Line extension allowances are on their way out, and regulators can finish the job.
Line extension allowances - the term of art for the utility customer-funded subsidies for new gas pipes - are finally, slowly on their way out of Cascadia. This is thanks to regulators who recognize the contradiction of, on the one hand, utility customers subsidizing the proliferation of carbon-intensive gas infrastructure and use, and on the other, utilities' obligations to reduce their carbon emissions over time - to say nothing of the general need to protect customers from the high costs of future stranded assets and bloated energy bills.
On January 1, 2025, two Washington state utilities, Avista and Puget Sound Energy (PSE), fully eliminated costly line extension allowances - a first in Cascadia. And Oregon regulators have put Avista and NW Natural on a schedule to ratchet down their allowances annually and ultimately eliminate them in 2027. Similar phaseouts are in the works for Cascade Natural Gas's gas infrastructure subsidies in both Oregon and Washington.
Still, regulators have not yet done away with the line extension allowances offered by the 11 other gas utilities across Cascadia, including three in Oregon and Washington. And as more customers every year choose to reduce their gas use or go fully electric, for financial or health or climate reasons, they're leaving a shrinking number of customers on the hook for paying off those gas pipe extensions over time. Plus, new evidence suggests gas utilities that are getting rid of line extension allowances may have overcharged customers already, on the order of millions of dollars in excess of allowed amounts.
Regulators across the region can do away with these costly subsidies to obsolescing fossil fuel-based systems once and for all (something California regulators did in 2023). And they can do one better by investigating utilities' possible overcharges to customers to fund these subsidies.
The old logic: Endless gas expansion, funded by ratepayers
Line extension allowances, as Sightline wrote about in 2023, were once a good deal for both new and existing gas customers - that is, before the world learned of the incontrovertible evidence about the climate and health hazards of burning gas in homes. Without the subsidies, a developer or homeowner could expect to pay thousands of dollars to connect their building to a gas distribution pipeline. So, regulators allowed utilities to subsidize the cost of installing new gas service lines, a cost utilities then recouped by adding them to their "rate base."
Financing these subsidies though a rate base works like a home mortgage. Every month ratepayers pay back to the utility some of the original investment plus an interest charge (i.e., profit for the utility). Once the investment is fully paid off (say, in 50 or 60 years for a gas service line), the amount ratepayers have paid is many times the original subsidy amount. In Oregon and Washington, the total cost of line extension allowances over the depreciation life can be four to ten times the initial subsidy price.
In Oregon and Washington, utilities will roll into the rates they charge their customers roughly $91 million in costs for gas line extension allowance offered in 2022-23 alone. Sightline estimates that figure balloons to more than $570 million over the new pipelines' "book life" when accounting for utility profits, taxes, and operational and maintenance expenses. In British Columbia, FortisBC padded its rate base with an estimated C$139 million in line extension allowances in 2022-23, which will cost British Columbians more than C$1.5 billion over the 60-year book life of these assets.
Historically, existing customers of a utility benefited from this arrangement, even though they were footing the bill for the subsidy. That's because more total gas customers meant further spreading out the costs of maintaining expensive pipeline infrastructure, which lowered everyone's bills.
But as ...

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