Controversial clean energy law takes effect in Washington

Gov. Jay Inslee on Thursday signed a hotly contested bill to quicken Puget Sound Energy’s transition away from natural gas, leaving in place a provision that critics argued would unfairly benefit the utility’s investors at the expense of ratepayers.

Flanked by lawmakers and labor leaders at a union hall in Kent, Inslee said House 1589 provides the state’s largest utility with a road map and tools “to get out of the fossil fuel business.”

A short time later, the investor-owned utility, which serves 800,000 customers in six counties, issued a statement lauding the “thoughtful leadership” of Inslee and lawmakers.

“This is a positive step in what will be a lengthy process of planning for the future energy choices of our electric and natural gas customers and meeting our state’s aggressive clean energy goals,” the statement read.

Under state law, PSE must generate 80% of its energy from renewable energy sources by 2030 and 100% by 2045.

The new law is intended to speed up PSE’s shift toward clean energy, setting the stage for more customers to rely on electric appliances, rather than gas ones, for heating and cooking. 

Natural gas energy use is already falling among the company’s ratepayers. It declined 7% for residential and 3% for commercial customers in 2023, according to PSE. Electricity use is increasing and forecasted to continue to rise, the utility reports.

While the new law deals heavily with utility planning requirements and includes provisions related to rate-setting, Inslee was pressed to veto a section focused on “accelerated depreciation.”

With depreciation, utilities spread the cost of major new projects over years, rather than letting the expense hit their books and ratepayers all at once. 

HB 1589 requires the state’s Utilities and Transportation Commission to let PSE speed up how quickly it is passing the costs of natural gas infrastructure to customers. This would open the door for higher rates in the near term. It’s similar to a 15-year mortgage versus a 30-year.

Environmental and progressive organizations, including the Sierra Club, Washington State Budget and Policy Center, Washington State Community Action Partnership, and Sightline Institute had urged Inslee to veto the accelerated depreciation language.

They warned inclusion of the provision would lead to “significant short-term rate increases which will disproportionately impact low- and moderate-income households.”

Backers of the bill point out there is no rate increase tied to the bill. And, they said, accelerated depreciation ensures that current customers who are benefiting from the gas infrastructure pay their fair share of the costs before leaving the system, helping to protect against an undue cost burden falling on an increasingly smaller group of customers.

This legislation was one of the most divisive proposals of the session. It passed by votes of 27-22 in the Senate and 50-45 in the House of Representatives.

Republicans argued it would drive energy costs higher for lower-income ratepayers. Democrats and climate advocates framed the bill as a key step toward decarbonization, although some House Democrats who voted for the legislation expressed concerns about its impact on energy bills.

The law goes into effect immediately.