Parties Submit Opening Comments on CPUC's Renewable Gas Standard PD

Parties recently commented on CPUC President John Reynolds' March 6 PD, which restructures the Renewable Gas Standard (see CRI's coverage here). The parties converge on a single point: the Renewable Gas Standard has not produced a financeable market.

UPDATE: Since this post was published, multiple other parties' comments have surfaced in the CPUC's document feed. Our briefing has been updated accordingly.

Senate Bill 1221 Implementation; Reining in RNG Costs

Commissioner Karen Douglas issued a third amended scoping memo in the CPUC’s Long-Term Gas Planning docket.

CALIFORNIA REGULATORY INTELLIGENCEMC

Background

President Reynolds' PD modifies the Renewable Gas Standard program created under Senate Bill 1440 to change biomethane procurement requirements for California's gas utilities. The PD concludes that the procurement framework adopted in a 2022 decision (D.22-02-025) would impose excessive above-market costs on ratepayers given the early-stage biomethane market and limited feedstock supply.

• To address this, the PD adopts a Cost Containment Mechanism that caps average program rate impacts at 1% of each utility's bundled core customer revenue requirement with a maximum 3% year-over-year increase. The Cost Containment Mechanism is the controlling constraint; the CPUC will not approve contracts that would cause rates to exceed it.
• The PD also reduces the overall biomethane procurement target from 72.8 billion cubic feet annually to 36.4 billion cubic feet and extends the compliance timeline from 2030 to 2035. The prior short-term/medium-term structure is eliminated in favor of a single 2035 deadline. The Diverted Organic Waste procurement goal of 17.6 Bcf remains unchanged, tied to California's Senate Bill 1383 methane-reduction policy.
• The PD opens all feedstocks to bid into utility solicitations while maintaining the dedicated Diverted Organic Waste target and directs utilities to revise their Renewable Gas Procurement Plans via Tier 2 Advice Letters. The 4% livestock biomethane procurement limit is retained.
• The PD removes the previous 2040 delivery cutoff so contracts can extend beyond that date, retains the M-RETS tracking system, and establishes an 80/10/10 Renewable Thermal Certificate unbundling framework:
  • 80% of biomethane by volume stays bundled with Renewable Thermal Certificate retired by the utility;
  • 10% allows the developer to retain the RTC;
  • 10% allows the utility to market it; and
  • Unbundled volumes purchased at market rate do not count against the Cost Containment Mechanism.

Utilities are also directed to advice letters addressing landfill eligibility and interconnection cost reductions, respectively. The earliest the CPUC will consider the PD is April 9.

Parties' Positions

The program is not functioning economically

Developers, trade groups, and utilities all point to the same constraint:

• No operating RNG project has recovered its costs;
• Procurement targets have already been missed; and
• Contract approvals remain sparse and delayed.

Developers (e.g., landfill and dairy RNG operators) explicitly warn that if contract pricing is constrained or timelines remain uncertain, capital will shift to other markets where RNG commands stronger offtake terms.

The Cost Containment Mechanism structure is under debate

There is consensus among parties on on ratepayer protection, but not on the Cost Containment Mechanism design itself.

• Most parties cannot evaluate whether procurement targets remain achievable under the cap
• Key inputs (e.g., revenue requirement baselines, derivation of 1%/3%) are not transparent
• Several parties argue the CCM is not tied to carbon-reduction value.

The utilities seek flexibility or alternative calculation methods. Generators and trade groups question whether the program can function under the cap at all.
Consumer and ratepayer advocates support strong cost controls but do not resolve feasibility. The Cost Containment Mechanism is now controlling the program without demonstrating it can support procurement.

Supply constraints remain policy-driven, not physical

The record identifies landfill gas as the most immediate scalable source of RNG. Developers and utilities emphasize that large volumes of landfill gas are currently flared or underutilized. Multiple parties argue that limiting landfill participation constrains near-term procurement.

At the same time, dairy and livestock feedstocks are divided. Developers and agricultural groups push to remove the 4% cap and expand supply. And environmental groups argue that dairy procurement drives negative externalities and should be limited or excluded. On balance, parties indicate that supply exists, but access is being determined by policy tradeoffs, not availability.

Unbundling introduces unresolved accounting risk

The PD’s 80/10/10 RTC structure is one of the most contested elements.

• Registry operators, utilities, and consumer advocates warn that unbundling without clear ownership rules creates double-counting risk;
• Environmental groups argue unbundling may violate SB 1440 and weaken program integrity;
• Developers and agricultural interests propose alternative frameworks where:
  • Compliance attributes remain bundled and retired;
  • Upstream methane-reduction value can be monetized separately.

The utilities also raise a very specific issue: the PD treats Cap-and-Invest biogenic treatment and Carbon Intensity-based emissions benefits as separable, even though lifecycle frameworks already incorporate biogenic carbon and methane impacts. In sum, parties say the PD introduces market flexibility before defining a complete accounting system.

Interconnection costs and process delays remain barriers

There is broad agreement that California interconnection costs are significantly above national benchmarks and current timelines delay or deter project development. The PD defers cost solutions to workshops and future filings.

At the same time, the contract approval process is viewed as a crucial juncture:

• Developers, utilities, and trade groups argue that the lengthy process of Tier 3 advice letters introduces delays that are incompatible with project finance; and
• Consumer and environmental advocates support stricter oversight, including Tier 3 review and disclosure requirements.

The program is attempting to scale supply through a process that slows execution.

Legal and policy tensions are now explicit

New filings surface potential legal vulnerabilities:

• Unbundling may conflict with SB 1440 requirements regarding environmental attributes;
• Eligibility language changes may weaken statutory intent around in-state environmental benefits;
• Some parties argue the program may not meet cost-effectiveness requirements under existing law.

At the same time, competing policy objectives are now visible e.g., cost containment vs. market viability; supply expansion vs. environmental and local impacts; and speed vs. regulatory oversight.

INSTANT ANALYSIS

The record is unusually aligned on diagnosis and divided on remedy: The program has not produced a financeable project. Every major issue flows from that constraint. Consequently, the Commission is being pushed toward a reset that:

• Accelerates approvals,
• Clarifies and potentially loosens the Cost Containment Mechanism,
• Expands access to scalable feedstocks, and
• Defines accounting rules before enabling unbundling.

If those changes are implemented, the Renewable Gas Standard becomes investable. If not, the program remains a compliance construct that cannot attract capital at scale.