February 20, 2025. California Sen. Timothy Grayson (D-9) on Feb. 14 introduced California Senate Bill 377 (SB-377), legislation that modifies the state’s renewable natural gas (RNG) procurement framework and authorizes utilities to recover costs associated with RNG interconnection investments. RNG Coalition sponsored this bill and considers it a top priority as it directly impacts the expansion and affordability of in-state RNG projects.
SB-377 reduces interconnection costs — Utility involvement will lower customer costs of California RNG interconnection investments. Currently, RNG projects steered by developers in California are subject to a 24% tax factor when a project transfers interconnection assets to the utility— but this tax factor does not apply to utility investments. By allowing utilities to avoid the tax factor, overall costs for all California RNG projects will decrease, providing savings for utility customers in meeting existing RNG goals.
It also increases options for RNG supply to displace fossil gas imports – By lowering barriers to RNG imports the bill diversifies RNG supply to reduce gas customer costs of meeting existing RNG goals.
The bill adds new eligibility criteria — The displacement of conventional natural gas would here forth be recognized as an environmental benefit.
California leads the nation in cutting methane emissions by converting organic waste into renewable natural gas (RNG), displacing fossil gas throughout the state’s energy system. Landmark policies like SB 1383 (Lara), SB 1440 (Hueso), and AB 3187 (Grayson) have driven RNG development and procurement, ensuring continued progress toward the state’s 2030 climate goals. These policies have allowed RNG to grow exponentially within the state, with RNG now accounting for nearly 100% of all fuel used in California’s natural gas vehicle (NGV) market — policies like SB 377 are aimed encouraging growth in the state’s utility market, which has been more gradual to develop.
“California’s leadership on climate policy requires action to ensure clean energy solutions are both viable and affordable,” said Sam Wade, RNG Coalition’s Vice President of Public Policy. “SB-377 is a critical step in ensuring that renewable natural gas can compete on a level playing field and deliver emissions reductions at scale across California and across North America.”
Passage of SB 377 would create further opportunity for California to continue its leadership on RNG. Last year, the state marked a significant milestone with the commissioning of the Keller Canyon landfill gas-to-RNG project in Northern California, now the largest operating RNG project within the most robust market for RNG in the U.S.