Municipal gas utilities/CCA

AN ACT Relating to the compliance obligation under the climate 1
commitment act for certain municipal gas utilities; amending RCW 2
70A.65.080 and 70A.65.130; and adding a new section to chapter 70A.65 3
RCW. 4
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:5
NEW SECTION. Sec. 1. A new section is added to chapter 70A.65 6
RCW to read as follows: 7
(1) A municipal gas utility subject to the provisions of chapter 8
35.92 RCW whose associated greenhouse gas emissions did not exceed 9
27,000 metric tons of carbon dioxide equivalent during any year prior 10
to 2022 may elect to pursue the alternative emission reduction 11
pathway authorized under this section in lieu of remaining a covered 12
entity under this chapter. If a municipal gas utility elects to 13
pursue the alternative emission reduction pathway under this section, 14
the department must adopt an emergency rule to adjust the allowance 15
budget of the program applicable to years 2026 and beyond.16
(2) A municipal gas utility electing to pursue the alternative 17
emission reduction pathway authorized under this section must submit 18
written notice to the department by September 1, 2025, informing the 19
department of its intent to elect the alternative emission reduction 20
pathway. This notice must be accompanied by a plan that meets the 21
S-1228.1
SENATE BILL 5698
State of Washington 69th Legislature 2025 Regular Session
By Senators Ramos and Nobles
Read first time 02/07/25. Referred to Committee on Environment,
Energy & Technology.
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requirements of subsection (3) of this section. If the department 1
reviews the plan and determines that it meets the requirements of 2
subsection (3) of this section, the department must notify the 3
utility that its plan has been approved, and the municipal gas 4
utility is relieved of its compliance obligation as of December 31, 5
2025. 6
(3) An alternative emission reduction pathway proposed by a 7
municipal gas utility must: 8
(a) Be designed to reduce the covered emissions of the municipal 9
gas utility below 22,500 tons of carbon dioxide equivalent by 2030 10
and each year thereafter; 11
(b) At minimum, result in the targeted expenditure, on emission 12
reduction activities under the plan, by the municipal gas utility of 13
funds that equal or exceed the funds that would have been expended by 14
the municipal gas utility to satisfy its compliance obligation under 15
this chapter each year through 2030; and 16
(c) Describe the activities that the municipal gas utility will 17
pursue to reduce its greenhouse gas emissions to below 22,500 tons of 18
carbon dioxide equivalent by 2030, and demonstrate, including 19
detailed assumptions, how the activities will result in the reduction 20
of greenhouse gas emissions by 2030 and each year thereafter.21
(4)(a) In the event that a municipal gas utility implementing an 22
alternative emission reduction pathway fails to achieve emission 23
reductions sufficient to drop the utility's emissions below 22,500 24
tons of carbon dioxide equivalent by 2030, the utility shall revert 25
to being a covered entity for purposes of the third compliance 26
period. Because data allowing for the department to determine whether 27
the utility's alternative emission reduction pathway plan may not be 28
available until midway through the third compliance period, the 29
department must allow the utility to submit all compliance 30
instruments to satisfy its compliance obligation during the third 31
compliance period in the final year of the third compliance period. 32
However, a utility whose alternative emission reduction pathway plan 33
fails to achieve its 2030 target must also submit penalty compliance 34
instruments in an amount equal to one compliance instrument for each 35
ton of emissions that were not covered by the program during the 36
years 2026 through 2030. 37
(b) In the event that a municipal gas utility implementing an 38
alternative emission reduction pathway has covered emissions during 39
any year after 2030 that exceed 22,500 tons of carbon dioxide 40
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equivalent, the municipal gas utility must become a covered entity 1
effective as of the year its emissions exceeded 22,500 tons of carbon 2
dioxide equivalent. A utility electing an alternative emission 3
reduction pathway whose covered emissions exceeds 22,500 tons of 4
carbon dioxide equivalent in any year after 2030 must also submit 5
penalty compliance instruments in an amount equal to one compliance 6
instrument for each ton of emissions that were not covered by the 7
program during the years 2026 through the year that the utility 8
resumed a compliance obligation under this chapter as a covered 9
entity. 10
Sec. 2. RCW 70A.65.080 and 2024 c 352 s 4 are each amended to 11
read as follows: 12
(1) A person is a covered entity as of the beginning of the first 13
compliance period and all subsequent compliance periods if the person 14
reported emissions under RCW 70A.15.2200 for any calendar year from 15
2015 through 2019, or if additional data provided as required by this 16
chapter indicates that emissions for any calendar year from 2015 17
through 2019 equaled or exceeded any of the following thresholds, or 18
if the person is a first jurisdictional deliverer and imports 19
electricity into the state during the compliance period:20
(a) Where the person owns or operates a facility and the 21
facility's emissions equal or exceed 25,000 metric tons of carbon 22
dioxide equivalent; 23
(b) Where the person is a first jurisdictional deliverer and 24
generates electricity in the state and emissions associated with this 25
generation equals or exceeds 25,000 metric tons of carbon dioxide 26
equivalent; 27
(c)(i) Where the person is a first jurisdictional deliverer 28
importing electricity into the state and: 29
(A) For specified sources, the cumulative annual total of 30
emissions associated with the imported electricity exceeds 25,000 31
metric tons of carbon dioxide equivalent; 32
(B) For unspecified sources, the cumulative annual total of 33
emissions associated with the imported electricity exceeds 0 metric 34
tons of carbon dioxide equivalent; or 35
(C) For electricity purchased from a federal power marketing 36
administration pursuant to section 5 (b) of the Pacific Northwest 37
electric power planning and conservation act of 1980, P.L. 96-501, if 38
the department determines such electricity is not from a specified 39
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source, the cumulative annual total of emissions associated with the 1
imported electricity exceeds 25,000 metric tons of carbon dioxide 2
equivalent. 3
(ii) In consultation with any linked jurisdiction to the program 4
created by this chapter, by October 1, 2026, the department, in 5
consultation with the department of commerce and the utilities and 6
transportation commission, shall adopt by rule a methodology for 7
addressing imported electricity associated with a centralized 8
electricity market; 9
(d) Where the person is a supplier of fossil fuel other than 10
natural gas and from that fuel 25,000 metric tons or more of carbon 11
dioxide equivalent emissions would result from the full combustion or 12
oxidation, excluding the amounts for fuel products that are produced 13
or imported with a documented final point of delivery outside of 14
Washington and combusted outside of Washington; and15
(e)(i) ((Where)) Except as provided in section 1 of this act, 16
where the person supplies natural gas in amounts that would result in 17
exceeding 25,000 metric tons of carbon dioxide equivalent emissions 18
if fully combusted or oxidized, excluding the amounts for fuel 19
products that are produced or imported with a documented final point 20
of delivery outside of Washington and combusted outside of 21
Washington, and excluding the amounts: (A) Supplied to covered 22
entities under (a) through (d) of this subsection; and (B) delivered 23
to opt-in entities; 24
(ii) Where the person who is not a natural gas company and has a 25
tariff with a natural gas company to deliver to an end-use customer 26
in the state in amounts that would result in exceeding 25,000 metric 27
tons of carbon dioxide equivalent emissions if fully combusted or 28
oxidized, excluding the amounts: (A) Supplied to covered entities 29
under (a) through (d) of this subsection; and (B) the amounts 30
delivered to opt-in entities; 31
(iii) Where the person is an end-use customer in the state who 32
directly purchases natural gas from a person that is not a natural 33
gas company and has the natural gas delivered through an interstate 34
pipeline to a distribution system owned by the purchaser in amounts 35
that would result in exceeding 25,000 metric tons of carbon dioxide 36
equivalent emissions if fully combusted or oxidized, excluding the 37
amounts: (A) Supplied to covered entities under (a) through (d) of 38
this subsection; and (B) delivered to opt-in entities.39
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(2) A person is a covered entity as of the beginning of the 1
second compliance period and all subsequent compliance periods if the 2
person reported emissions under RCW 70A.15.2200 or provided emissions 3
data as required by this chapter for any calendar year from 2023 4
through 2025, where the person owns or operates a waste to energy 5
facility utilized by a county and city solid waste management program 6
and the facility's emissions equal or exceed 25,000 metric tons of 7
carbon dioxide equivalent. 8
(3) A person is a covered entity as of the beginning of the third 9
compliance period, and all subsequent compliance periods if the 10
person reported emissions under RCW 70A.15.2200 or provided emissions 11
data as required by this chapter for 2027 or 2028, where the person 12
owns or operates a railroad company, as that term is defined in RCW 13
81.04.010, and the railroad company's emissions equal or exceed 14
25,000 metric tons of carbon dioxide equivalent. 15
(4) When a covered entity reports, during a compliance period, 16
emissions from a facility under RCW 70A.15.2200 that are below the 17
thresholds specified in subsection (1) or (2) of this section, the 18
covered entity continues to have a compliance obligation through the 19
current compliance period. When a covered entity reports emissions 20
below the threshold for each year during an entire compliance period, 21
or has ceased all processes at the facility requiring reporting under 22
RCW 70A.15.2200, the entity is no longer a covered entity as of the 23
beginning of the subsequent compliance period unless the department 24
provides notice at least 12 months before the end of the compliance 25
period that the facility's emissions were within 10 percent of the 26
threshold and that the person will continue to be designated as a 27
covered entity in order to ensure equity among all covered entities. 28
Whenever a covered entity ceases to be a covered entity, the 29
department shall notify the appropriate policy and fiscal committees 30
of the legislature of the name of the entity and the reason the 31
entity is no longer a covered entity. 32
(5) For types of emission sources described in subsection (1) of 33
this section that begin or modify operation after January 1, 2023, 34
and types of emission sources described in subsection (2) of this 35
section that begin or modify operation after 2027, coverage under the 36
program starts in the calendar year in which emissions from the 37
source exceed the applicable thresholds in subsection (1) or (2) of 38
this section, or upon formal notice from the department that the 39
source is expected to exceed the applicable emissions threshold, 40
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whichever happens first. Sources meeting these conditions are 1
required to transfer their first allowances on the first transfer 2
deadline of the year following the year in which their emissions were 3
equal to or exceeded the emissions threshold. 4
(6) For emission sources described in subsection (1) of this 5
section that are in operation or otherwise active between 2015 and 6
2019 but were not required to report emissions for those years under 7
RCW 70A.15.2200 for the reporting periods between 2015 and 2019, 8
coverage under the program starts in the calendar year following the 9
year in which emissions from the source exceed the applicable 10
thresholds in subsection (1) of this section as reported pursuant to 11
RCW 70A.15.2200 or provided as required by this chapter, or upon 12
formal notice from the department that the source is expected to 13
exceed the applicable emissions threshold for the first year that 14
source is required to report emissions, whichever happens first. 15
Sources meeting these criteria are required to transfer their first 16
allowances on the first transfer deadline of the year following the 17
year in which their emissions, as reported under RCW 70A.15.2200 or 18
provided as required by this chapter, were equal to or exceeded the 19
emissions threshold. 20
(7) The following emissions are exempt from coverage in the 21
program, regardless of the emissions reported under RCW 70A.15.2200 22
or provided as required by this chapter: 23
(a) Emissions from the combustion of aviation fuels;24
(b) Emissions from watercraft fuels supplied in Washington that 25
are combusted outside of Washington; 26
(c) Emissions from a coal-fired electric generation facility 27
exempted from additional greenhouse gas limitations, requirements, or 28
performance standards under RCW 80.80.110; 29
(d) Carbon dioxide emissions from the combustion of biomass or 30
biofuels; 31
(e)(i) Motor vehicle fuel or special fuel that is used 32
exclusively for agricultural purposes by a farm fuel user. This 33
exemption is available only if a buyer of motor vehicle fuel or 34
special fuel provides the seller with an exemption certificate in a 35
form and manner prescribed by the department. For the purposes of 36
this subsection, "agricultural purposes" and "farm fuel user" have 37
the same meanings as provided in RCW 82.08.865. 38
(ii) The department must determine a method for expanding the 39
exemption provided under (e)(i) of this subsection to include fuels 40
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used for the purpose of transporting agricultural products on public 1
highways. The department must maintain this expanded exemption for a 2
period of five years, in order to provide the agricultural sector 3
with a feasible transition period; 4
(f) Emissions from facilities with North American industry 5
classification system code 92811 (national security); and6
(g) Emissions from municipal solid waste landfills that are 7
subject to, and in compliance with, chapter 70A.540 RCW.8
(8) The department shall not require multiple covered entities to 9
have a compliance obligation for the same emissions. The department 10
may by rule authorize refineries, fuel suppliers, facilities using 11
natural gas, and natural gas utilities to provide by agreement for 12
the assumption of the compliance obligation for fuel or natural gas 13
supplied and combusted in the state. The department must be notified 14
of such an agreement at least 12 months prior to the compliance 15
obligation period for which the agreement is applicable.16
(9)(a) The legislature intends to promote a growing and 17
sustainable economy and to avoid leakage of emissions from 18
manufacturing to other locations. The legislature further intends to 19
see innovative new businesses locate and grow in Washington that 20
contribute to Washington's prosperity and environmental objectives.21
(b) Consistent with the intent of the legislature to avoid the 22
leakage of emissions to other jurisdictions, in achieving the state's 23
greenhouse gas limits in RCW 70A.45.020, the state, including lead 24
agencies under chapter 43.21C RCW, shall pursue the limits in a 25
manner that recognizes that the siting and placement of new or 26
expanded best-in-class facilities with lower carbon emitting 27
processes is in the economic and environmental interests of the state 28
of Washington. 29
(c) In conducting a life-cycle analysis, if required, for new or 30
expanded facilities that require review under chapter 43.21C RCW, a 31
lead agency must evaluate and attribute any potential net cumulative 32
greenhouse gas emissions resulting from the project as compared to 33
other existing facilities or best available technology including 34
best-in-class facilities and emerging lower carbon processes that 35
supply the same product or end use. The department may adopt rules to 36
determine the appropriate threshold for applying this analysis.37
(d) Covered emissions from an entity that is or will be a covered 38
entity under this chapter may not be the basis for denial of a permit 39
for a new or expanded facility. Covered emissions must be included in 40
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the analysis undertaken pursuant to (c) of this subsection. Nothing 1
in this subsection requires a lead agency or a permitting agency to 2
approve or issue a permit to a permit applicant, including to a new 3
or expanded fossil fuel project. 4
(e) A lead agency under chapter 43.21C RCW or a permitting agency 5
shall allow a new or expanded facility that is a covered entity or 6
opt-in entity to satisfy a mitigation requirement for its covered 7
emissions under this chapter and under any greenhouse gas emission 8
mitigation requirements for covered emissions under chapter 43.21C 9
RCW by submitting to the department the number of compliance 10
instruments equivalent to its covered emissions during a compliance 11
period. 12
Sec. 3. RCW 70A.65.130 and 2021 c 316 s 15 are each amended to 13
read as follows: 14
(1) For the benefit of ratepayers, allowances must be allocated 15
at no cost to covered entities that are natural gas utilities.16
(a) By October 1, 2022, the department shall adopt rules, in 17
consultation with the utilities and transportation commission, 18
establishing the methods and procedures for allocating allowances to 19
natural gas utilities. ((Rules)) Except as provided in section 1 of 20
this act, rules adopted under this subsection must allow for a 21
natural gas utility to be provided allowances at no cost to cover 22
their emissions and decline proportionally with the cap, consistent 23
with RCW 70A.65.070. Allowances allocated at no cost to natural gas 24
utilities must be consigned to auction for the benefit of ratepayers 25
consistent with subsection (2) of this section, deposited for 26
compliance, or a combination of both. The rules adopted by the 27
department pursuant to this section must include provisions directing 28
revenues generated under this subsection to the applicable utilities.29
(b) By October 1, 2022, the department shall adopt an allocation 30
schedule by rule, in consultation with the utilities and 31
transportation commission, for the first two compliance periods for 32
the provision of allowances for the benefit of ratepayers at no cost 33
to natural gas utilities. 34
(c) By October 1, 2028, the department shall adopt an allocation 35
schedule by rule, in consultation with the utilities and 36
transportation commission, for the provision of allowances for the 37
benefit of ratepayers at no cost to natural gas utilities for the 38
compliance periods contained within calendar years 2031 through 2040.39
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(2)(a) Beginning in 2023, 65 percent of the no cost allowances 1
must be consigned to auction for the benefit of customers, including 2
at a minimum eliminating any additional cost burden to low-income 3
customers from the implementation of this chapter. Rules adopted 4
under this subsection must increase the percentage of allowances 5
consigned to auction by five percent each year until a total of 100 6
percent is reached. 7
(b) Revenues from allowances sold at auction must be returned by 8
providing nonvolumetric credits on ratepayer utility bills, 9
prioritizing low-income customers, or used to minimize cost impacts 10
on low-income, residential, and small business customers through 11
actions that include, but are not limited to, weatherization, 12
decarbonization, conservation and efficiency services, and bill 13
assistance. The customer benefits provided from allowances consigned 14
to auction under this section must be in addition to existing 15
requirements in statute, rule, or other legal requirements.16
(c) Except for low-income customers, the customer bill credits 17
under this subsection are reserved exclusively for customers at 18
locations connected to a natural gas utility's system on July 25, 19
2021. Bill credits may not be provided to customers of the gas 20
utility at a location connected to the system after July 25, 2021.21
(3) In order to qualify for no cost allowances, covered entities 22
that are natural gas utilities must provide copies of their 23
greenhouse gas emissions reports filed with the United States 24
environmental protection agency under 40 C.F.R. Part 98 subpart NN - 25
suppliers of natural gas and natural gas liquids for calendar years 26
2015 through 2021 to the department on or before March 31, 2022. The 27
copies of the reports must be provided in electronic form to the 28
department, in a manner prescribed by the department. The reports 29
must be complete and contain all information required by 40 C.F.R. 30
Sec. 98.406 including, but not limited to, information on large end 31
users served by the natural gas utility. For any year where a natural 32
gas utility was not required to file this report with the United 33
States environmental protection agency, a report may be submitted in 34
a manner prescribed by the department containing all of the 35
information required in the subpart NN report. 36
(4) To continue receiving no cost allowances, a natural gas 37
utility must provide to the department the United States 38
environmental protection agency subpart NN greenhouse gas emissions 39
report for each reporting year in the manner and by the dates 40
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provided by RCW 70A.15.2200(5) as part of the greenhouse gas 1
reporting requirements of this chapter. 2
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