The "Emission Reduction Innovation Act" empowers gas public utilities in New Jersey to develop "utility innovation plans" aimed at decreasing greenhouse gas emissions linked to natural gas usage. The bill defines key terms such as "biogas," "carbon capture and utilization," and "renewable natural gas," and specifies that these plans must include innovative resources, lifecycle greenhouse gas emissions reductions, cost-effectiveness analyses, and local job creation impacts. Additionally, the plans must address benefits for low- and moderate-income residential customers and incorporate a cost recovery mechanism for incurred expenses. The Board of Public Utilities (BPU) is tasked with reviewing and approving these plans to ensure alignment with the state's greenhouse gas reduction goals set by the "Global Warming Response Act."

The legislation outlines that utility innovation plans will be valid for five years, with provisions for utilities to submit updated versions thereafter. Utilities must demonstrate the reasonableness of costs associated with these plans, which can be recovered through customer rates. The bill allows for budget flexibility, permitting utilities to shift up to 25 percent of the total budget between projects with prior notice, while larger shifts require BPU approval. Furthermore, the Department of Environmental Protection (DEP) is mandated to review the methodology for calculating lifecycle greenhouse gas reductions in collaboration with the BPU, ensuring compliance with state standards and emissions reduction goals. The BPU must also evaluate cost-benefit analyses of the plans according to existing guidelines for utility investments.