Environmental advocates are hailing a decision by Massachusetts regulators that will give more than 1.3 million households access to lower winter electricity prices if they use a heat pump in their home.
Public utilities regulators on Monday ordered National Grid, the state’s second-largest electric company, to develop a lower, seasonal rate for houses with heat pumps. The decision comes three months after the state approved a similar rate plan by Unitil, an electric utility that serves 108,500 Massachusetts households.
“They hit the nail on the head here,” said Kyle Murray, Massachusetts program director for climate and energy nonprofit Acadia Center.
Heat pumps are a major element of Massachusetts’ strategy for going carbon neutral by 2050. However, high electricity prices and historically low natural gas prices make switching to a heat pump financially difficult for many people. Unitil’s pricing plan is an attempt to bridge that affordability gap and make heat pumps more accessible, said spokesman Alec O’Meara.
National Grid had proposed a technology-neutral “electrification rate” that would have offered a discounted rate to high-volume electric consumers, whether the power demand was coming from an efficient heat pump, inefficient electric resistance heat, or even a pool heater. Environmental activists, advocates for low-income households, a solar industry group, the state energy department, and the state attorney general all filed comments objecting to this approach and pushing for a heat pump-specific rate like Unitil’s.
“The proposal that National Grid had filed wasn’t going to do anything to ensure that customers who opted into their electrification rate were actually participating in our decarbonization efforts,” said Priya Gandbhir, a senior attorney with the Conservation Law Foundation, one of the groups that pushed for a heat pump specific rate.
In their order, regulators sided with the objectors. They concluded that National Grid’s proposal did not meet the state’s legal mandates to consider the impact of rate design changes on greenhouse gas emissions and energy efficiency, as opposed to Unitil’s approach, which removes a barrier to lower emissions and greater efficiency.
“The heat pump rate will reduce kilowatt hour electricity rates for these customers during winter when heat pumps replace fossil fuel heating equipment, furthering the reduction of greenhouse gas emissions,” said Alanna Kelly, spokesperson for the state department of public utilities.
The order also encouraged National Grid to create the rate quickly so it could be in effect before the coming winter heating season.
Residents with heat pumps in four Massachusetts towns will soon pay hundreds of dollars less for their electricity over the winter, thanks to a new pricing approach advocates hope will become a model for utilities across the state.
State regulators in June approved a plan by utility Unitil to lower the distribution portion of the electric rate from November to April for customers who use heat pumps, the first time this pricing structure will be used in the state. It’s a shift the company hopes will make it more financially feasible for residents of its service area to choose the higher-efficiency, lower-emissions heat source.
“We asked, is there a way we can structure the rates that would be fair and help customers adopt a heat pump?” said Unitil spokesman Alec O‘Meara. “We recognize that energy affordability is very important to our customers.”
A balancing act
Electric heat pumps are a major part of Massachusetts’ strategy for reaching its goal of going carbon-neutral by 2050. Today, nearly 80% of homes in the state use natural gas, oil, or another fossil fuel for space heating. Looking to upend that ratio, the state has set a target of having heat pumps in 500,000 homes by 2030.
One of the major obstacles to this goal is cost. To address part of this barrier, Massachusetts offers rebates of up to $16,000 for income-qualified homeowners and $10,000 for higher-income residents for heat pump equipment.
The cost of powering these systems though, can be its own problem. Natural gas prices have been trending precipitously downward for the past two years and Massachusetts has long had some of the highest electricity prices in the country. This disparity can be particularly stark in the winter, when consumers using natural gas for heating get priority, requiring the grid to lean more heavily on dirtier, more expensive oil- and coal-fueled power plants, said Kyle Murray, Massachusetts program director for climate and energy nonprofit Acadia Center.
So switching from natural gas to an electric heat source — even a more efficient one like a heat pump — doesn’t always mean savings for a consumer, especially those with lower incomes.
“Electric rates are disproportionately higher than gas rates in the region,” Murray said.
Unitil’s new winter pricing structure is an attempt to rebalance that equation. In New England, electric load on the grid is generally much lower in the winter, when people turn off their air conditioners and switch over to gas or oil heating. That means that the grid, built to accommodate summer’s peak demand, has plenty of capacity for the added load of new heat pumps coming online — no new infrastructure needs to be built to handle this demand (for now, at least).
“The marginal cost of adding demand is lower,” said Mark Kresowik, senior policy director at American Council for an Energy-Efficient Economy, which supports heat pump-specific rates.
Unitil, which provides electricity to 108,500 households, decided to let customers share in that lower marginal cost. The company estimates customers will save about six cents per kilowatt-hour, which would work out to a monthly savings of more than $100 for a home using about 2,000 kilowatt-hours per month. The new rate should go into effect in early 2025, O’Meara said.
Statewide solutions?
As Unitil is preparing to deploy its heat pump rate, environmental advocates and other stakeholders are pushing for adoption of this strategy beyond Unitil’s relatively limited territory.
Public utilities regulators are in the middle of considering a rate case filed by National Grid, which serves some 1.3 million customers in Massachusetts. National Grid has proposed what it calls a technology-neutral “electrification rate,” which would provide discounts to certain high-volume energy users, which would include heat pump users.
However, several advocates for low-income households and clean energy — including Acadia Center, Conservation Law Foundation, Environmental Defense Fund, Low-Income Energy Affordability Network — as well as the state energy department and Attorney General Andrea Campbell argue that this approach is inadequate. They’ve submitted comments urging regulators to require National Grid to offer a heat pump rate similar to Unitil’s plan, but modified to work within National Grid’s pricing model.
“Every intervenor in the docket who commented on the electrification proposal in any capacity was negative on it,” Murray said. “And the [department of public utilities] in its questioning seemed fairly skeptical as well.”
National Grid declined to comment on the pending rate case.
The electrification rate, opponents argue, would lower costs not just for households with heat pumps, but also for those with inefficient electric resistance heating and even heated pools, effectively running counter to the goal of reducing greenhouse gas emissions.
“The ‘electrification’ proposal would apply to all electricity consumption, whether or not consistent with the Commonwealth’s climate policy of reducing greenhouse gases,” said Jerrold Oppenheim, a lawyer for the Low-Income Weatherization and Fuel Assistance Program Network and the Low-Income Energy Affordability Network.
It would also do nothing to encourage heat pump adoption among low- and moderate-income households, they say: Some 48% of low-income customers interested in switching to a heat pump would actually see bill increases of up to 33%, according to a brief filed by Oppenheim for the network.
Beyond the National Grid rate case, other stakeholders are also pushing for seasonal heat pump rates. The state has convened an Interagency Rates Working Group to study and make recommendations on the challenges of changing how electric rates are designed to encourage electrification of home heating and adoption of electric vehicles. In August the group released an analysis that found seasonal rates created significant savings for homes with heat pumps.
“They came to the same conclusion, that this is the right approach,” Kresowik said.
Eventually, the introduction of advanced metering technology will simplify the process of applying lower rates to desired uses, like heat pumps and electric vehicles. But the full deployment of these systems is still several years in the future, and action to ease adoption of heat pumps must be taken much sooner, advocates argue.
In the meantime, many have expressed some optimism that regulators will require National Grid to make its electrification proposal more responsive to the state’s climate and equity priorities.
“I would be surprised if the electrification pricing proposal exists as is in the final [regulatory] order,” Murray said.
This article was originally published by Canary Media.
A hefty chunk of U.S. emissions comes from the energy used to heat buildings. That means millions of homes must be converted to electric heating in order to meet climate targets.
In Colorado, a 2021 law spurred the state’s largest investor-owned utility to produce a plan that could transition a lot of homes to clean heating — and fast.
Xcel Energy’s Clean Heat Plan was approved this May. It directs more than $440 million over the next three years mainly to electrification and energy-efficiency measures that are meant to reduce reliance on the gas system and cut annual emissions by 725,000 tons.
The utility, which provides both gas and electricity to its customers, filed an initial plan that included proposals to spend heavily on hydrogen blending, biomethane, and certified natural gas. But after strong opposition from clean energy advocates who say these routes do not represent viable pathways to decarbonization, those proposals were reevaluated. Following a motion filed by the Sierra Club, Natural Resources Defense Council, and others last November, Xcel amended its original plan filed with the Colorado Public Utilities Commission.
Now the majority of funds will go toward building electrification and energy efficiency, which the commission found to be the “most cost effective and scalable ways to reduce emissions from burning gas and buildings, both in the short run as well as in the long term,” said Meera Fickling, building decarbonization manager at Western Resource Advocates.
Electrification efforts will primarily take the form of incentives that make it cheaper for customers to switch gas heating appliances to electric heat pumps. The incentives can be combined with federal electrification tax credits and extend to all-electric new construction as well. One-fifth of the program’s funding is earmarked for low-income customers. The plan’s funding is roughly three times the $140 million that the Inflation Reduction Act allocated to Colorado for similar measures.
The utility forecasts gas sales to decline by 14 percent between this year and 2028, The Colorado Sun reports.
While many states have incentives and rebates available for upgrading to energy-efficient appliances and heating solutions, Colorado specifically directs its gas utilities to lead those programs — and holds them accountable for contributing to the state’s climate goals.
That’s why Xcel’s new clean heat program will be “a test case of a utility-led model towards decarbonizing the gas distribution system,” Fickling said. “It really serves as a model — a nationwide model — for how gas utilities can allocate resources to decarbonize their system in the long term.”
From state laws to utility plans
Colorado’s push to clean up home heating started three years ago with the Clean Heat Law, which requires gas distribution utilities to create concrete plans to reduce their greenhouse gas emissions 4 percent below 2015 levels by 2025 and 22 percent by 2030. Xcel’s recently approved Clean Heat Plan will carry the utility through 2027, and the utility must propose a new plan in the coming years to meet the next target.
“I expect the next plan to really take a close look at the 2030 target and the trajectory to achieve it,” said Jack Ihle, regional vice president of regulatory policy at Xcel.
The Clean Heat Law was the first of its kind in any state, Fickling said, though others have since taken steps to curtail the climate impact of heating.
Following Colorado’s 2021 law, in 2023 Vermont passed the Affordable Heat Act to reduce emissions from home heating, and Massachusetts drafted similar legislation. This year, Illinois and New Jersey have both introduced bills with clean heating and decarbonization standards.
In Minnesota, the state’s largest gas utility just received approval for a five-year, $106 million plan to reduce its emissions following the state’s 2021 Natural Gas Innovation Act. The utility, CenterPoint Energy, says the plan would “reduce or avoid an estimated 1.2 million tons of carbon emissions over the lifetime of the projects,” though advocates have criticized the approach.
But utilities in Colorado “have a lot more flexibility in terms of the portfolio that they propose,” said Joe Dammel, manager of carbon-free buildings at RMI. While Xcel can prioritize energy efficiency and electrification in Colorado, Minnesota’s Natural Gas Innovation Act requires gas utilities to produce emissions-reduction plans that spend at least half of their budgets on alternative fuels like renewable natural gas, which can still heavily pollute. In Colorado, a much smaller amount is dedicated to alternative fuels; only around $10 million out of the $440 million can be spent on renewable natural gas and recovered methane, and all projects must specifically be approved by the commission.
Another difference between the two recently approved plans is that Xcel delivers gas and electricity to about 1.5 million customers in Colorado, which gives it an opportunity to counterbalance lost gas revenue with increased sales from its electricity business.
Meanwhile, CenterPoint serves gas to about 910,000 customers but has no electricity customers. That gives it fewer opportunities to make up for losses from its gas business driven by electrification mandates, and more incentive to prioritize the use of alternative fuels delivered through the pipelines it owns — and not electrification.
Investing in 100,000 heat pumps
Now that the funds have been approved, Xcel is waiting on a final written order from regulators, which should arrive later this month. From there, it will start implementing the plan and work on defining rebate levels and informing customers on how to access incentives.
The details are still being decided, but customers will likely need to pay first and then get reimbursed later, as is the case for many current rebate programs, said Emmett Romine, vice president of energy and transportation solutions at Xcel. Customers would also get higher rebates if they choose more advanced technologies, like high-efficiency cold-climate heat pumps.
Beyond educating customers, the company is putting workforce-training plans together to ensure there are enough heat-pump installers ready to help customers convert. Xcel is also working with distributors and manufacturers “to make sure that there’s a supply chain that will come to Colorado when we stimulate demand,” Romine said.
The plan represents a significant step up from Xcel’s current pace of upgrades. “The goals are really aggressive,” Romine said. “When you look at the number of heat pumps and the number of water heaters we’ve got to contemplate getting into homes, it’s an enormous amount of work.” Currently, Xcel does around 10,000 rebates a year for traditional gas furnaces. Now, it’s aiming to do 20,000 heat-pump conversions this year and just under 100,000 total by the end of 2026, Romine said.
That supercharged effort won’t come without costs. Ratepayers will see electricity rates go up by 1.1 percent and gas rates rise by 7 percent over the next four years due to the plan. But advocates say it’s worth it to avoid pouring money into a gas system that must be phased out — and that the climate benefits outweigh the upfront costs. Even without the Clean Heat Plan, Xcel projected it would need to increase base rate revenue by 32 percent between 2023 and 2030, The Colorado Sun reported.
Colorado’s plan “is a very good example of needing to pursue both sides of the equation at the same time — decarbonization, electrification — but at the same time ensuring that we’re starting to shrink and eliminate unnecessary investments in the gas system,” said Alejandra Mejia Cunningham, senior manager of state buildings policy at the Natural Resources Defense Council.
The Public Utilities Commission has encouraged Xcel to report its progress by 2026, ahead of the legally mandated schedule, Ihle said. Advocates will be watching closely to see how it all plays out.
“We’re gonna have to make sure that we’re seeing the results of that in terms of participation, customer satisfaction, and ultimately emissions and cost reductions,” Dammel said. “There’s going to be a lot of utilities across the country following this.”
A new analysis says Vermont is not on track to meet its 2025 target for reducing greenhouse gas emissions, with declines in thermal fossil fuel use driven mostly — though not entirely — by warming winters.
The study, released last month by the Vermont nonprofit Energy Action Network, also shows signs of progress: Though rising temperatures are still the main driver of lower heating fuel sales, weatherization and electric heat pump adoption are starting to have a greater impact.
“Vermont’s efforts… are, ironically, being aided by the very global heating that we are working to do our part to help minimize,” the study says. “Relying on warmer winters to reduce emissions from fossil heating fuel use is not a sustainable strategy. … What [the warming trend] means for temperatures — and therefore fuel use — in any given year is still subject to variation and unpredictability.”
Credit: Energy Action Network
Like most other New England states, Vermont relies heavily on heating oil and, to a lesser degree, propane and utility gas, to heat buildings. This makes the building sector a close second to transportation in terms of the biggest contributors to planet-warming emissions in Vermont and many of its neighbors.
Vermont’s statutory climate targets, adopted in 2020, aim to cut these emissions by 26% below 2005 levels by next year, with higher targets in the coming decades.
“It’s technically possible” that Vermont will meet its thermal emissions goal for next year, but “at this point, primarily dependent on how warm or cold the fall and early winter heating season is at the end of 2024,” EAN executive director Jared Duval said. The transportation sector would need to see a nearly unprecedented one-year decline.
On the whole, EAN says it’s “exceedingly unlikely” that Vermont will meet its 2025 goal.
Warmer winters ‘not the whole story’
EAN found that heat pump adoption and weatherization are not happening fast enough, and what’s more, the current trend sets Vermont up for a Pyrrhic victory at best: Rising temperatures in the upcoming heating season would have to be at least as pronounced as in last year’s record-warm winter in order to reduce fuel use enough to meet the 2025 target for the thermal sector.
Either way, warming alone won’t get Vermont to its 2030 target of a 40% drop in emissions over 1990 levels, Duval said. The state wants to end up at an 80% reduction by 2050.
“The only durable way to reduce emissions in line with our science-based commitments is to increase the scale and pace of non-fossil fuel heating solutions and transportation solutions,” he said.
The EAN study found that fuel sales tend to decline alongside heating degree days: a measurement of days when it’s cold enough to kick on the heat. Vermont is seeing fewer of these days overall as temperatures warm.
“The reduction in fossil heating fuel sales as winters have been warming is not surprising,” Duval said. “Historically, fossil heating fuel use and therefore greenhouse gas emissions have largely tracked with heating demand, with warmer winters corresponding with less fossil fuel use and colder winters with more fossil fuel use. The good news is that’s not the whole story.”
In recent years, he said, fuel sales have begun to “decouple” from the warming trend to which they were once more closely linked. From 2018 to 2023, EAN found that Vermont fuel sales declined 12% while heating degree days only declined 8%.
Credit: Energy Action Network
“Fossil heating fuel sales are declining even more than you would expect just from warmer winters alone,” Duval said. “And that’s because many non-fossil fuel heating solutions are being adopted.”
Upgrades needed to accelerate progress
From 2018 to 2022, EAN found, Vermont saw a 34% increase in weatherization projects and more than 50,000 more cold-climate heat pumps installed in homes and businesses, with a 3.3% increase in the number of homes that said they use electricity as their primary heating fuel.
The upshot: The number of cold days explains 50% of Vermont’s declining fuel use from 2018 to 2023, while heat pump growth explains as much as 28% and other efficient upgrades explain a further 15%. The remaining 7% of the decline couldn’t easily be broken down and could partly be from people shifting to wood heat during periods of high fuel prices, Duval said.
“In order to achieve thermal sector emissions reduction targets without relying primarily on an abnormal amount of winter warming, significantly more displacement and/or replacement of fossil heating fuel… will be necessary,” the study says. Upgrades like heat pumps will lead to more sustainable emissions cuts, it says, “no matter what the weather-dependent heating needs in Vermont will be going forward.”
EAN is nonpartisan and doesn’t take policy positions, but research analyst Lena Stier said this data suggests that expanding Vermont’s energy workforce and tackling heat pumps and weatherization in tandem would spur faster progress on emissions cuts, while keeping costs low.
EAN based its estimates of fuel use and emissions impacts from heat pumps on the official assumptions of a state-approved technical manual, which Duval said may be overly optimistic. But Stier said the reality could differ.
“We’ve heard anecdotally that a lot of people who have installed heat pumps in their homes… are kind of primarily using them for cooling in the summer,” she said. “So our kind of assumption is that, in reality, it would be a smaller share of that (fossil fuel use) reduction coming from heat pumps.”
While fuel use declined overall in the study period, he said this came mostly from people using less heating oil specifically — propane sales actually increased in the same period.
Duval noted that propane is cheaper than oil on paper, but actually costs more to use because it generates heat less efficiently than oil does.
“Once you look at that, then heat pumps become that much more attractive,” he said.
Editor’s note: This story has been updated for clarity.
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