Gas pipeline replacement driving up customer bills

Gas utilities across the U.S. are spending billions of dollars to replace aging gas lines, but recent data suggests the safety benefits of doing so are unclear, while the spending is driving up utility bills for customers.

Pennsylvania’s six largest utilities, comprising 97 percent of the state’s customers, have collectively spent $11 billion between 2013 and 2025 to replace gas lines. The increase in spending is a major driver of the 67 percent average increase in ratepayer bills over that time period, according to a new study from the Building Decarbonization Coalition (BDC), a research organisation. Costs are rising even as customer demand in Pennsylvania has declined by roughly 28 percent since 2000.

Over the past two decades, utility spending on infrastructure has ballooned, making up an ever-increasing share of customers’ bills. Currently, roughly two-thirds of a residential customer’s bill goes to the cost of gas infrastructure (“delivery” costs), and just one-third represents the cost of the gas itself. In the 1980s, that breakdown was flipped.

“I think this is a big problem for households because they think their bills are going up because they’re maybe turning up the heat too much, or using too much hot water, but it’s not that much in their control because a lot of their bill is just these costs that have already been spent and that they’re going to continue paying for for decades to come,” Kristin George Bagdanov, associate director of research at BDC, told Gas Outlook.

“More and more of these fixed infrastructure costs have to be socialized, and the customer base isn’t growing in proportion and the utilization is shrinking. That creates a huge financial risk for customers as well as the utilities,” George Bagdanov said. “There’s a risk of future stranded assets.”

Pennsylvania is not alone. The trend is common nationwide, and experts trace the origin back to 2011, when the Pipeline and Hazardous Materials Safety Administration – the federal agency that regulates pipeline safety – issued a “call to action” to address pipeline safety, calling on utilities to undertake a massive pipe replacement programme. Also, the agency formalized a rule that required gas distribution companies to identify and mitigate safety risks on their lines.

Much of the policy work was taken up at the state level, where many state legislatures passed laws or regulatory rules to incentivize such work. There were variations, but the broad approach was quite similar across the country: Utilities could suddenly recoup spending costs on an accelerated timeline, and their gas line replacement projects would be approved through a parallel regulatory process that was vastly easier to complete compared to typical rate cases.

Collectively known as gas infrastructure “trackers,” an estimated 43 states have adopted similar legislation or regulatory schemes. In Pennsylvania, the “tracker” law is called Act 11.

“We see Act 11 as this hinge point of going from business as usual spending to accelerated spending,” George Bagdanov said. With financial returns for capital spending all but certain, risk for utilities to spend lavishly on pipeline replacement was minimized. The result was an explosion in spending. Prior to around 2013, utility expenditures grew at a 4.3 percent annual rate. But that accelerated to an average 7.8 percent annual growth rate in the years since.

Per-mile cost of pipeline replacement has also doubled from $1.2 million to $2.8 million, with costs growing much faster than inflation can explain.

“It’s basically an ‘easy pass’ for ‘let’s spend a boatload of money on replacing pipes,’” Jamie Van Nostrand, policy director at the Future of Heat Initiative, a nonpartisan research organisation that advocates for utility regulatory reform, told Gas Outlook. “What does that do? That forces up the delivery charges on your bill massively.”

Higher bills, unclear benefits

Nationwide, gas utilities have spent around $250 billion since 2011 on gas line repair and replacement. Despite the enormous spending, it may come as a surprise that the safety benefits of 15 years of replacing thousands of miles of pipeline remain unclear.

Data collected and analyzed by the Future of Heat Initiative found that there wasn’t a discernible statistical relationship between pipeline replacement and a decline in the rate of safety incidents. In fact, one of the main causes of safety problems with gas lines is digging – an excavator digging underground and colliding with gas pipes – not leaks or ruptures resulting from old infrastructure.

The findings call into question the usefulness of all the spending by gas companies around the country.

“The outcomes have been mixed at best. Our findings are quite bracing. It’s unclear what we’ve gotten for all this spending,” Justin Gundlach, general counsel and director of research at the Future of Heat Initiative, told Gas Outlook. “This pattern does not exist solely in Pennsylvania, it exists in lots of places.”

It is impossible to ignore the incentive structure at play, he said.

“The way gas utilities make money is capital spending. And so if you are no longer in a position to grow your capital assets by expansion, you need to find some other way to do it. And the other way that they have found to do it has been to replace pipes,” Gundlach said. “They call it modernization. They call it a variety of things. They talk about it in terms of safety, but this pattern of pipe replacement has led to a remarkably capital-intensive span of 15 years.”

He cautioned that some within the industry likely undertook this programme in good faith, seeking to achieve safety benefits at a time when the shale gas revolution brought cheap gas to consumers, leaving “headroom” in customer bills for what many thought was needed maintenance and repair. However, the result is that customer bills are now soaring, with little prospect of relief any time soon.

Gas Outlook reached out to the American Gas Association for comment, but did not receive a response.

Gas utility reform

Van Nostrand was the Chair of the Massachusetts Department of Public Utilities (DPU) from 2023 to 2025, during which the DPU issued a landmark 2023 order that made it much more difficult for gas utilities to engage in business-as-usual spending on pipeline replacement and expansion.

The order called on utilities to align their spending programmes with state climate laws, and it also blocked rate recovery for utilities who spend on gas lines if there were non-gas alternatives.

“We pretty much put the utilities on notice. Going forward, we have a presumption against putting any more natural gas infrastructure in the ground,” Van Nostrand said, summarizing the significance of the 2023 order.

He said that going forward, other states should look at repealing the “tracker” policies that allow utilities to recover costs on an accelerated timeline and through a streamlined regulatory process. Scrapping these laws is “low-hanging fruit” for lowering customer bills. Infrastructure “tracker” legislation was intended to be “an end run around” the traditional regulatory process, leading to excessive spending, he said.

“You can just pull the plug” on these laws and “you can have almost immediate savings to customers,” Van Nostrand said.

Illinois is one state that has done that. Gas utilities now have to go through the traditional regulatory rate case process, which requires them to justify their spending.

“By moving it away from the special regulatory treatment back to traditional rate regulation, it gives the regulators and parties like us a lot more opportunity to rein in what we see as wasteful and unnecessary spending,” Abe Scarr, state director, Illinois PIRG, an advocacy and research organisation, told Gas Outlook.

Gas utilities “know that there is a risk to their business model in heat pumps and electrification, and from climate goals in states like Illinois, Maryland, or Massachusetts,” Scarr said “There’s just no way to square the gas system with any serious attempt to get to carbon neutrality. And so there is a reckoning coming, and I think they know that.”