ARTICLE 11. Neighborhood Decarbonization Zone Pilot Projects [660. - 666.]

Cal. Public Utilities Code - PUC 11.

in effect

Cal. Public Utilities Code - PUC § 660. Section 660.

For purposes of this article, the following definitions apply: (a) “Disadvantaged community” means a community identified pursuant to Section 39711 of the Health and Safety Code. (b) “Distribution integrity management plan” means a plan developed pursuant to Part 192 (commencing with Section 192.1) of Subchapter D of Chapter I of Subtitle B of Title 49 of the Code of Federal Regulations. (c) “Gas distribution line” means either a gas distribution main line or gas distribution service line. (d) “Gas distribution main line” has the same meaning as “main” set forth in Section 192.3 of Title 49 of the Code of Federal Regulations. (e) “Gas distribution service line” has the same meaning as “service line” set forth in Section 192.3 of Title 49 of the Code of Federal Regulations. (f) “Low-income” means having a household income no greater than 80 percent of area median income or qualifying for participation in the California Alternate Rates for Energy (CARE) program or Family Electric Rate Assistance (FERA) program. (g) “Priority neighborhood decarbonization zone” means a zone identified pursuant to Section 662. (h) “Thermal energy network” means a network of piped noncombustible fluids used for transferring heat into and out of buildings for purposes of providing zero-emission heating and cooling services. (i) “Tribe” means a California Native American tribe, as defined in Section 21073 of the Public Resources Code. (j) “Zero-emission alternatives” means methods of providing gas customers with suitable substitute energy service that does not require new investment in gas distribution lines, including, but not limited to, electrification of gas end uses and energy efficiency, thermal energy networks, and demand flexibility measures to alter energy needs.

Cal. Public Utilities Code - PUC § 661. Section 661.

(a) On or before July 1, 2025, and each year thereafter, each gas corporation shall submit to the commission a map that includes all of the following: (1) The location of all potential gas distribution line replacement projects identified in its distribution integrity management plan and any foreseeable gas distribution pipeline replacements. (2) The city, county, and census tract boundaries within the gas corporation’s service territory. (3) Locations of disadvantaged communities, tribes, and priority neighborhood decarbonization zones, as designated by the commission pursuant to Section 662, that are within the gas corporation’s service territory. (4) Any additional information required by the commission. (b) This section does not modify a gas corporation’s safety requirements under state or federal law. (c) On or after January 1, 2030, the commission may determine whether gas corporations will continue to be subject to the requirements of this section.

Cal. Public Utilities Code - PUC § 662. Section 662.

(a) On or before January 1, 2026, in a new or existing proceeding and following recommendations from each gas corporation and the opportunity for public comment, the commission shall designate priority neighborhood decarbonization zones. In designating the zones, the commission shall consider factors that include, but are not limited to, all of the following: (1) Presence of disadvantaged or low-income communities in high-temperature climate zones or low-temperature climate zones that disproportionately lack cooling or heating. (2) Presence of environmental and social justice communities as defined in the commission’s Environmental and Social Justice Action Plan. (3) Availability of supportive local government or community partners. (4) Concentration of gas distribution line replacement projects identified in the map submitted pursuant to Section 661. (b) The commission shall coordinate with relevant agencies to identify nonratepayer funding, such as state and federal funds, that may be used to execute pilot projects in priority neighborhood decarbonization zones that would be cost effective with supplemental nonratepayer funding. (c) If pilot projects for zero-emission alternatives pursuant to Section 663 are implemented in a priority neighborhood decarbonization zone, the commission may direct gas corporations and electrical corporations, if appropriate, to leverage other available programs, including, but not limited to, energy efficiency, low-income weatherization, and distributed generation programs. (d) The commission may, after providing an opportunity for public comment, update the priority neighborhood decarbonization zones as necessary.

Cal. Public Utilities Code - PUC § 663. Section 663.

(a) On or before July 1, 2026, in a new or existing proceeding, the commission, in consultation with the state’s gas corporations, shall establish a voluntary program to facilitate the cost-effective decarbonization of priority neighborhood decarbonization zones, not to exceed 30 pilot projects across the state and affecting no more than 1 percent of each gas corporation’s customers within their service territory. A pilot project where a gas corporation obtains the consent of 100 percent of property owners with natural gas service within the pilot project boundary shall not count toward the 30 pilot project limit. (b) In administering the pilot projects established pursuant to subdivision (a), the commission shall establish all of the following: (1) A process for gas corporations to determine and submit pilot projects for approval. (2) Criteria and methodology for determining the cost-effectiveness of a zero-emission alternative as compared to replacement, repair, or continued operation of the affected asset of the gas system. Nonenergy benefits may be considered in prioritizing pilot projects, but shall not be used to calculate cost-effectiveness. The total cost incurred by the gas corporation for the zero-emission alternative shall be less than the total cost that would have otherwise occurred. Gas corporations shall use nonratepayer funding when available. (3) Requirements and programs to ensure that a substitute for gas service for low-income customers is affordable, adequate, efficient, and just and reasonable. (4) A requirement that no less than 67 percent of the property owners with natural gas service within the pilot project boundary consent to the pilot project. The commission shall establish the manner in which consent shall be received and notifications about the pilot project shall be provided to property owners and affected customers. Notifications shall include information about the anticipated costs and benefits of the zero-emission alternative offering. Notifications shall be made available in the zone’s prevailing languages. (5) A requirement for addressing master-metered properties to ensure tenants receive adequate notification and engagement. (6) A preference for pilot projects that provide prevailing wages and use high road job programs. (7) A requirement that gas corporations and electrical corporations, local publicly owned electric utilities, load-serving entities, local governments, and, if feasible, core transport agents affected by the pilot project coordinate and collaborate. (8) A requirement that gas corporations recover costs related to the pilot projects that are deemed just and reasonable and a requirement that prohibits a gas corporation from recovering behind-the-meter costs associated with the pilot projects as capital costs that are afforded a rate of return. (9) The appropriate rate of return and recovery period that a gas corporation is eligible to receive for its costs to implement a zero-emission alternative. A gas corporation shall not receive ratepayer funding for the costs of a zero-emission alternative that are covered by incentives under federal, state, or local laws. (c) Notwithstanding any other law, if the commission approves a pilot project proposed by a gas corporation pursuant to subdivision (a), the commission shall, pursuant to Section 451.9, relieve the gas corporation of its obligation to provide service within the pilot project boundary upon completion of all affected customers’ conversion to zero-emission alternatives. A property owner’s withholding of consent to a pilot project shall not give rise to a right to continued natural gas service if the commission approves a pilot project that includes that property within its boundary. (d) The commission shall not establish pilot projects under this section on or after January 1, 2030.

Cal. Public Utilities Code - PUC § 664. Section 664.

(a) (1) Beginning on January 1, 2029, the commission, in a new or existing proceeding, shall review the efficacy of the pilot projects established pursuant to Section 663 in providing benefits to gas corporation customers and in assisting the state in meeting the state’s climate change goals. (2) On or before March 1, 2030, the commission shall submit to the relevant policy committees of the Legislature a report on the review performed pursuant to paragraph (1). (b) On or before March 1, 2026, and on or before March 1 of each year thereafter, the commission shall submit a progress report to the relevant policy committees of the Legislature summarizing the findings of the pilot projects, including the locations of the pilot projects, the number of customers affected, the costs of the pilot projects, the funding used to pay for the pilot projects, any assistance provided to customers, and any outcomes, challenges, and recommendations. (c) Reports submitted pursuant to this section shall be submitted in compliance with Section 9795 of the Government Code.

Cal. Public Utilities Code - PUC § 665. Section 665.

In a new or existing proceeding, the commission shall evaluate the costs and benefits of thermal energy networks and identify potential implementation barriers.

Cal. Public Utilities Code - PUC § 666. Section 666.

(a) Except as provided in subdivision (b) or (c), this article shall remain in effect only until January 1, 2031, and as of that date is repealed. (b) Notwithstanding subdivision (a), a pilot project that has been established pursuant to Section 663 and is pending as of January 1, 2031, may continue until the completion of the pilot project. (c) Subdivision (a) does not affect the commission’s authorization to relieve a gas corporation of its obligation to provide service within a pilot project boundary under subdivision (c) of Section 663.

Source: CA Legislative Counsel Bulk DataURL: https://downloads.leginfo.legislature.ca.gov/pubinfo_2025.zipFetched: 6/27/2026