California Public Utilities Commission explores natural gas price spike, but is short on solutions
California utility regulators got a clear picture Tuesday of the market conditions that pushed up regional natural gas prices. But the California Public Utilities Commission (CPUC) did not lay out a clear path for solutions that would keep huge price increases from happening again.
“Customers are really hurting here,” said Alice Busching Reynolds, the president of the CPUC. “People have experienced severe 'sticker shock' on their energy bills.”
Experts called in by the panel pointed to a number of reasons for the sudden and sharp increase in the price of natural gas, a commodity the CPUC does not directly regulate.
Presenters at the commission's “En Banc” hearing blamed a widespread "cold snap" that pushed up residential and small business demand for the fuel.
“The extra demand was driven by weather,” said Rodger Schwecke, a senior vice president of Southern California Gas.
That demand drove down inventories, which drove up prices. Pipeline repairs also restricted the flow of natural gas to Southern California.
“Frankly, we don’t know all of the pieces of the puzzle, and this issue is critically important and needs to be examined further,” Busching Reynolds said.
Busching Reynolds pointed out that it is not only a state issue, but it affects much of the western United States. California regulators have opened a dialogue with other states to monitor the situation and bring some price stability to customers.
“High gas prices haven’t affected the reliability of the system,” said Becky Robinson, an economist at the California Independent System Operator, the agency that runs the state’s electricity grid. “It is not a question of whether you can get the gas, it's just a matter of how much you will pay.”
California had the highest price increases in the country.
Governor Gavin Newsom on Monday called on the Federal Energy Regulatory Commission to investigate the recent price spikes. He says the agency should find out if there was any market manipulation or other anti-competitive behavior.
The California Public Utilities Commission and the agency’s independent Public Advocate’s office also asked federal officials to look into the unusually high spike in the cost of natural gas in Southern California.
One observer said it was curious that natural gas market prices seemed to stabilize when questions were raised about the reasons for the sharp increases.
“Why is it that the day after Senator (Steven) Bradford sent a letter to the CPUC calling for an investigation, prices were slashed in half from the $20 mark to the $10 mark?” said Marlon Santa Cruz, a gas buyer for the Los Angeles Department of Power and Water. “And as news was brought on about Governor Newsom’s letter being made public, now we stabilize at $5, as of yesterday?”
A local consumer advocacy group called Public Power San Diego is asking the San Diego city council to investigate San Diego Gas and Electric, because local natural gas prices went up more than at other utilities.
They also point out that local storage of the commodity fell just before the winter heating crunch.
Public Power San Diego said this week that city officials need to investigate and find solutions to keep price spikes like those the region experienced this winter from happening again.
San Diego Gas and Electric officials began warning customers in October, again in November and December, about expected high prices. But those prices exceeded even utility expectations in January.
The cost of natural gas bought by utilities climbed from $.65 a therm in November to $1.05 in December. Then January prices soared to $3.45. February’s price is $1.11.
The January price hike more than doubled SDG&E gas bills when compared to the same rates from a year earlier. The investor-owned utility said natural gas usage that generated a $105 dollar bill in the first month of 2022, cost $225 this January.
“A bill price spike this high puts Californians in a position where they have to make tough choices affecting their lives and families,” said CPUC Commissioner John Reynolds.
Last week, the CPUC moved some climate credits from the spring and summer to February as part of the effort to speed relief to customers struggling with higher bills.
That could be as much as $104 for SDG&E customers who have natural gas hook-ups which is about 900,000 of the utility's 3.7 million customers.
The money for those credits comes from California’s cap and trade program, which requires polluters to buy permits to release greenhouse gasses into the air.