Council considers studying decarbonization of Richmond Gas Works
Costs for the utility continue to rise as customers decrease consumption.
Richmond City Council will consider funding the development of a decarbonization plan for Richmond Gas Works in this year’s budget cycle.
Council unanimously approved a climate emergency declaration in 2021 that commits them to work with Mayor Levar Stoney’s office on “an equitable plan to phase out reliance on gas and shift to accelerated investment in City-owned renewable energy.”
This week 2nd District Councilmember Katherine Jordan, who sponsored that declaration, submitted a $200,000 budget amendment to fund the creation of a decarbonization plan.
“What's the next 20 years for a city that has decided it's going to be an energy provider for its residents, for its businesses?” Jordan said. “Is natural gas the energy source we want to be relying on? Personally, you know, to me, no — I think we need to be transitioning towards renewable energies.”
She’s concerned with recent fluctuations in the wholesale price of natural gas and said the city can take steps to provide energy sources minus the health and environmental risks associated with the fossil fuel.
The combustion of natural gas produces nitrogen dioxide (NO2), a pollutant that can increase the risk of asthma attacks, exacerbate respiratory issues and inflame airways, according to the American Lung Association. Recent research shows the pollutant is a likely cause of asthma in children.
The combustion of natural gas also produces carbon dioxide, and the gas itself is mostly composed of methane, a highly potent greenhouse gas. Methane deteriorates more quickly in the atmosphere than carbon dioxide (CO2) — which drives most human-caused global warming — but its short-term effects are significant. On average, atmospheric methane is 80 times more potent than carbon dioxide in the first 20 years after release.
A range of grants and loans were made available through the federal Inflation Reduction Act and other programs. Jordan said Richmond should look into how that cash can support a local energy transition and the installation of in-home efficiency measures like heat pumps.
Jordan’s also sponsoring a budget amendment that would create an Office of Sustainability position tasked with finding and pursuing such grants.
The push comes as the Department of Public Utilities continues to expand its service area into the city’s surrounding counties. The department is also requesting an $8.70 rate increase for typical monthly bills — including a $2.24 monthly increase for gas service.
DPU is an enterprise fund, meaning the operation of its systems is paid for with rates as opposed to the city’s tax base. Put another way: If you buy gas from Richmond Gas Works, you are paying for the fuel, pipeline infrastructure, maintenance and expansion of the system, personnel and more. The department also issues bonds to finance major projects, which are repaid by customers over an extended time period.
Billy Vaughan, DPU’s deputy director for finance, addressed the Governmental Operations Committee at city hall on March 22.
“The significant drivers of our [operations and maintenance] costs are people, power and chemicals,” Vaughan said.
Natural gas prices spiked in recent years, due in part to war in Ukraine, so those costs have to be covered — as well as mandated raises for city workers that apply to DPU employees.
Vaughan said the department has loads of aging infrastructure to handle as well, totaling over $2 billion in project costs. The department estimates updating the gas system will cost $760 million. A DPU spokesperson said replacement of old cast iron lines has been underway since 1992 and will likely continue for another 10 years.
There are environmental concerns associated with aging natural gas pipelines, which are more likely to leak than new pipes. Based on Energy Information Administration data, local advocacy coalition Electrify RVA estimates that about 5% of the natural gas that’s sent through the city’s system leaks into the atmosphere. The coalition includes members of the Virginia chapter of the Sierra Club and other local groups.
Significantly, Vaughan said customers are using less water and gas, and DPU expects that trend to continue. But the majority of DPU’s costs are fixed: Those rehabilitation projects, raises and bond payments are baked in.
“So as consumption declines, the unit cost will have to increase in order to cover costs,” Vaughan said.
Vaughan also said an expanding customer base for gas connections would likely lead to a slight increase in overall sales for that utility.
Those trends are concerning to Kevin Cianfarini, a volunteer data analyst with Climate Changemakers who is working with Electrify RVA. That group has lobbied for council to adopt the decarbonization plan.
Cianfarini argues that because of the greater number of customers in Chesterfield, Henrico and Hanover counties, all customers are on the hook for an increasingly long and costly distribution system -- and that mounting incentives to electrify homes will result in more disconnections.
“We need to start considering an equitable phaseout of our gas utility for everybody involved. We need to ensure that DPU workers are offered the ability to be retrained. We need to ensure that residents are protected from ever-increasing DPU rates,” Cianfarini said.
He’s concerned the utility could fall into what’s known as a ‘death spiral’ — where continuously rising costs are unable to be met by a dwindling customer base.
Jordan said the plan would be similar to a study that Charlottesville is undertaking of its city-owned gas utility.
That study, led by consulting firm Black & Veatch, will examine the legality of discontinuing gas service, pathways towards decarbonization and the financial effects on customers. The city expects the study to be completed by March 2024.
It’s not clear what the funding source would be for Richmond’s own study, but Jordan noted that the mayor’s office is supportive of the budget amendment. Stoney submitted his own request to offset half of the electricity used by city-owned buildings through offsite renewable energy purchases as part of his budget proposal earlier this year.
“We have amazing employees at DPU,” Jordan said. “I know we can figure this out.”
City Council will hold a work session on budget amendments Monday in downtown Richmond.