Will San Diegans see another spike in natural gas bills this winter? - Del Mar Times

Will San Diegans see another spike in natural gas bills this winter? - Del Mar Times

Will San Diegans see another spike in natural gas bills this winter?

After rates hit record highs, this year’s forecast is described as ‘elevated, but less extreme’ than last winter.

As the weather starts to turn chillier in coming weeks, San Diego Gas & Electric officials are guardedly optimistic that utility customers with natural gas hookups won’t see a repeat of last winter, when bills hit all-time highs.

“Operationally, we’re better situated today than we were last year,” Rodger Schwecke, chief infrastructure officer for San Diego Gas & Electric and Southern California Gas, said at a virtual workshop Oct. 26 organized by the California Public Utilities Commission. “Everything points in a positive direction, but we all know the weather can change tomorrow.”

Of SDG&E’s customer base of 3.7 million, about 905,000 have gas meters and they crank up their heating units as the weather gets colder.

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At the start of 2023, the commodity (or wholesale) price of natural gas soared to record levels across California, which, coupled with below-normal temperatures, caused customers’ bills to soar to unprecedented levels. Some SDG&E customers saw their January and February utility bills more than double, making them irate.

Market conditions look better for the coming winter, though utility and natural gas company representatives at the workshop were quick to add caveats.

“Operationally, we’re better situated today than we were last year. Everything points in a positive direction, but we all know the weather can change tomorrow.”

— Rodger Schwecke, San Diego Gas & Electric and Southern California Gas

Ray Sasaki, director of gas acquisition at SoCal Gas, said the chance of a price surge is tamped down because natural gas prices are low right now and production has picked up, leading to higher storage inventories.

On the other hand, meteorologists anticipate an El Niño weather pattern this winter, which often results in wet conditions for California and an uptick in utility demand. That has caused a rise in natural gas futures prices in the region and concerns about market volatility.

Sasaki described the takeaway as “elevated, but less extreme.”

“Financial markets in general do not like uncertainty,” said Pete Koszalka, Pacific Gas & Electric’s director of core gas supply. “And the big unknown coming into winter is weather, of course. We have a fairly tight supply-demand balance, so small events can really trigger big price moves.”

What’s different this time?

Reasons for an improved outlook this winter include:

- A 770-mile segment of pipeline that serves as a major source of natural gas to Southern California has been back in service since February. The Kinder Morgan line had been shut down for about 18 months after an explosion in Coolidge, Ariz., in August 2021 killed two people.
- Other gas pipelines servicing the West that were shut down for maintenance last winter are back up and running. About 95 percent of Southern California’s natural gas comes from outside the Golden State.
- Plus, the Aliso Canyon natural gas storage facility in Los Angeles County received the OK from the Public Utilities Commission in late August to boost capacity from 41.16 billion cubic feet to 68.6 billion — an increase of 66.7 percent.

The commission’s decision was controversial. A leak at the SoCal Gas facility that began Oct. 23, 2015, took 118 days to cap and released nearly 100,000 tons of methane and other substances into the atmosphere and forced thousands living nearby to evacuate their homes. Many residents of the Porter Ranch area have insisted the storage site must be shut down immediately.

State officials plan to close Aliso Canyon in 2027 as California tries to wean itself off fossil fuels. But the PUC, in its 5-0 vote, cited concerns about natural gas supplies and volatile price swings in the energy markets for its decision to increase Aliso’s storage capacity.

“We will reduce our dependency on Aliso Canyon, but we also need to allow people, especially low-income and vulnerable communities, to access affordable energy as we move to a new electrified economy,” PUC President Alice Reynolds said at the August meeting.

SDG&E’s natural gas is purchased by SoCal Gas, a fellow subsidiary of San Diego-based energy giant Sempra.

The price for what’s called “core procurement” that goes to residential and small commercial customers is set at the start of each month.

The SoCal Gas procurement price spiked to $3.45 per therm in January— more than four times higher than a year earlier — before the price dropped to more normal levels in March. A therm refers to one unit of natural gas.

This month’s procurement price stood at 38.1 cents per therm, the lowest since May 2021.

A typical SDG&E customer uses an average of 19 therms in November, and the amount grows as the weather gets colder. The five-year average is 31 therms in December, 44 in January, 39 in February and 35 in March.

Per PUC rules, investor-owned utilities such as SDG&E cannot profit on the price of electricity or natural gas. The cost is a direct pass-through — meaning if a California utility pays, say, $1 for natural gas in the commodity market, that’s what customers pay.

High natural gas prices don’t just affect customers who have gas hookups in their heating units, stoves and appliances. Natural gas is the largest single energy source in California’s power mix — 36.4 percent in 2022 — so when gas prices go up, overall electricity rates go up, too.

Suspicions

Last winter’s price spike led some to speculate the natural gas market had been manipulated.

“[Gas] prices don’t just double overnight because things got a little colder than last year,” Jamie Court, president of the Los Angeles-based Consumer Watchdog, said in January.

Two months later, the PUC voted unanimously to launch an investigation into potential market manipulation, review whether utilities effectively communicated to customers about the impacts higher prices would have on their bills, and find ways to avoid similar price spikes in the future.

The Oct. 26 meeting was part of the commission’s investigation.

“Looking into what happened last year, we really want to work to raise the bar in terms of effective communications to customers and, broadly, situational awareness about where we are and how we’re looking as the winter progresses,” said Karen Douglas, one of the five commissioners.

Another workshop is scheduled for the first quarter of next year. ◆

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