An act to add Section 25236 to the Public Resources Code, and to add Sections 236.5, 451.10, 451.10 and 719.5 to the Public Utilities Code, relating to public utilities.
AB 2088 would authorize California Public Utilities Commission-regulated utilities, including gas corporations, to own and operate thermal energy service through thermal energy networks. The bill defines a thermal energy network as a multiuser system of piped noncombustible fluids used to transfer thermal energy for zero-emission heating, cooling, or process heat, and it allows these systems to use sources such as geothermal energy, industrial waste heat, data center waste heat, wastewater heat recovery, and ambient heat. It also directs the State Energy Resources Conservation and Development Commission, in consultation with the PUC, to develop technical standards for these networks by December 31, 2027, before the PUC begins a related rulemaking proceeding.
The bill would require the PUC to initiate a proceeding by December 31, 2027, to establish a regulatory framework for cost-effective thermal energy service by gas corporations or other appropriate public utilities. That framework must address cost-effectiveness, nonenergy benefits, customer protections, safety and reliability, and how to determine whether thermal energy service is an adequate substitute for gas service. The bill also bars utilities from recovering gas infrastructure costs in areas approved for thermal energy networks, except for costs needed to ensure safety of decommissioned gas infrastructure.
AB 2088 would also impose labor-related requirements on thermal energy network projects. It requires the PUC and gas corporations to prioritize use of the existing gas utility workforce during the transition and prohibits layoffs or workforce reductions caused by that transition. It further requires gas corporation utilities to ensure that contractors and subcontractors use a skilled and trained workforce, unless the work is covered by a valid collective bargaining agreement. Because these labor provisions would be enforced through PUC action, the bill is described as creating a state-mandated local program, though it states no reimbursement is required.
The overall sentiment reflected in the bill text and committee action is supportive of thermal energy networks as a climate and decarbonization strategy. The legislative findings emphasize California’s carbon neutrality goals, the need to reduce building-sector emissions, and the view that clearer statutory authority is needed to reduce uncertainty and encourage investment in zero-emission thermal infrastructure. The bill passed its April 22 committee vote 17-0, suggesting broad support at that stage, but it was later held under submission in committee, indicating unresolved fiscal, policy, or implementation concerns.
The main points of contention are likely to center on cost allocation, utility obligations, and workforce impacts. The bill tries to protect remaining gas customers from bearing disproportionate costs and requires customers transitioning to thermal energy service to pay an equitable share of unrecovered gas infrastructure costs, but those provisions may still raise concerns about rate impacts and stranded assets. Utilities and regulators may also scrutinize the limits on gas cost recovery, the scope of PUC authority, and the practical feasibility of replacing gas service with thermal energy networks while maintaining reliability. Labor groups and contractors may focus on the skilled-and-trained workforce mandate and the workforce retention language, while gas utilities may be concerned about operational and financial consequences of the transition.
AB 2088 would add new authority and regulatory duties to the Public Utilities Code and Public Resources Code, expanding the PUC’s oversight to include thermal energy networks as a regulated utility service. It would require state agencies to develop technical and regulatory standards, create a framework for utility ownership and operation of thermal energy service, and establish rules governing cost recovery, customer transition protections, and workforce requirements. The bill would also affect gas corporations, other PUC-regulated utilities, contractors, subcontractors, and customers in areas converted to thermal energy networks, while limiting recovery of certain gas infrastructure costs in those areas.
The bill appears generally favorable toward thermal energy networks and decarbonization, with the legislative findings framing the measure as a necessary step to support California’s climate and air quality goals. The committee vote of 17-0 on the amended version indicates strong initial support. At the same time, the later action of being held under submission suggests that, despite broad conceptual support, there may be unresolved concerns about implementation details, fiscal effects, ratepayer impacts, and labor or utility transition issues.
Likely points of contention include whether thermal energy networks are cost-effective compared with gas and electric alternatives, how to allocate stranded gas infrastructure costs, and whether customers remaining on the gas system would be unfairly burdened. Utilities may object to limits on gas infrastructure cost recovery and to obligations tied to workforce retention and skilled-and-trained labor requirements. Labor stakeholders may support the workforce protections, while contractors or utilities may view them as restrictive. Regulators may also need to resolve how to define an adequate substitute for gas service and how quickly thermal energy networks can be deployed without compromising safety or reliability.