Cutting These Subsidies Could Save States Millions of Dollars

This RMI fact sheet examines the practice of gas line extension allowances—subsidies where existing customers fund the cost of connecting new buildings to the natural gas system—and the movement among US states to phase them out to lower utility bills and support electrification.

• Gas line extension allowances are subsidies for new gas utility connections that are funded through utility bills, meaning the cost of expanding the gas system is borne by existing customers rather than the developers of new buildings.
• Regulators are reconsidering these allowances because the historical model—where new customers' future bills would recover the upfront connection costs—is failing as more users switch to electric alternatives or increase efficiency, leaving existing customers to cover the gap.
• Eight US states have taken action to reduce or phase out these allowances: California, Washington, Colorado, Oregon, Minnesota, Maryland, Massachusetts, and New York. Collectively, these actions could reduce utility costs by $750 million annually in those states.
• Phasing out these subsidies appears to encourage the construction of buildings without gas connections. In 2023, PG&E reported that 72 percent of residential and 91 percent of non-residential new line extension requests were for electric service only. In Colorado, the phaseout supported a plan by homebuilder Lennar to build 1,500 homes using geothermal heating and no natural gas.
• Further reductions are being considered in other states; for example, RMI estimates that eliminating these allowances in Minnesota could reduce annual capital spending by approximately $34 million.

APA

RMI (2025). Cutting These Subsidies Could Save States Millions of Dollars. https://rmi.org/resources/cutting-gas-system-subsidies-could-save-states-millions-of-dollars/

Chicago

RMI. Cutting These Subsidies Could Save States Millions of Dollars. 2025. https://rmi.org/resources/cutting-gas-system-subsidies-could-save-states-millions-of-dollars/.

Wikipedia

{{cite report |author=RMI |title=Cutting These Subsidies Could Save States Millions of Dollars |date=27 August 2025 |url=https://rmi.org/resources/cutting-gas-system-subsidies-could-save-states-millions-of-dollars/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2025cutting, author = {{RMI}}, title = {{Cutting These Subsidies Could Save States Millions of Dollars}}, institution = {RMI}, year = {2025}, month = aug, url = {https://rmi.org/resources/cutting-gas-system-subsidies-could-save-states-millions-of-dollars/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }