Public Utilities Code section 663
(a)
On or before July 1, 2026, in a new or existing proceeding, the commission, in consultation with the state’s gas corporations, shall establish a voluntary program to facilitate the cost-effective decarbonization of priority neighborhood decarbonization zones, not to exceed 30 pilot projects across the state and affecting no more than 1 percent of each gas corporation’s customers within their service territory. A pilot project where a gas corporation obtains the consent of 100 percent of property owners with natural gas service within the pilot project boundary shall not count toward the 30 pilot project limit.(b)
In administering the pilot projects established pursuant to subdivision (a), the commission shall establish all of the following:(1)
A process for gas corporations to determine and submit pilot projects for approval.(2)
Criteria and methodology for determining the cost-effectiveness of a zero-emission alternative as compared to replacement, repair, or continued operation of the affected asset of the gas system. Nonenergy benefits may be considered in prioritizing pilot projects, but shall not be used to calculate cost-effectiveness. The total cost incurred by the gas corporation for the zero-emission alternative shall be less than the total cost that would have otherwise occurred. Gas corporations shall use nonratepayer funding when available.(3)
Requirements and programs to ensure that a substitute for gas service for low-income customers is affordable, adequate, efficient, and just and reasonable.(4)
A requirement that no less than 67 percent of the property owners with natural gas service within the pilot project boundary consent to the pilot project. The commission shall establish the manner in which consent shall be received and notifications about the pilot project shall be provided to property owners and affected customers. Notifications shall include information about the anticipated costs and benefits of the zero-emission alternative offering. Notifications shall be made available in the zone’s prevailing languages.(5)
A requirement for addressing master-metered properties to ensure tenants receive adequate notification and engagement.(6)
A preference for pilot projects that provide prevailing wages and use high road job programs.(7)
A requirement that gas corporations and electrical corporations, local publicly owned electric utilities, load-serving entities, local governments, and, if feasible, core transport agents affected by the pilot project coordinate and collaborate.(8)
A requirement that gas corporations recover costs related to the pilot projects that are deemed just and reasonable and a requirement that prohibits a gas corporation from recovering behind-the-meter costs associated with the pilot projects as capital costs that are afforded a rate of return.(9)
The appropriate rate of return and recovery period that a gas corporation is eligible to receive for its costs to implement a zero-emission alternative. A gas corporation shall not receive ratepayer funding for the costs of a zero-emission alternative that are covered by incentives under federal, state, or local laws.(c)
Notwithstanding any other law, if the commission approves a pilot project proposed by a gas corporation pursuant to subdivision (a), the commission shall, pursuant to Section 451.9, relieve the gas corporation of its obligation to provide service within the pilot project boundary upon completion of all affected customers’ conversion to zero-emission alternatives. A property owner’s withholding of consent to a pilot project shall not give rise to a right to continued natural gas service if the commission approves a pilot project that includes that property within its boundary.(d)
The commission shall not establish pilot projects under this section on or after January 1, 2030.
Source:
Section 663, https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=PUC§ionNum=663. (accessed May 10, 2025).