PROBE: Why has the price of natural gas increased so much?
Staff Writer
Question: Why has the price of natural gas increased so much? As a resident of El Centro, I was charged $1.60 per term last month, and the current bill for January is $4.50 per term. Why has the price of natural gas increased so much? Answer: The Southern California Gas Company (SoCalGas) website says that natural gas prices have reached unprecedented levels on the American West Coast. SoCalGas continues to diligently work to secure cost-effective natural gas supplies on behalf of our residential and small business customers. The price of natural gas is determined by broader regional, national, and global markets and is passed on directly to our customers without markup. SoCalGas does not earn any profits from higher natural gas prices, according to the website. In mid-January, SoCalGas indicated that due to widespread below-normal temperatures, high natural gas consumption, reduced natural gas flows, and pipeline restrictions, including the maintenance in West Texas, drove the price of fuel up. "If your peak winter residential bill was around 65 (dollars) last winter, you can expect to see bills closer to 160 (dollars) this year," the company explained at the time. "In the same way, if last winter it cost around 130 (dollars), customers can expect to see bills of around 315 (dollars) this year." According to SoCalGas, these increases are primarily due to increases in the price of gasoline and to a much lesser extent higher transportation rates. "Our rates for the transportation of natural gas are established by the California Public Utilities Commission, which reviews those rates annually," the company said. Given the increase in the cost of natural gas, the company invited users to lower the thermostat, and the temperature of the water heater, wash clothes with cold water, insulate doors and windows, and limit the use of appliances that consume natural gas. In a statement, SoCalGas warned that January bills will be surprisingly high given the unprecedented cold snap across the country that, in part, has caused natural gas market prices in the West to more than double between December 2022 and January 2023. The increase was 128% compared to December. "We understand that our customers are starting to feel the pain caused by the big changes in the natural gas market," Gillian Wright, Senior Vice President and Chief Customer Service, said. "We also recognize that we owe it to our customers to provide as many tools and tips as possible to help them find ways to prepare for the colder weather and higher bills of winter, including financial assistance in some cases," she said. During the winter months, natural gas prices tend to rise. For the past two years, prices right now have been in the $5 to $6 range for dekatherm. Last year, January prices were higher, around $8 per dekatherm. (A dekatherm is a unit of energy that is equal to one million British thermal units or ten therms, according to http://costanalysts.com">costanalysts.com. Primarily used in the natural gas industry, dekatherms measure the actual heating value of a specific volume of natural gas, the site states.) In late December 2022, when SoCalGas was asked to submit estimates to the California Public Utilities Commission (CPUC) for natural gas costs for January, prices shot up to $50 per dekatherm and averaged around $42 per dekatherm, more than five times last year's price. "Due to our available natural gas storage and other factors that SoCalGas uses to help mitigate price fluctuations, the final estimated price that SoCalGas submitted to the CPUC for January ended up being $34 per dekatherm, a record January price for our customers," the company said. In response, SoCalGas announced a $1 million contribution to the Gas Assistance Fund, a program that helps income-qualified customers pay their bills. The program was opened in January instead of February of this year. For residential customers, SoCalGas is proactively delaying collection activities on past-due accounts until April 1, 2023, and will not disconnect past-due customers for the first half of the year. The company also proactively delayed non-residential disconnections until at least March 1, according to their website. Starting last January, with prior authorization from the CPUC, the company began to apply new gas transportation rates, which registered an 8% increase in residential transportation. For small businesses, fees increased by about 5%, on average. According to SoCalGas, 48% of the fee paid by users corresponds to the cost of natural gas, 47% to gas transportation fees, and the remaining 5% is a CPUC charge to finance public programs. In the last 12 years, prices have never risen above 100 dollars. Last June it was the first, with the same situation repeated in December, so that in January it shot up to $344 per thermal unit. Natural gas charges are expected to decline in February, as the price per thermal unit dropped to $110.87. The company also stated that low-income customers may qualify for a 20 percent discount on their gas bill, under the California Alternative Rates for Energy (CARE) Program. The support is granted, for example, to families of four who have an income of $55,500 dollars a year. People who are enrolled in an assistance program like WIC, TANF, Medi-Cal, SNAP, or LIHEAP also qualify. Other clients, who do not qualify for the CARE discount, pay this subsidy within the payment of their bills. The California Alternate Rates for Energy program offers 30% to 35% off your electric bill and 20% off your natural gas bill. For the CARE Program, electric companies with 100,000 or more customer accounts in California offer a discount of 30% to 35%, per the Public Utilities Code. Power companies with fewer than 100,000 customer accounts in California offer a 20% discount. The vast majority of natural gas utility customers in California are residential and small commercial customers, which consume one-third of the state's gas. The other two-thirds are consumed by higher volume or secondary customers. The CPUC explained that most of the natural gas used in California comes from natural gas basins outside of the state. In 2017, California utility customers received 38% of their natural gas supply from basins located in the southwestern United States, 27% from Canada, 27% from the Rocky Mountain area, and 8% of production located in California. California-regulated utilities do not own any natural gas production facilities. All natural gas sold by utility companies must be purchased from suppliers or traders. California does not receive supplies of liquefied natural gas (LNG). The price of natural gas sold by suppliers and traders was deregulated by FERC in the mid-1980s and is determined by "market forces." However, the CPUC decides whether California utilities have taken reasonable steps to minimize the cost of natural gas purchased on behalf of their major customers. In addition, the Commission authorizes reasonable natural gas utility services and costs and rates that permit recovery of such costs. The California Public Utilities Commission will hold a meeting next week to discuss the recent high natural gas prices this winter, examine possible drivers and impacts on the electric markets, and explore possible measures to mitigate the impact of the volatility of the electric power market, natural gas and electricity. For more information on SoCalGas Support contact (800) 427-2200, (800) 331 7593, (800) 427 2200 or visit http://www.socalgas.com/save-money-and-energy/assistance-programs/califo...