Overextended: It’s Time to Rethink Subsidized Gas Line Extensions

A new natural gas customer is added to the system every minute in the United States, and existing gas customers are covering their construction costs through subsidies knows as line extension allowances. Each year, these extensions of gas service enable utilities to pass hundreds of millions of dollars in costs to existing customers while expanding the fossil fuel system for decades to come.

While these policies may have made sense in prior contexts, the climate and economic justifications have changed dramatically. Now, a suite of factors challenges the rationale for line extension allowances, including expected reductions in future gas use, the growing costs of maintaining the existing distribution system, and the imperative to phase out fossil fuels.

In our new insight brief, we examine the prior rationales for these policies and lay out the case for change. Utility regulators in every state should reform line extension allowances to eliminate subsidies for gas, align with state climate policies, and reduce the financial burden on existing gas customers.