Palo Alto utility explores gas phase-out options amid rising costs for remaining customers

The Climate Action and Sustainability Committee of Palo Alto convened on June 13, 2025, to discuss critical steps towards reducing reliance on natural gas and transitioning to more sustainable energy sources. A significant focus of the meeting was the need to reassess the assumptions surrounding industrial users of natural gas, with committee members urging a careful examination of whether these users can transition to electric heating solutions, such as heat pumps.

One speaker emphasized that the remaining industrial gas customers should not expect other Palo Alto residents to subsidize their gas usage. As the costs of maintaining the gas system rise, these users may face increased rates, reflecting the financial burden of the dwindling customer base. This shift is expected to encourage a transition away from gas, aligning with broader sustainability goals.

The committee also discussed the impact of upcoming regulations from the Bay Area Air District, which will prohibit the sale of gas-powered heating appliances by 2030. This regulation is anticipated to accelerate the transition for residential users, as they will be compelled to adopt electric alternatives.

Innovative solutions were highlighted, including a system from Harvest Thermal that integrates space heating, air conditioning, hot water, and energy storage into one unit. This technology could facilitate a smoother transition for residents looking to replace their gas systems.

Former Palo Alto utilities employee Tom Caput contributed to the discussion by advocating for a proactive approach to the decommissioning of the gas utility. He suggested that the costs associated with winding down the gas system should be communicated to current customers through a volumetric rate adder. This would prepare residents for future rate increases and encourage them to participate in the electrification movement.

The meeting underscored the urgency of transitioning to sustainable energy sources and the need for clear communication with residents about the implications of these changes. As Palo Alto moves forward, the committee's discussions will play a crucial role in shaping the city's energy landscape and ensuring a smooth transition for all users.