California Public Utilities Commission to investigate this winter's natural gas price spike

The California Public Utilities Commission on Thursday unanimously voted to launch an investigation into the eye-popping surge in natural gas prices that led to skyrocketing bills this winter for many customers across the Golden State — and in the San Diego area in particular.

"This issue is one of our top priorities, as ratepayers in California have been significantly burdened by the price spike," said Alice Reynolds, president of the commission, known as the CPUC for short.

The investigation will examine the reasons natural gas commodity prices took off in January, whether the gas market was manipulated, review if utilities effectively communicated with their customers about the impacts higher prices would have on their bills, and find ways to avoid similar price spikes in the future.

"Californians have every right to be outraged and confused about what they experienced," said CPUC commissioner John Reynolds. "Wild changes in utility bills from one month to the next are not just hard to manage financially, it can also undermine the public's trust ... If we can't prevent events like this in the future, that trust will be further undermined."

The commodity, or wholesale, price of natural gas soared in late December and January in California and in markets across the West.

At the beginning of the year, the San Diego Gas & Electric warned customers with gas hookups to expect their January bills to jump 114 percent compared to one year earlier. Prices in February and March have come down to more normal levels but not before some customers bitterly complained that their bills more than doubled.

SDG&E spokesman Anthony Wagner said the utility supports the CPUC's decision to review "the natural gas supply and storage constraints, and cold weather conditions that drove up commodity prices in the Western United States recently and that left many SDG&E customers facing unprecedented winter heating bills."

Of SDG&E's customer base of 3.7 million, about 905,000 have gas meters.

About 90 percent of California's natural gas comes from outside the state, and the CPUC has no authority to regulate natural gas prices or producers.

"I appreciate that the commodity prices are not under our jurisdiction, nor controlled by the utilities, and that the utilities do not make a profit off of the gas," said commissioner Genevieve Shiroma. "However, we must question whether market fundamentals are sound and what additional circumstances influence the market."

The investigation will call on utilities that are regulated by the CPUC (including the big three investor-owned power companies — SDG&E, Southern California Edison and Pacific Gas & Electric) as well as Southern California Gas Co. and various in-state gas companies and storage facilities to provide information surrounding market activity since last November.

However, according to the order passed on a 5-0 vote Thursday, the CPUC intends "to resolve this proceeding within 36 months."

San Diego attorney Michael Aguirre said three years is too long.

"We better be able to get it done before 36 months," Aguirre said. "Everybody will have forgotten about the cost increases if we're three years down the road."

Responding to an email from the Union-Tribune, CPUC spokeswoman Terrie Prosper said, "In this case, finding meaningful solutions for the future could take some time, so we provided time for that effort. We will make every effort to conclude the proceeding as soon as practicable."

One of the commission's administrative law judges will be assigned to the case.

The CPUC expects many of the issues raised during the investigation will be addressed through filed comments, public meetings and workshops so evidentiary hearings will not be needed.

But Aguirre, who plans to file to be a party to the proceeding, said he will argue for hearings and a ban on ex parte communications — any talks, discussions or electronic messages — between entities involved in the investigation.

"The decision regarding what exactly caused these (price) spikes is really a factual decision that has to be made based on the evidence, not discussion, not speculation," Aguirre said.

Utilities blamed soaring natural gas prices on a confluence of events.

The weather across California has been abnormally wet and cold this winter, leading customers to turn up their natural gas heating units and driving up demand. The U.S. Energy Information Administration cited reduced pipeline capacity and constraints in gas deliveries from other states. The EIA also said inventories on the West Coast were well below the five-year average.

A major pipeline that sends gas from Texas to Southern California had been out of service but came back online last month, adding much-needed supply.

Gov. Gavin Newsom sent a letter on Feb. 6 to the chairman of Federal Energy Regulatory Commission — the agency that oversees the interstate transmission of natural gas, electricity and oil — requesting that FERC investigate if market manipulation was at play during the price spike.

FERC's acting chairman Willie L. Phillips has not disclosed if a probe is underway but said staff members are using "enhanced surveillance" to look into California's natural gas prices this winter.

"If our office of enforcement discovers any potential violations of our anti-manipulation rule, we will — and I'm going to add this — aggressively pursue violations of that rule," Phillips told reporters during a briefing in Washington on Feb. 16.

This story originally appeared in San Diego Union-Tribune.

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