Roundtable: Energy prices soar to start off new year

S1: Energy prices see a big increase as we enter 2023. I met Hoffman and this is KPBS roundtable. 2023 has arrived and with it comes a doubling of natural gas prices for San Diegans. This latest rise in energy prices comes in the middle of what many are calling a cost of living crisis. The high cost of housing in the region , it usually gets the brunt of the blame , but it's not the only source. San Diego is home to some of the nation's highest gas and electricity prices , and now the state is promising to investigate. Here to help us better understand the hows and whys of what's been happening , as well as talk about where energy may be heading in California are Rob Nicholas. He's the energy reporter with the San Diego Union-Tribune and KPBS environment reporter Erik Anderson is here with us again. I want to thank you both so much for joining us here on roundtable. You know , in what's becoming something of a winter tradition. San Diego and saw an increase in energy prices to ring in the new year. It's led to more than a doubling in gas prices for many customers. So , Robin , Erik , simple question. What's going on here ? Erik , we'll start with you and then Rob , jump in.

S2: Yeah , I think this is the kind of a winter tradition that San Diego could willingly live without. But for the second year in a row , price of natural gas on the open market has gone up sharply , and that's been immediately reflected in the bills of local customers. And it's a dramatic impact for this month. The cost of a utility bill , if you look at last January and your bill was about 100 bucks , the cost of your utility bill this January , if you use the same amount of energy , is going to be more than twice that. So quite a wake up call for San Diego customers who have natural gas in their home.

S3: Yeah , it's it's the natural gas customers who are really getting shocked and expects people who have natural gas hookups in their homes to see their bills double. If you're just an electric customer , you will see an increase , but not nearly as dramatic.

S1: And Rob , it sounds like that the state agency responsible for overseeing public utilities is launching an investigation into these rising natural gas costs.

S3: They're going to take a look at the root causes of this spike in natural gas prices. I was talking to the director of the Public Advocate's office , which is the independent arm of the CFPB. Yesterday , he says he doesn't see any evidence that there's any market manipulation , but they want to do an examination nonetheless. And also the California Public Utilities Commission and the public Advocate's office. They're looking at trying to give some people some short term relief. And they're talking about moving the climate credits that natural gas customers get. Normally , it averages about $40 a year. Every year , natural gas customers get what's called a climate credit. The money comes from the cap and trade program that's done in California. And every utility across California does that. That comes out to about $40. Normally , it goes out in April and they're talking about moving it up into the February billing cycle. So that could deflect at least deduct 40 to $50 off people's natural gas bills.

S1: I know. I'm definitely happy to see that credit on my bill when it comes. But we know that , as the genie says , that they're just passing along the market cost of energy to consumers here , Eric. So generally , if they don't make money there , how do they.

S2: Well , they do a couple of things. First of all , they pay for gas. The market price of gas , which is what we're where the big increase is during this month. And and where that comes from is the utility buys the gas a year out. They put it on contracts , but the contracts are indexed. So it's not like they buy a set price a year in advance. They buy the contract with a price that's indexed to certain market measurements. And what happened is , is those indexes just like took off for a number of reasons here in Southern California. And that really shot up the price of gas where SD , G and E makes their money is in the delivery fee. Right. The infrastructure that they build , it's much like they do with the electricity bill , the infrastructure that they build. They get a certain rate of return on that. The delivery fees that they charge to , to bring the gas , the pipelines , all those things is where they make their money. Yeah.

S3: Yeah. Want to jump in there ? Part of that infrastructure that can be not just the delivery fees , but it's also the public purpose programs and other programs that sometimes the legislature tells the California Public Utilities Commission to direct the utilities to do , for example , charging stations. If the utility in a given area of California certainly is involved in EV charging stations. If they're going to start building EV charging stations , they get approval from the CPC , they get a rate of return of about nine or 10%. That's a big reason why. That's a big reason how utilities are able to make money rather than through the actual commodity price of of electricity or natural gas.

S1: And Rob , natural gas , it's measured in therms.

S3: Think of it as the same way that a gallon of gasoline is charged when you go to the gas pump as well. If you go to the gas pump , you know you're paying X number of dollars per gallon. That's basically what a third is , only on the natural gas side.

S1: And both of you have been writing a lot about this. And , Rob , in a recent article , you tackled one question that a lot of people have had. Why are gas rates increasing so dramatically in San Diego yet the price of natural gas elsewhere in the country has been decreasing.

S3: Basically , California is kind of an energy island when it comes to natural gas because we're separated by the Rocky Mountains and a large stretch of the desert down in the southwest. And so basically the the natural gas that might be able to be delivered in other parts of the country has to go through California in rather constrained ways. Normally , that's not a problem , but this time it has been. Also a big factor is weather. While the weather here in California in the last month or so as. It's been colder than normal , wetter than normal. People are cranking up their natural gas heating devices to heat their homes , and that leads to using more natural gas that sinks inventories well in other parts of the country. We got very cold in December and right around Christmas time. It's been unseasonably warm over large parts of the country. So in the inverse or the reverse of what's happening here in California , people are using less natural gas in other parts of the country. So what energy experts tell me is that because one area of the country might have a lot of natural gas , does it mean that they're going to another area of the country , especially in the West ? California , Oregon and Washington doesn't mean that they're going to have a lot of natural gas. Hmm.

S1:

S2: And of those , about 905,000 also have gas in their house or residence. So it's about a third , a little bit more than a third of the customers have both gas and electric in San Diego County. But thing to keep in mind here , too , is the trend line is away from gas. Some of the state agencies that regulate air pollution have already made moves to kind of de gas ify the state's economy. For example , the California Air Resources Board recently passed a measure that would not allow retailers to sell gas furnaces or gas water heaters in the state after 2030. And that's seen as just one step in that direction. The concern , of course , is natural gas is a fossil fuel. There are emissions that affect the climate. And when when you are trying to get to a net zero climate for the state , that's one point that you attack.

S1: And we're going to get into that a little bit later in the show. But it sounds like we're talking about , you know , just a little under a million San Diegans or a million San Diego households that are impacted here. And a lot of those residents , they don't seem pleased with these increases. Even my barber , when I was getting a haircut , was complaining about it. But , Erik , what have you been hearing about how these upticks are impacting everyday San Diegans ? Sure.

S2: It's not hard to find someone who's who's willing to complain about San Diego gas and Electric , because they are a monopoly utility and they have been for many , many years. But I think that there are real concerns about this particular price increase. It is three times higher than it was last year. The actual commodity price is over $3. It was about a dollar five last year. And that's creating real hardship. Now , in fairness , utility officials say there are a lot of programs out there to help. But there's also many people in a situation where they feel like they've done everything that they can. I talked to a crassness of about a little bit earlier this week about her situation. She's an elderly woman who lives in Oceanside. And she said she just she finds it difficult. This is what she had to say to me.

S3: It concerns me greatly. It's one of the costs that you can only drive it down so far in terms of usage unless you want to sit in the dark , you know. And I think I've done everything that I am capable of doing to minimize my usage except sitting in the dark. So I'm not sure exactly what to do. I'll just have to cut back on other things.

S2: And that's really the double edged sword here , is when energy prices climb dramatically. In the course of a month , people on fixed incomes are devastated and they have to make difficult choices. I was talking to a national official earlier this week who told me that it's unusual to have these kinds of price spikes and it puts people in a difficult situation because if you lose your power , you lose contact with your society. There's no Internet , there's no television , there's no light , there's no heat. Losing your power is really a dramatic step. And then in order to keep that on , where do you sacrifice if you don't have the financial flexibility ? And I think that's a choice that lots of people are asking themselves and dealing with these days.

S1: You're listening to KPBS roundtable. We're talking about energy prices in San Diego this week. Our guests are Rob Nicholas from the San Diego Union-Tribune and KPBS is Eric Anderson. Robb , in response to some of this outcry , San Diego Gas and Electric , they announced a grant program to help relieve some of the stress here , but it's only for certain customers.

S3: And what you can do if you qualify under that circumstance , you can dial two , one , one in San Diego County and they'll get you in touch with a nonprofit organization that's working with you to help you qualify. You can get a one time grant of $300. Now , if someone in your family is on the medical baseline program , in other words , they they've got a situation where they need electricity to keep their medical devices going. You can be eligible up for up to $400.

S1: And I believe that they said that this was shareholder money , that's SDG.

S3: I mean , these are shareholder dollars , $1 million rather than rate payers. So it's not so this program is not coming out of rate payers expense.

S2: But I think also it's it's a drop in the bucket. It's a very small amount considering what the utility is dealing with. When I was talking to San Diego Gas and Electric officials earlier this week , they told me that they have $200 million in outstanding debt. That means money that is owed them for gas and electricity , that they've provided $200 million since they have some 341,000 of their 905,000 of all their customers , of their 3.7 million customers , 341,000 are at least 30 days late on their bill. A large percentage of that , probably 97 percentage of that. Those people are 60 days in arrears on their bills. So this is creating a financial issue not only for the customers who are trying to make ends meet on a on a daily basis , but also for the utility , which , you know , if they don't get that money from those customers , they will shift that cost into the customers who are paying. So it will raise the rates even more if they can't collect on that $200 million.

S1: And there's some other efforts to help people try and pay their bills. The state's cap program , it was put into place to help those who fall behind because of the pandemic. And CAP stands for the California Arrearage Payment Program.

S2: You know , a lot of people couldn't afford to pay their bills because they weren't working and a lot of debt piled up. The California legislature approved $61 million , roughly payment to help kind of a raise some of that debt from 2020. There's another round of debt repayment coming , another 52 million or so dollars that the utility is going to start taking off of people's past due debts. This month , those , you know , those reductions will start showing up in people's bills at the end of this month and they'll happen for the next couple of months. You know , how much you get reduced depends on how much you owe , etc.. But it's an effort to make it a little bit easier on people who are battered by the pandemic. And it's also helping in a way kind of reduce this outstanding debt problem for the state. But basically what it is , it's California taxpayers are stepping up and getting rid of this debt to keep people and the utility out of trouble.

S1: With the pandemic. Jeanie They had not been cutting off powers for customers with unpaid bills , but those pandemic era protections , they've now gone away. Rob , Do we expect to see shutoffs coming to San Diego soon or. I don't know if they have already.

S3: Well , I talked to San Diego Gas and Electric officials the other day about this , and they said that that since March of 2020 , since the pandemic began , they have not cut off customers for nonpayment or been behind on their bills. So we'll see what happens down the road. But as of right now , they said that they have not cut off anyone since March of 2020.

S2: I just want to kind of add in. I do think that they are getting to the point where sometime this year , I'm not sure when , but sometime this year that's going to happen because. I think what they're looking at is that they can't keep having this debt grow and grow and grow. And they fear that if people have no stick out there to get them to pay their bill , that they maybe don't think about it and don't worry about it and don't pay it. And they may have to return to that as kind of a stick to to to encourage people to begin paying their bill , knowing that at some point they could lose service.

S1: Eric , you did mention this a little bit earlier. You've reported on some statewide efforts to move away from natural gas and replace them with more electric solutions. Bans on gas powered furnaces and water heaters , they're set to take effect in the coming years , as you mentioned.

S2: And you look at some of the climate related plans for the state , the efforts to move to net zero energy. This is a part of it. It's finding a way to get natural gas out of buildings that have it and finding a way to keep natural gas from being put into new buildings that are being built. There are a number of different municipalities around the state that have already said , if you build a new house in our community , we only want that house to be powered by electricity , no natural gas. And so it's definitely a trend in that direction. And because of the urgency of the climate crisis and the and the desire to get to that net zero goal , I think that you'll see momentum in that direction.

S1:

S3: California wants to drive 100% of its electricity by 2035 from non-fossil fuel sources , from sources that don't emit any carbon. But as Eric mentioned earlier , it's going to be hard to do that right now because the facts are that the only other state other than California that uses more natural gas on a daily basis is taxes. Natural gas is a major portion , a major source of electricity generation in California.

S1: As we've talked about. And I think both of your reporting does a good job of showing this. There's a larger issue here in San Diego and really across California , and that's just energy affordability. Eric , I know you're working on an upcoming story about all this.

S2: They are doing what they have been directed to do by the California Public Utilities Commission. They're , you know , charging for electricity inside of rates. And I think that's where the nub of the problem may be. When you pay for electricity , for example , you're paying less than half of that cost to produce electricity , with slightly more than half of that cost being other associated costs , whether that's transmission lines , whether it's construction of of batteries , whether it's all kinds of infrastructure , whether it's power plants that you built 20 years ago , that you're still paying bonds on stranded assets , all those things are in the price of what you buy when you buy electricity. And there's many people are starting to talk about this idea that maybe that's not the best way to charge for energy in order to keep it affordable and to keep it accessible for customers. Utilities are pushing their version of rate reform. You've seen it a couple of times in some of the filings that Jenni has made. They'd like to have a flat fee. That's just like a connection fee , a demand charge like they do on the commercial side and then add on the cost for use. But where that ends up , I think is still a matter of debate among California regulators. There's a chance that the California legislature could get involved as well , and that makes it a political issue.

S1:

S3: This is kind of where the rubber is hitting the road because Californians always , or at least in the last couple of decades , had higher electricity rates , higher utility rates than other areas of the country. And now I think it's getting to the point where lower income people , middle income people are having lots of problems and they're and they're angry about it and they're letting their legislators know about it. The CPC has been talking about. If they had a brainstorming session last year where they had a number of people talking about some of the things that Eric was talking about , how can we change the way energy or electricity rates are charged ? One of the one interesting proposal that came from some energy analysts from UC Berkeley would be taking the idea of just the electricity and separating that from other programs like public purpose programs such as wildfire mitigation spend , spent about $3 billion on wildfire mitigation since the 2007 devastating wildfires. But that goes into rates. And there's the people at UC Berkeley are talking about , well , if we were able to separate and just have an electricity bill , an energy bill that is isolated into the energy sector and passing that on as the electricity bill and these other public purpose programs like wildfire mitigation , EV charging stations , batteries , having that go through the state legislature and having those funded by the general fund rather than going through rates , that's the sum of the debate that's just heating up. And I think it's going to get even more percolating in the coming months and maybe in the next year or so. Yeah.

S2: Yeah. And one of the other ideas that they're floating around that I've heard from a number of different people is having a sort of income based rate. So depending on how much money you make , that's what you pay for your electricity bill. And the idea there is to make it more equitable. It would take a lot of pressure off of the lower income families that are trying to keep the electricity on in their house or in the gas on in their house and put some of the burden on those that can afford to pay it. But that's just something that they're considering.

S1: And Rob mentioned the CPU. See there again there , the California Public Utilities Commission. And final thoughts before we go. Simple question.

S2: I'm also interested in seeing how the solar industry performs this year once the new net energy metering rules go into effect. Because if there is a huge drop in the amount of adoption of solar in California as a result of those rule changes , that will have an impact on some of the state's climate goals. And so it may prompt the legislature to get involved. It's something that we'll track and we'll keep watching and see what develops there.

S3: Yeah , I think that affordability is going to be an increasingly important issue because it's getting it's expensive now. And by all indications , it's going to get more expensive. The CPC has had a number of reports that indicated the growth chart in rates. And also the California Independent system operator of the nonprofit that manages the electric grid in California. They had a 20 year outlook that they released about nine months ago , and they said that using with an electric grid that California is trying to seek that with lots and lots of renewables in the system that would cost $30.5 billion in transmission costs alone. So this this transition is going to be very expensive and we're going to have to figure out a way in order to make sure that people , average people , can afford to pay their bills so they can keep their lights on because getting having electricity and having access to electricity is so important to people.

S1: And as Rob did mention earlier , if you are facing difficulties from these price increases , you can call 211 to learn more about SDG assistance program. And we're going to have to end it there for this week's edition of KPBS roundtable. And I want to thank our guest so much , Rob Nicholas from the San Diego Union-Tribune. And KPBS is Eric Anderson. Be sure to stream our show any time as a podcast roundtable is produced by Andrew Bracken. And Adrian Villalobos is our technical director. I'm your host , Matt Hoffman. Thanks so much for being here with us. And have a great weekend.