Who Pays for Renewable Natural Gas? Follow the Utility Bill.

In February 2025, the Oregon Public Utility Commission approved a rate adjustment that added $4.12 per month to residential gas bills. Buried in the filing was the cost of two biogas procurement contracts, pipeline injection agreements that obligate NW Natural to purchase RNG at three to five times the market price of conventional natural gas. Most ratepayers never saw the line item. They just saw a higher bill.

This is not an Oregon problem. It is a structural feature of how RNG economics work across the country. When renewable natural gas enters the pipeline system, someone has to pay the premium. In most states, that someone is the residential gas customer.

The Cost Pass-Through Mechanism

RNG typically costs $15 to $40 per MMBtu to produce, depending on feedstock and facility scale. Conventional natural gas trades at $2 to $4 per MMBtu. The gap between these numbers does not disappear. It gets allocated.

In states with renewable portfolio standards or voluntary RNG programs, utilities sign long-term procurement contracts with RNG producers. These contracts guarantee a purchase price well above market. The utility then recovers the incremental cost through rate cases, spreading the premium across all ratepayers.

California's SB 1440 directed utilities to develop RNG procurement programs. Pacific Gas and Electric, SoCalGas, and other utilities now include RNG costs in their general rate cases. The California Public Utilities Commission has approved cost recovery mechanisms that socialize the premium across millions of residential accounts.

The pattern repeats in Oregon, Washington, Vermont, and every state that has adopted or is considering RNG mandates. The cost flows downhill to the ratepayer.

What Ratepayers Are Actually Funding

When a utility purchases RNG, the ratepayer is not just paying for gas molecules. They are funding the entire capital stack of an RNG project: the $8 to $25 million upgrading facility, the pipeline interconnection, the gas quality monitoring, the credit market administration, and the developer's return on equity.

A single large dairy RNG project might produce 500,000 MMBtu per year. At a $20/MMBtu premium over conventional gas, that is $10 million per year in above-market costs passed to ratepayers. Over a 15-year contract, one project transfers $150 million from consumers to project investors.

This transfer occurs regardless of whether the project achieves its stated environmental goals. If methane slip reduces net destruction efficiency to 80%, the ratepayer still pays the full premium. If credit markets collapse and the project becomes uneconomic, the procurement contract survives. The ratepayer absorbs the risk that the investor will not.

The Transparency Gap

Most residential gas customers do not know they are subsidizing RNG. Utility bills do not itemize RNG procurement costs separately. Rate case filings, where these costs are approved, run hundreds of pages and attract minimal public comment.

A 2024 analysis by the American Gas Association found that utilities in 14 states had active RNG procurement programs. The total ratepayer cost exposure across these programs exceeded $2 billion annually. The figure received almost no media coverage.

Contrast this with rooftop solar. Net metering costs, which shift grid maintenance expenses from solar adopters to non-solar ratepayers, have generated sustained public debate, legislative action, and utility commission proceedings in nearly every state. RNG cost-shifting operates at comparable scale with a fraction of the scrutiny.

The Affordability Alternative

Enclosed flares destroy methane on-site for $200,000 to $500,000 per unit. There is no pipeline interconnection, no gas upgrading, no long-term procurement contract. The cost of methane destruction stays at the site and does not flow through to ratepayer bills.

If policymakers created a destruction credit, even a modest $5 to $10 per ton of CO2 equivalent, the funding mechanism could come from existing climate budgets rather than utility rate cases. The per-ton cost to the public would be a fraction of what ratepayers currently pay through RNG procurement premiums.

Consider the math. An RNG project destroying methane at an effective cost of $50 to $100 per ton of CO2e (after accounting for slip losses) passes that cost to ratepayers through utility bills. An enclosed flare destroying the same methane at $10 to $20 per ton of CO2e could be funded through direct public expenditure with full transparency.

The atmospheric outcome is better. The cost is lower. The only thing missing is the policy mechanism.

What Should Change

Three reforms would protect consumers while improving methane outcomes.

First, require utilities to itemize RNG procurement costs on residential bills. Ratepayers funding $10 to $40 per MMBtu gas premiums deserve to see the line item. Transparency alone would reshape the policy debate.

Second, mandate cost-effectiveness analysis for all ratepayer-funded methane programs. If a procurement contract costs $80 per ton of CO2e avoided and a destruction alternative achieves the same atmospheric outcome at $15 per ton, regulators should have to justify the premium.

Third, create a destruction pathway in state renewable portfolio standards. Current standards reward only gas production and pipeline injection. Adding a destruction credit would let the cheapest, fastest form of methane elimination compete on its merits.

The goal is not to end RNG. It is to stop forcing consumers to fund the most expensive methane strategy while ignoring the most effective one.