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Home My WebLink About9/3/2019 Item 18, Tomkinso� SoCalGas A A�Sempra Energy utility August 9, 2019 Chris Read Sustainability Manager Office of Sustainability City of San Luis Obispo 900 Palm Street San Luis Obispo, CA 93401 11ZLC_ e— -i Sharon Tomkins Vice President, Strategy & Engagement SLO CITY CLERK 555 W. Fifth Street, GCT 2105 Los Angeles, CA 90013 Email: STomklns@socalgas.com RE: OPPOSE City of San Luis Obispo — Local Amendments to the 2019 California Building Code Dear Mr. Read, Southern California Gas Company (SoCalGas) appreciates the opportunity to comment on the City of San Luis Obispo's proposed Draft Local Amendments to the 2019 California Building Code ("Reach Code"). The City is one of many other cities and counties currently evaluating advanced sustainability goals and targets, especially regarding greenhouse gas emission reductions, energy efficiency/conservation, and climate adaption considerations. We strongly believe that solutions proposed in furtherance of achieving these goals should not only be evaluated in terms of potential local environmental benefits, but also in terms of economic feasibility, customer adoptability, and overall contribution to broader State sustainability goals and targets. Further, such evaluation should be based on comprehensive, unbiased data that accurately reflects real-world conditions. Local jurisdictions attempting to pass building reach codes are required to apply to the California Energy Commission (CEC) for approval and include supporting analysis demonstrating that 1) their proposed standards are more energy efficient than current State building code standards and 2) that the local standards are cost-effective.' The City of San Luis Obispo in looking at this issue is using analyses prepared by Frontier Energy, Inc, and Mist! Bruceri & Associates, LLC for Pacific Gas and Electric Company, titled "2019 Energy Efficiency Ordinance Cost -Effectiveness Study"" and "2019 Nonresidential New Construction Reach Code Cost 1 California Energy Commission, Local Ordinances Exceeding the 2015 Building Energy Efficiency Standards. htt s: ww2.etier .c ov ti ieZ4 2016standards ordinances 2 Frontier Energy, Inc., Mist! Brucerl & Associates, LLC. 2019 Cost -Effectiveness Study: Low -Rise Residential New Construction, August 2019 Effectiveness Study3," as a sources to satisfy the cost-effectiveness requirement for approval of their proposed Reach Code. Each analysis document concludes that all -electric building models for both residential and nonresidential new construction to be the most cost-effective and energy efficient building options, thereby seeming to validate the City's proposed Reach Code that favors all -electric construction for new buildings. The data, however, used to reach these conclusions is flawed, as discussed in a summary below and further expanded on the Concern Detail section attachment . Summary of Concerns • Use of PG&E gas infrastructure costs in SoCalGas territory— Because SoCalGas is the sole provider of gas service to the City of San Luis Obispo, the City should not rely on a cost-effectiveness analysis that uses infrastructure cost estimates provided by PG&E to determine incremental customer costs for a mixed fuel home. PG&E's provided estimates are approximately three times greater than SoCalGas' infrastructure costs. a Use of an unsubstantiated and flawed study to support affordability analysis —the analysis relies on the flawed conclusions of E3's Deep Decarbonization study that contains inaccurate projections of utility gas rate increases and underestimates. electricity rate increases. For example, it does not take into account wildfire damage recover costs or system infrastructure expansion costs ■ Inaccurate valuation of the societal costs of electrical infrastructure and societal benefits of gas infrastructure — The cost-effectiveness analysis overlooks the vulnerability of electric infrastructure to climate change impacts and how such impacts affect energy reliability to residents. It also does not account for the public health and environmental impacts from the fires caused by electric infrastructure. Overall, the cost-effectiveness analysis appears to be designed to reach a predetermined conclusion to support building electrification as the optimal pathway to decarbonize buildings, which is reflected in the language of the City's. Reach Code. Large scale, economy -wide cost impacts to City residents and businesses should be based on robust and broad technical support and analysis, which as discussed above and in the attachment, the current cost- effectiveness study does not do . We support the city's goal to reduce its carbon emissions but do not believe an all -electric scenario achieves that and places unnecessary costs on residents. We have enclosed a copy of our white -paper, which provides a high-level policy discussion of a broad-based approach to help California achieve its ambitious climate change goals. 3 Frontier Energy, Inc., Mist! Bruceri & Associates, LLC. 2019 Nonresidential New Construction Reach Code Cost Effectiveness Study. July 2019 2 Sincerely, Sharon Tomkins Vice President, Strategy & Engagement ATTACHMENT Concern Details Below we elaborate further on these points and request that the City redo the analysis to incorporate these additional comments. 1. Development infrastructure costs for SoCalGas are overestimated As stated above, the cost -benefit analysis only uses gas infrastructure cost estimates from PG&E to calculate incremental costs to mixed fuel residences. This is inappropriate as SoCalGas is the only utility responsible for providing gas service to the City of San Luis Obispo, not PG&E. Therefore, the City should have used an analysis that included infrastructure cost estimates from SoCalGas, which are considerably lower than PG&E's provided estimates. For example, the cost-effectiveness analysis currently states that total first cost of running a natural gas line to a new residential development is approximately $11,836. However, SoCalGas average direct costs for 2019 for gas line installs was only $4,400. This is approximately 63% less than PG&E's estimate. if SoCalGas' cost estimates had been incorporated into the analysis, costs to consumers for natural gas energy would be significantly lowered, and in turn, would considerably alter both the On -Bill and TDV analyses. Therefore, because the current analysis uses cost estimates from a utility that has no role providing gas service to the City, the analysis cannot be justifiably used to support the City's Reach Code, as this generates an overestimated assessment of the customer costs for natural gas infrastructure/service within the City. 2. Analysis relies on deeply flawed E3 Deep Decarbonization Study for exacerbated utility rate projections The cost-effectiveness analysis states that it relies on E3's Deep Decarbonization Study to model escalating utility rates over time, as well as SoCalGas' and PG&E's General Rate Case (GRC) filings, and further states that rates from 2023-2025 are assumed to escalate 4% per year above inflation, which "reflects historical rate increases between 2013 and 2018." Addressing these sources in turn, SoCalGas would like to emphasize the flawed nature of E3's Deep Decarbonization Study, which was largely funded and supported by the Building Decarbonization Coalition, an entity largely supported by electricity providers and equipment manufacturers. Most importantly this study severely underestimates electric rate increases, which then falsely makes building electrification seem more economically attractive to consumers. Currently, the analysis shows electric rate increases to be at only 2% which, alone, is specious given that electric rates have been shown to increase three times faster than natural gas rates.a Further, as stated in SoCalGas' 2019 public comments to the California Energy Commission (CEC) regarding this study, "[itjis disturbingly misleading in estimating an 'uncertain' 6%-8% increase in rates for 2018-2022." Among other things, this is unrealistic as the electric rate projections do not appear to factor in potential increases from, for example, 4 Navigant Consulting, Inc. Analysis of the Role of Gas for a Low -Carbon California Future. 2019