 Prices have climbed 30 percent over the last decade as successive governors have mandated that an increasing share of electricity is sourced from renewables.
According to Bryce, if California continues this “electrify everything” trend, consumers will be forced to buy electricity, which is more expensive than natural gas on an energy-equivalent basis*:
“Assuming a 100 percent efficient use of electricity, California residents are paying about $56 per million Btu (MMBtu) for the electricity they consume. In 2019, the average residential price of natural gas in California was $13.32 per MMBtu. Assuming that fuel is consumed in an appliance or heater that is 95 percent efficient, the cost of natural gas to residential consumers is about $14 per MMBtu. Thus, by banning gas-fired appliances, California politicians are forcing homeowners and renters to pay four times as much for their energy as they would if they were consuming natural gas directly.” (emphasis added)
An Undue Burden
The cities that have passed these natural gas bans have the ability to stomach this price increase without much worry because they are some of the wealthiest regions in the nation. Berkley, the first city to ban natural gas hookups, has a median household income of $80,912 and a per capita income of $48,229, Encinitas earns $113,175 and $62,251, respectively, Los Altos has six figure incomes for both categories, and the list continues.
On average, these cities have an 80 percent higher income than the United States and have a 46 percent higher income than the rest of California.
Meanwhile, 18.1 percent of residents in the sunshine state live in poverty and 33 percent are classified as low income. According to a study by Energy Efficiency For All, any modest electricity rate increase would threaten these vulnerable households with mass shut-offs and economic dislocations.
The higher costs to these individuals would only reduce already low levels of disposable incomes and directly threaten their well bring.
The Gas Grid
In 2019, California Gridwords released a report detailing how a declining customer base would cause a negative feedback loop as rates increase for those still on the gas grid. Their payments would go to maintaining a system whose costs remain steady, despite reduced gas connections. As Bryce details:
“The declining customer base will amplify rate increases for the remaining gas customers…Widely dispersed building electrification in response to individual customer economics typically will not result in meaningful system cost reductions, as no new infrastructure or existing maintenance needs can be avoided.”
The report estimates that rapid reductions in gas consumption would cause rates to double or triple for those connected to the grid, with a special focus on the lower income and disadvantaged communities who cannot voluntarily leave the grid and accept the higher electricity prices.
“A primary issue affecting low-income and disadvantaged communities discussed in our stakeholder engagement was that the high upfront cost to convert to all-electric service may force low-income and otherwise vulnerable customers to remain on the gas distribution system and, as wealthier customers electrify and leave the gas system, those left behind would face ever-increasing gas rates.”
The potential spike in prices has spurred The California Energy Commission to consider imposing an exit fee of $5 a month on individuals moving into all-electric buildings. This fee would be combined with tax dollars to “cover a share of the gas system revenue requirement” to mitigate the necessary rate increases.
So even if individuals leave the grid, they will still be responsible for its upkeep. They will have to pay the cost of not being on the grid with electricity higher prices, and they will pay the price of leaving the grid through their tax dollars and collected fees.
The Cost To Transition
The goal in the natural gas shut offs is to decarbonize buildings by becoming all electric. But the cost for this switch is extremely high and too often not talked.
Decarbonizing buildings would require retrofitting apartment buildings with electric appliances and upgrading their circuit breakers to handle the additional power requirements. As one ClimateWorks Foundation employee, Californian Justin Guay, that cost is approximately $13,100 for a heat pump installation and duct work, and $2,800 for a feeder line and electric panel. The $15,000 mentioned to upgrade his house does not include the cost of replacing the water heater, stovetop or dryer.
In Guay’s switch to all electric, he noted the irony that he was more reliant on the electricity grid. As houses electrify, they become more reliant on the grid to feed electric appliances that were previously gas powered.
Couple this increased draw on the electric grid with a growing population and the increased energy consumption projected by California Energy Commission, and natural gas use is simply shifted upstream to power generation to meet demand. The change in end use from home to power plant results in nearly a 50 percent decrease in its efficiency. 92 percent of natural gas is delivered as energy after being transmitted, while 62 percent of its energy potential is lost during power generation.
According to Bryce, there are no winners here. As individuals leave the gas grid, the poor will face higher prices on the grid and higher electricity prices when they switch. They will be threatened with a higher cost of living that could force them from their homes. Lower income individuals are priced out of neighborhoods where they could build equity because of higher electric costs. Middle class and wealthy individuals pay four times more for electricity, diminishing disposable income, while still paying for a gas grid they are unable to connect to through municipal law.
The result of California’s efforts? A reduction of global emissions by less than half of one percent.