SoCalGas Announces First Renewable Natural Gas Contract Approved Under California Program

Rhea-AI Summary

SoCalGas (SOCGP) has announced its first renewable natural gas (RNG) contract with Organic Energy Solutions (OES), marking a significant milestone under California's SB 1440 program. The contract, approved by the California Public Utilities Commission, will source RNG from organic waste in San Bernardino.

The project, set to begin operations in the second half of 2026, will convert industrial and food waste through anaerobic digestion into pipeline-quality RNG. OES estimates it will prevent approximately 15,300 tons of greenhouse gases annually, equivalent to the energy usage of 2,984 homes per year.

SoCalGas aims to replace 12% of traditional natural gas for residential and small business customers with RNG by 2030. The company has already achieved 5% RNG delivery to customers since 2023 and operates 37 carbon-negative fueling stations. This initiative supports California's goal to reduce methane emissions by 40% by 2030.

Positive

• First approved RNG contract under California's SB 1440 program
• Project will prevent 15,300 tons of GHG emissions annually
• Already delivering 5% RNG to customers since 2023
• Operating 37 carbon-negative fueling stations

Negative

• RNG project won't be operational until second half of 2026
• Current RNG delivery (5%) still far from 2030 target of 12%

Insights

Financial Analyst

SoCalGas securing the first renewable natural gas (RNG) contract approved under California's SB 1440 represents a strategic regulatory win with positive long-term implications. This milestone gives SoCalGas a first-mover advantage in California's renewable gas standard implementation, potentially establishing favorable precedents for future RNG procurement approvals.

The company has already achieved 5% RNG delivery to customers since 2023, demonstrating early execution toward its 12% RNG target by 2030. This gradual transition aligns with California's climate goals while allowing the utility to leverage its existing infrastructure assets rather than facing stranded asset risks from rapid electrification mandates.

From a decarbonization perspective, the OES partnership helps SoCalGas capture double environmental benefits: reducing landfill methane emissions (which are 20% of California's methane footprint) while simultaneously greening its gas supply. The expected 15,300 annual tons of GHG reduction may seem modest relative to SoCalGas' overall footprint, but demonstrates measurable, verifiable environmental progress.

For investors, this contract illustrates how SoCalGas is successfully navigating California's complex regulatory landscape by aligning business strategy with state climate policies. The 2026 implementation timeline indicates this is part of a long-term sustainability strategy rather than yielding immediate financial impacts, but positions the company favorably within California's evolving energy transition framework.

Environmental Policy Expert

This contract represents a practical implementation of California's pioneering renewable gas standard, translating legislative mandates into operational reality. SB 1440's importance cannot be overstated - as the nation's first renewable gas standard, it creates a regulatory framework that could be replicated across other states seeking to address methane emissions from organic waste streams.

What's particularly notable is SoCalGas' approach to carbon-negative fuel sourcing. By targeting organic waste that would otherwise emit methane in landfills (a greenhouse gas 25 times more potent than CO2), this project delivers emissions reductions beyond simply replacing fossil fuels. The San Bernardino project essentially transforms an environmental liability (waste) into an energy asset.

The California Air Resources Board's recognition of RNG from these sources as carbon-negative gives SoCalGas valuable regulatory currency, potentially positioning the company to generate additional value through carbon credits or other incentive mechanisms. The project's prevention of 15,300 tons of GHG emissions annually (equivalent to 1.7 million gallons of gasoline) provides quantifiable environmental progress.

Importantly, this contract demonstrates how existing gas infrastructure can participate in decarbonization efforts rather than becoming stranded assets. By harnessing biological carbon cycles rather than extracting fossil carbon, SoCalGas is adapting its business model to align with California's ambitious 40% methane reduction target by 2030 while maintaining the utility and value of its pipeline network.

LOS ANGELES, March 18, 2025 /PRNewswire/ -- Southern California Gas Company (SoCalGas) today announced it executed a contract with Organic Energy Solutions (OES) to procure renewable natural gas (RNG) converted from organic waste and inject it into SoCalGas' pipeline system. The contract is the first approved by the California Public Utilities Commission (CPUC) under Senate Bill (SB) 1440 which sets specific RNG procurement targets for the state's natural gas utilities. The RNG will be sourced from a project located in the city of San Bernardino and is an important step toward achieving California's goal to reduce methane emissions from agriculture and waste while advancing energy decarbonization in the state.

SB 1440 is recognized as the nation's first renewable gas standard and led the CPUC to set goals for the procurement of RNG, also known as biomethane, which is made from the organic waste of wastewater treatment plants, dairies, landfills, agricultural practices and forestry residues. Depending on its source, RNG can be carbon negative, meaning it captures more greenhouse gases than it emits. SoCalGas aims to replace approximately 12% of the traditional natural gas it delivers to residential and small business customers with RNG by 2030, pursuant to the targets that have been established under SB 1440 by the CPUC. The new RNG standard is expected to help the state achieve its goal to reduce methane emissions by 40% by 2030.

"As the first RNG procurement project under California's renewable gas standard, this contract represents an important milestone for the RNG industry and SoCalGas as we work together to advance California's energy goals," said Elsa Valay-Paz, vice president of gas acquisition at SoCalGas. "By converting waste that would otherwise end up in landfills into usable energy, this project is intended to help reduce greenhouse gas emissions, improve air quality and help California reach its climate goals." 

"At OES, we are proud to unite with SoCalGas on this groundbreaking renewable natural gas project, which marks a significant step forward in California's transition to cleaner energy. By converting organic waste into a valuable energy resource, we aim to not only reduce greenhouse gas emissions but also create a more sustainable and resilient energy future," said Brian Hume, senior vice president of operations for BioStar Renewables, owner of OES. "This collaboration underscores our commitment to innovation in waste-to-energy solutions and our shared vision for a cleaner, more sustainable California."

OES, a company specializing in biomass processing and fuel production, will collect organic waste – a source of greenhouse gas emissions (GHGs) – from local industrial and food waste, and process it in an anaerobic digester which speeds up natural decomposition. Methane emissions from the decomposition process are captured and converted into RNG, which will then be injected into the SoCalGas pipeline system. The project is expected to begin supplying RNG to SoCalGas' system in the second half of 2026. Organic waste in landfills contributes to approximately 20% of California's methane emissions. Once operational, OES estimates the project will prevent approximately 15,300 tons of GHGs from entering the atmosphere each year, which is the equivalent to the energy usage of 2,984 homes per year or 1.7 million gallons of consumed gasoline. 

RNG is already helping reduce emissions from trucks and buses, contributing to cleaner air. In 2019, SoCalGas began replacing traditional compressed natural gas with RNG at its fueling stations to help reduce GHGs. Since 2020, the RNG supplied at SoCalGas' 37 fueling stations has been classified as carbon negative by the California Air Resources Board (CARB). SoCalGas continues to advance its efforts to decarbonize the fuel it transports, delivering approximately 5% RNG to customers since 2023.

"SoCalGas' progress toward RNG procurement targets established under California's SB 1440 will be watched closely by counterparts and policymakers in other U.S. states, with the potential for agreements like these to create a powerful precedent for lasting energy system change," said Sam Wade, vice president of public policy for RNG Coalition. "RNG is an innovative climate solution that converts methane emissions from organic waste into a low-carbon replacement for fossil fuels, making it a cleaner fit for long-term decarbonization plans at the utility level."

SoCalGas' RNG initiatives support California's clean air and climate goals, including the CARB Scoping Plan, which projects RNG will play a vital role in reducing GHGs and decarbonizing industrial buildings and processes, as well as the transportation sector. The California Integrated Energy Policy Report also found that RNG can significantly reduce GHGs and pollutant emissions compared to conventional diesel trucks.

For more information on SoCalGas' RNG initiatives, visit Renewable Natural Gas | SoCalGas.

About SoCalGas  

SoCalGas is the largest gas distribution utility in the United States, serving more than 21 million consumers across approximately 24,000 square miles of Central and Southern California. Our mission is: Safe, Reliable and Affordable energy delivery today. Ready for tomorrow. SoCalGas is a recognized leader in the energy industry and has been named Corporate Member of the Year by the Los Angeles Chamber of Commerce for its volunteer leadership in the communities it serves. SoCalGas is a subsidiary of Sempra (NYSE: SRE), a leading North American energy infrastructure company.  For more information, visit SoCalGas.com/newsroom or connect with SoCalGas on social media @SoCalGas.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions about the future, involve risks and uncertainties, and are not guarantees. Future results may differ materially from those expressed or implied in any forward-looking statement. These forward-looking statements represent our estimates and assumptions only as of the date of this press release. We assume no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise.

In this press release, forward-looking statements can be identified by words such as "believe," "expect," "intend," "anticipate," "contemplate," "plan," "estimate," "project," "forecast," "envision," "should," "could," "would," "will," "confident," "may," "can," "potential," "possible," "proposed," "in process," "construct," "develop," "opportunity," "preliminary," "initiative," "target," "outlook," "optimistic," "poised," "positioned," "maintain," "continue," "progress," "advance," "goal," "aim," "commit," or similar expressions, or when we discuss our guidance, priorities, strategies, goals, vision, mission, projections, intentions or expectations.

Factors, among others, that could cause actual results and events to differ materially from those expressed or implied in any forward-looking statement include: decisions, denials of cost recovery, audits, investigations, inquiries, ordered studies, regulations, denials or revocations of permits, consents, approvals or other authorizations, renewals of franchises, and other actions, including the failure to honor contracts and commitments, by the (i) California Public Utilities Commission (CPUC), U.S. Department of Energy, U.S. Internal Revenue Service and other regulatory bodies and (ii) U.S. and states, counties, cities and other jurisdictions therein where we do business; the success of business development efforts and construction projects, including risks related to (i) completing construction projects or other transactions on schedule and budget, (ii) realizing anticipated benefits from any of these efforts if completed, (iii) obtaining third-party consents and approvals and (iv) third parties honoring their contracts and commitments; changes to our capital expenditure plans and their potential impact on rate base or other growth; litigation, arbitration and other proceedings, and changes (i) to laws and regulations, including those related to tax, (ii) due to the results of elections, and (iii) in trade and other foreign policy, including the imposition of tariffs by the U.S. and foreign countries; cybersecurity threats, including by state and state-sponsored actors, of ransomware or other attacks on our systems or the systems of third parties with which we conduct business, including the energy grid or other energy infrastructure; the availability, uses, sufficiency, and cost of capital resources and our ability to borrow money or otherwise raise capital on favorable terms and meet our obligations, which can be affected by, among other things, (i) actions by credit rating agencies to downgrade our credit ratings or place those ratings on negative outlook, (ii) instability in the capital markets, and (iii) fluctuating interest rates and inflation; the impact on affordability of our customer rates and our cost of capital and on our ability to pass through higher costs to customers due to (i) volatility in inflation, interest rates and commodity prices and (ii) the cost of meeting the demand for lower carbon and reliable energy in California; the impact of climate policies, laws, rules, regulations, trends and required disclosures, including actions to reduce or eliminate reliance on natural gas, increased uncertainty in the political or regulatory environment for California natural gas distribution companies, the risk of nonrecovery for stranded assets, and uncertainty related to emerging technologies; weather, natural disasters, pandemics, accidents, equipment failures, explosions, terrorism, information system outages or other events, such as work stoppages, that disrupt our operations, damage our facilities or systems, cause the release of harmful materials or fires or subject us to liability for damages, fines and penalties, some of which may not be recoverable through regulatory mechanisms or insurance or may impact our ability to obtain satisfactory levels of affordable insurance; the availability of natural gas and natural gas storage capacity, including disruptions caused by failures in the pipeline and storage systems or limitations on the injection and withdrawal of natural gas from storage facilities; and other uncertainties, some of which are difficult to predict and beyond our control.

These risks and uncertainties are further discussed in the reports that the company has filed with the U.S. Securities and Exchange Commission (SEC). These reports are available through the EDGAR system free-of-charge on the SEC's website, www.sec.gov, and on Sempra's website, www.sempra.com. Investors should not rely unduly on any forward-looking statements.

Sempra Infrastructure, Sempra Infrastructure Partners, Sempra Texas, Sempra Texas Utilities, Oncor Electric Delivery Company LLC (Oncor) and Infraestructura Energética Nova, S.A.P.I. de C.V. (IEnova) are not the same companies as the California utilities, San Diego Gas & Electric Company or Southern California Gas Company, and Sempra Infrastructure, Sempra Infrastructure Partners, Sempra Texas, Sempra Texas Utilities, Oncor and IEnova are not regulated by the CPUC.

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SOURCE Southern California Gas Company

FAQ

What are the greenhouse gas reduction targets for SoCalGas (SOCGP) RNG project in San Bernardino?

The project aims to prevent 15,300 tons of greenhouse gases annually, equivalent to 2,984 homes' energy usage or 1.7 million gallons of gasoline.

When will SoCalGas (SOCGP) begin receiving RNG from the Organic Energy Solutions project?

The project is scheduled to begin supplying RNG to SoCalGas' system in the second half of 2026.

What percentage of RNG does SoCalGas (SOCGP) aim to deliver by 2030?

SoCalGas aims to replace 12% of traditional natural gas with RNG for residential and small business customers by 2030.

How much renewable natural gas is SoCalGas (SOCGP) currently delivering to customers?

Since 2023, SoCalGas has been delivering approximately 5% RNG to its customers.