Southwest Gas advances renewable natural gas deal with Anaergia and Anew Climate to cut methane emissions in California

Why is Southwest Gas pursuing renewable natural gas from food and wastewater sources in California?

Southwest Gas Holdings Inc. (NYSE: SWX), through its regulated utility subsidiary Southwest Gas Corporation, has moved a step closer to decarbonizing its natural gas distribution system in California. The company has filed a procurement agreement with the California Public Utilities Commission (CPUC) to secure renewable natural gas (RNG) from a facility operated by Anaergia Inc.’s SoCal Biomethane subsidiary in partnership with Anew Climate LLC. This deal aligns with the CPUC’s implementation of Senate Bill 1440, California’s biomethane procurement program, which requires regulated gas utilities to integrate RNG into their supply portfolios to help reduce short-lived climate pollutants.

RNG, produced from organic waste streams such as food scraps and municipal wastewater, is increasingly being positioned as a critical tool in California’s climate strategy. For Southwest Gas, the agreement represents not just regulatory compliance but also a broader shift toward cleaner energy delivery that could reshape how utilities balance environmental mandates with infrastructure realities. By sourcing biomethane from wastewater and food waste, the company is directly addressing methane—the most potent short-lived greenhouse gas—with a strategy that is both technologically feasible and locally scalable.

How does this agreement support California’s methane reduction goals under Senate Bill 1440?

California’s Senate Bill 1440, enacted in 2018, established binding procurement obligations for natural gas utilities to secure biomethane from qualified projects. The program is designed to cut methane emissions that would otherwise escape into the atmosphere from landfills, dairy operations, or wastewater treatment plants. Methane traps more than 80 times the heat of carbon dioxide over a 20-year timeframe, making its reduction a priority for state climate policy.

Under the agreement, RNG produced at the Victor Valley Wastewater Reclamation Authority (VVWRA) facility will be upgraded to pipeline-quality gas before injection into Southwest Gas’s distribution system. The CPUC filing indicates that this project could reduce emissions from natural gas delivered to customers by approximately 11,841 metric tons of carbon dioxide equivalent annually. According to the U.S. Environmental Protection Agency’s conversion metrics, this is the same as eliminating the emissions from nearly 2,800 gasoline-powered passenger cars driven for one year.

This project also represents the first actively producing facility to qualify under SB 1440, signaling a transition from pilot projects to fully integrated RNG supply contracts. Anaergia executives emphasized that this milestone demonstrates how wastewater treatment plants can evolve into renewable energy hubs, diverting more than 100,000 tons of organic waste each year while producing clean fuel for utilities.

What role do Anaergia and Anew Climate play in Southwest Gas’s renewable transition?

The RNG facility supplying Southwest Gas is operated by SoCal Biomethane LLC, a subsidiary of Anaergia Inc., a Canadian company specializing in anaerobic digestion and renewable energy recovery. Anaergia has built a reputation for designing systems that transform municipal waste streams into low-carbon resources. The Victor Valley plant co-digests municipal wastewater solids with slurried food waste, processing up to 65,000 gallons daily to generate biogas.

Anew Climate, which focuses on low-carbon fuel markets, is serving as the commercial counterparty in the agreement. Its managing director, Ryan Childress, noted that long-term offtake contracts with utilities provide critical certainty to developers, making it easier to finance and scale biogas facilities. In effect, Southwest Gas is anchoring a value chain that links waste management, renewable energy, and utility distribution in a single regulated framework.

For Southwest Gas customers in communities like Victorville, Apple Valley, and Hesperia, this deal means their energy mix will increasingly include RNG sourced from local waste. The arrangement also demonstrates the company’s ability to structure complex partnerships that satisfy regulatory requirements while offering resilience benefits, such as diversifying supply and reducing exposure to commodity volatility in traditional natural gas markets.

How does this project compare to other RNG initiatives in the U.S. utility sector?

Across the U.S., gas utilities are under pressure to demonstrate progress toward decarbonization without compromising reliability. Several peers of Southwest Gas have already embarked on RNG procurement programs. Southern California Gas Company (SoCalGas), for instance, has announced ambitious plans to deliver 20% RNG to its core customers by 2030, while Dominion Energy and NW Natural have similarly initiated biomethane procurement and customer choice programs.

Compared to these larger utilities, Southwest Gas operates at a smaller scale, serving approximately 2.2 million customers across Nevada, Arizona, and California. However, the company’s CPUC filing suggests it is leveraging California’s aggressive policy framework to gain an early-mover advantage in regulated RNG contracts. Unlike voluntary RNG programs in other states, SB 1440 provides a compliance-driven pathway with guaranteed cost recovery, making projects like the Victor Valley facility more financially durable.

This broader shift is part of a national debate over the role of RNG in decarbonization. Critics argue that RNG volumes will never be sufficient to fully replace fossil natural gas, while proponents see it as a bridge solution that can cut methane emissions quickly while supporting existing infrastructure. By filing for approval of a procurement agreement, Southwest Gas is signaling that it views RNG as a material part of its California operations for the foreseeable future.

What are the potential community and economic benefits of the Victor Valley RNG project?

Beyond emissions reductions, the Victor Valley facility offers tangible community benefits. Anaergia has committed to hiring local part-time and full-time staff, providing an economic lift to the region. The VVWRA also runs community outreach and educational programs, including Science, Technology, Engineering, and Mathematics (STEM) scholarships and facility tours for local schools. These initiatives integrate environmental infrastructure into broader community development strategies.

By diverting food waste and wastewater into a circular energy system, the project reduces pressure on local landfills and contributes to California’s waste diversion mandates. For communities often skeptical of large infrastructure projects, the educational and workforce development aspects can help build public trust and foster long-term acceptance of renewable energy solutions.

Southwest Gas executives, including President and CEO Karen S. Haller, have framed the RNG deal as an example of environmental stewardship paired with reliable energy service. Haller stated that bringing RNG to customers demonstrates the company’s commitment to sustainability, energy affordability, and community impact. For investors, such messaging is increasingly critical, as environmental, social, and governance (ESG) performance has become a key lens for evaluating utility stocks.

How is investor sentiment shaping Southwest Gas’s RNG strategy?

Southwest Gas Holdings trades on the New York Stock Exchange under the ticker SWX. The stock has experienced volatility in recent years, partly due to activist investor pressure and restructuring efforts. In 2022 and 2023, the company faced a high-profile proxy battle led by Icahn Enterprises, which pushed for divestitures and strategic reviews of non-core operations. Since then, management has emphasized a return to core regulated utility operations with an added focus on decarbonization pathways such as RNG.

As of mid-August 2025, shares of Southwest Gas are trading with modest gains compared to earlier in the year, reflecting cautious optimism from institutional investors. Analysts have generally issued neutral to “hold” recommendations, citing the company’s stable regulated earnings but limited near-term growth catalysts. However, the RNG procurement filing could be viewed as a sign that regulatory relationships in California are constructive, which may improve sentiment among ESG-focused funds.

Institutional ownership in SWX remains high, with pension funds and utility-focused ETFs among key holders. While foreign institutional investors (FIIs) have shown limited direct exposure to U.S. gas distribution utilities, domestic institutional flows (DIIs) have maintained steady positions, supporting stock stability. The RNG filing may not drive immediate earnings growth, but it strengthens the narrative that Southwest Gas is aligning with state policy and long-term decarbonization trends—an increasingly important factor for fund managers.

What does this mean for the broader energy transition and Southwest Gas’s role in California?

California’s energy transition strategy relies on electrification, renewable electricity, and low-carbon fuels like hydrogen and RNG. For utilities such as Southwest Gas, demonstrating progress on RNG procurement is vital to maintaining regulatory support and customer confidence. The Victor Valley project is unlikely to transform the company’s overall emissions profile overnight, but it is a symbolic and regulatory milestone that could pave the way for additional RNG contracts.

Industry observers note that utilities that establish early compliance positions under programs like SB 1440 may enjoy competitive advantages in future procurement cycles. They can also point to community partnerships, job creation, and educational programs as evidence of broader value creation beyond emission reductions. For Southwest Gas, which has faced investor scrutiny in the past, the RNG agreement offers a narrative of renewal and relevance in the clean energy era.

Ultimately, this deal underscores how waste-to-energy projects can serve multiple goals at once: reducing methane, supporting local economies, and giving utilities a tangible decarbonization story to tell investors and regulators. While RNG alone will not solve California’s climate challenge, projects like Victor Valley highlight how incremental steps can deliver measurable progress—and how utilities like Southwest Gas are positioning themselves within that evolving energy landscape.