Cost-Effective Neighborhood Decarbonization: SB 1221 Implementation
Background
In 2024, the California legislature passed Senate Bill (SB) 1221 (Min), requiring the California Public Utilities Commission (CPUC) to create a voluntary zonal decarbonization program and designate priority neighborhood decarbonization zones.
Priority neighborhood decarbonization zones are geographic areas where the CPUC may authorize pilot projects to facilitate the transition of some customers’ natural gas service to cost-effective, zero-emission alternatives. Zero-emission alternatives provide gas customers with substitute energy services that do not require new investment in gas distribution lines. Replacing a customer’s gas appliances with electric appliances is one method of providing zero-emission alternatives.
On July 2, 2026, the CPUC created a process for natural gas utilities to propose neighborhood pilot projects that replace natural gas service with zero-emission appliances. Proposed projects must meet the following requirements:
- Be cost-effective and allow portions of the natural gas system to be safely retired
- Be located in designated zones or otherwise meet the criteria specified in SB 1221
- Show that the utility is conducting active and thorough outreach throughout each phase of the pilot and providing people affected by the project with detailed information about the project and its impacts
- Demonstrate people affected by the project will receive reliable and affordable replacement energy service
- Coordinate with local communities and electric providers
- Obtain consent from at least 67 percent of property owners within each project area
Timeline
|
Date |
Requirement |
| April 1, 2027 | Deadline for natural gas utilities to submit the first round of pilot project applications. |
| Jan. 15, 2028 | Deadline for natural gas utilities to submit the second round of pilot project applications. |
| July 1, 2028 | Deadline for a third round of pilot project proposals, if fewer than 30 projects have been established after the first two rounds. |
| Jan. 1, 2030 | The CPUC may no longer establish new pilot projects under the program. |
Reporting Requirements
Annual Neighborhood Decarbonization Pilot Report
The CPUC must submit annual progress reports to the Legislature by March 1 of each year from 2026 through 2030.
3/1/2026: 2025 Annual Report – Neighborhood Decarbonization Zone Pilot Projects
Thermal Energy Networks
The CPUC must evaluate the costs and benefits of thermal energy networks in a new or existing proceeding and identify potential implementation barriers.
Frequently Asked Questions
What is SB 1221?
SB 1221 is a California law adopted in 2024 that directs the CPUC to establish a voluntary neighborhood decarbonization pilot program. This program allows utilities to replace aging gas infrastructure in targeted areas with zero-emission alternatives to gas service.
What are Zero-Emission Alternatives?
Zero-emission alternatives provide gas customers with substitute energy services that do not require new investment in gas distribution lines. Replacing a customer’s gas appliances with electric appliances is one method of providing zero-emission alternatives. Other methods may also be proposed.
How many pilot projects are allowed?
The CPUC may approve up to 30 pilot projects statewide in which at least 67 percent of property owners consent to the project. An unlimited number of projects with 100 percent consent could be allowed, since projects with 100 percent consent do not count toward the 30-project cap.
How will the program fund replacements and upgrades needed to electrify homes and buildings in the pilot zones?
The CPUC will determine how pilot programs are funded through the rulemaking process. SB 1221 requires that the CPUC ensure pilots are cost-effective. The zero-emission alternative must cost less than replacing, repairing, or continuing to operate the gas asset.
What are priority neighborhood decarbonization zones?
Priority neighborhood decarbonization zones are census tracts identified by the CPUC where pilot projects may be considered. Not all properties in an identified census tract will be selected for a pilot project. For example, because the zones are likely to be larger than any individual project, even if a project is implemented in a zone, it is unlikely that all properties in the zone will be part of the project. Similarly, although the CPUC has designated 151 initial priority neighborhood decarbonization zones, SB 1221 includes a 30-project cap. So, there are likely to be many priority zones that will not host a pilot project.
The CPUC has designated 151 initial priority neighborhood decarbonization zones for the pilots, aiming to maximize savings by targeting areas where at least 10 percent of gas lines are currently scheduled for repair or replacement and there is community support.
The initial 151 zones are listed in Appendix A of 2025 Annual Report – Neighborhood Decarbonization Zone Pilot Projects. Property owners and customers can find which census tract their property is located in here: 2020 Census Tract Identifier.
How were the initial zones selected?
Zones were selected in conformance with the requirements of PUC 662 and based on:
- Requests from local governments or organizations.
- Areas where at least 10 percent of gas pipelines are expected to be repaired or replaced in the next 10 years.
- A cap of 25 census tracts per county, with exceptions for disadvantaged communities.
Will the priority zones be updated?
The CPUC will update the list of priority neighborhood decarbonization zones by December 31, 2026.
How can community members and local organizations request that a neighborhood be considered for a priority neighborhood decarbonization zone?
Local governments, community organizations, or other groups expressed their interest in participating in a neighborhood decarbonization zone by submitting public comments with the 10-digit 2020 Census Tracts in R.24-09-012 by May 15, 2026.
How can community members and local organizations see if their jurisdiction is being considered?
Initial priority zones may be viewed in Appendix A of the 2025 Annual Report – Neighborhood Decarbonization Zone Pilot Projects.
Are any SB 1221 pilot projects active now?
No. The pilot program itself has not yet been approved, so no SB 1221 pilots are underway.
When will the pilot program rules be finalized?
SB 1221 requires the CPUC to establish the pilot program by July 1, 2026. The proceeding establishing the program rules is still underway.
SB 1221 Outreach
Utility Information Sessions
The CPUC’s Public Advisors Office provided the following Fact Sheet for utilities to use at the information sessions:
The CPUC has directed PG&E, SoCalGas, SDG&E, and Southwest Gas to each host and record one virtual SB 1221 information session for government representatives, community organizations, and members of the public in their service territory between January 15, 2026, and March 15, 2026. Links to the information sessions are below:
February 26, 2026: PG&E SB 1221 Information Session
- Recording: https://sb1221.pge.com/, click on “Info/Help” in the upper right corner, then click on “2/26 Public Information Session Video Recording”
March 5, 2026: SoCalGas SB 1221 Information Session
- Recording: https://www.socalgas.com/regulatory/SB1221Map, click on “SoCalGas’s Virtual Information Session on Pilot Neighborhood Decarbonization Programs”
March 9, 2026: SDG&E SB 1221 Information Session
- Recording: https://www.sdge.com/sb1221-maps, under “View San Diego Gas & Electric’s Virtual Information Session on Pilot Neighborhood Decarbonization Zones”
March 10, 2026: Southwest Gas 1221 Information Session
- Recording: https://www.swgas.com/en/california-rates-and-regulation, click on “Recording of Southwest Gas SB 1221 PNDZs Information Session – March 10, 2026”
CPUC Workshops and Webinars
The following workshops and webinars related to SB 1221 issues have been hosted by the CPUC.
February 12, 2026: Webinar: SB 1221 Neighborhood Decarbonization Pilots
September 22, 2025: Workshop: Long Term Gas Forecasting Analytics and Facilitating Non-Pipeline Alternatives
See also: November 8, 2024: SB 1221 Workshop
This workshop was not associated with a proceeding but is linked here for reference.
Initial Legislative Milestones
SB 1221 established the following requirements:
| Deadline | Requirements set forth in Public Utilities Code | Public Utilities Code | Link |
|---|---|---|---|
July 1, 2025 |
Gas corporations shall provide maps containing planned maintenance and replacement projects on the gas distribution network. | PUC 661 | SB 1221 Maps |
January 1, 2026 |
The CPUC shall define priority neighborhood decarbonization zones. |
PUC 662 | D.25-12-042 |
July 1, 2026 |
The CPUC shall establish a voluntary pilot project program. | PUC 663 | Proposed Decision (CPUC will vote on whether to adopt on 7/2 or later) |
Additional Information
The CPUC is implementing SB 1221 as part of the Long-Term Gas Planning Proceeding, R.24-09-012. Further information about the Long-Term Gas Planning Proceeding is available here.
Key Information
