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Utilities blame weather, high demand for gas price spikes. California wants feds to investigate

California's public utilities and energy commissions heard different reasons for why millions of residents have seen record high gas bills this winter.

SACRAMENTO, Calif. (CN) — Utility companies face mounting pressure to explain why many Californians are seeing huge spikes in their energy bills this winter, months after Big Oil was warned by the governor about price gouging.

In a combined hearing of the California Public Utilities Commission and the state Energy Commission, officials discussed causes for the recent spike in natural gas prices and explored measures the state could take on behalf of residents.

The Public Utilities Commission does not regulate natural gas prices or natural gas producers, but can accelerate the Climate Credit to relieve people experiencing high natural gas bills. The Energy Commission held a hearing this past November to determine possible causes behind gasoline prices spikes that month, before natural gas rates peaked in December.

Governor Gavin Newsom has positioned himself as an opponent to Big Oil and late last year called for a special session of the Legislature to discuss levying a windfall tax on oil companies.

On Monday, he said he would urge the federal government to investigate the recent utility price spikes when he goes to Washington this month.

“We know this provides only temporary relief from soaring bills,” Newsom said in a statement. “That’s why I’m asking the federal government to use its full authority to investigate the spike in natural gas prices and take any necessary enforcement actions. We’re going to get to the bottom of this because Californians deserve to know what’s behind these exorbitant bills.” 

In a letter to the Federal Energy Regulatory Commission — responsible for regulating wholesale natural gas — Newsom requested that the agency “immediately focus its investigatory resources on assessing whether market manipulation, anticompetitive behavior, or other anomalous activities are driving these ongoing elevated prices in the western gas markets.” He promised that millions of Californians will soon see $90-$120 in credits on their utility bills starting in March.

California spot prices for natural gas have been volatile since the end of November 2022. On Jan. 31, average prices in the Golden State were 215% higher than the national benchmark “Henry Hub” in Louisiana. 

In Tuesday's hearing Aleecia Gutierrez, director for the Energy Commission's energy assessments division, said the state is heavily dependent on out-of-state gas imports — through pipelines that are on average at least five decades old — and is vulnerable to natural disasters and unusual weather.

Natural gas prices were much higher in the California 2022-2023 winter than in the nationwide prior year. (Image via California Energy Commission)

Gutierrez said the December price peak was seven times higher than Henry Hub and was seen throughout the West. California gas prices remained twice as high as Henry Hub in January, but are trending downward.

Rodger Schwecke, senior vice president and chief infrastructure officer for Southern California Gas Company, said that operators saw record high usages in November and December due to colder temperatures, pipeline disturbances and below average storage levels. 

“While we’ve procured gas for our customers, the long standing policy of decoupling removes the direct connection between commodity sales and utility profits. The importance of unreliable and unrestricted gas infrastructure cannot be overstated,” he said.

Natural gas prices were very different across the American West compared to east cost prices in winter 2022-2023. (Image via California Energy Commission)

Pacific Gas and Electric’s procurement vice president Gillian Clegg said that PG&E does not mark up the cost of gas. Clegg blamed the drought for lower hydroelectric generation which had to be replaced with natural gas. 

Michael Williamson, CEO of Williamson Energy, said the gas storage deficit in the West is largely attributed to PG&E and recommended bumping up storage. 

“The market is back to normal in California, but if we don’t do something now, the same thing will continue to happen again and again,” he said. 

But Public Advocates office program manager Mark Pocta said January prices were “shockingly” beyond even “pessimistic estimates.” He added that the commission can optimize utilities’ storage assets and mitigate gas price movements, but that Cal Advocates also supports Newsom’s call for the feds to investigate price spikes. 

The commissions discussed how the 2020 explosion on the El Paso Line 2000, which resulted in two deaths, affected gas transport to California. Experts also reported how wholesale electricity prices also broke records. 

The nonprofit state Independent System Operator — which oversees California's electric power system, market and transmission lines — released a report Monday showing that electric prices in December 2022 were at five-year highs. The report attributed these spikes to sustained, consecutive days of more expensive fuel costs.

Marlon Santa Cruz, Los Angeles Department of Water and Power’s purchased power manager, said municipal utilities must balance a power grid with a vertical structure to handle the energy load and protect assets. He and Fred Heutte, NW Energy Coalition’s senior policy associate, said they agree that the primary culprit is not the markets, but overdependence on natural gas.

"Renewable energy gets the first right of refusal, it flows first," Santa Cruz said. "If the sun doesn’t shine, if the wind doesn't blow … we now have to make up the energy to serve the load with.”

Becky Robinson, the Independent System Operator’s principal economist, said the Operator has not heard of threats to curtailment of gas resources. 

“It hasn’t been a question of if gas will be available, it’s just been a question of, at what price?” Robinson said.

Many commenters said they want the state to investigate why their bills are so high. Naomi Luna said many people’s bills doubled and quadrupled, and her 3,000 square foot home once cost about $50 per month for utilities — but this month utilities cost her $400.

Lionel Morris of the San Fernando Valley said he is very disappointed with Southern California Gas, and said rate increases are “unfairly hurting working class families.”

“I cannot afford to pay more for utility costs,” Morris said. “We feel that SoCal Gas unfairly is price gouging, to take advantage of the market situation due to climate change.”

Trey Jackson said seniors and people with limited income “cannot afford to stay warm.”

“It’s like California doesn't really care,” he said.

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Categories / Economy, Energy, Regional

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