Southern California Gas Co.’s warning to its customers was unusually blunt: “There’s no easy way to do this,” the company said. “January bonds are likely to be shockingly high.”
SoCalGas said anyone who heats their home with natural gas will likely see a January bill that’s double what they paid a year ago.
SoCalGas, a 146% increase from last winter’s typical peak monthly bill of $65, will probably approach $160. A $130 bill will rise 142% to $315.
The increases are due to increases in the wholesale price of natural gas paid by SoCalGas and passed on to its customers. That price, determined by national and regional markets, is up 2 1/2 times from the December price and up more than 300% since January 2022, according to SoCalGas.
Tom Cox of Westchester hasn’t received his January bill yet, but he’s worried. He said his family worked hard to save energy, but saw their monthly bills jump from $22.46 in November to $100.56 in December. For December 2021, it was about half that, at $56.96.
“Our bill is not high compared to what I’ve heard” others with larger properties are paying, he said.
And it’s not just gas bills. Your electricity bill will also increase.
Southern California Edison said rates will increase 7.2% in January, largely due to higher natural gas prices. Natural gas is the source of about 22% of the company’s electricity, so when gas prices rise, so does electricity.
In Southern California, natural gas usage typically increases during the winter months as homes and businesses use the gas for heating. January is usually the peak month.
Gas prices are rising in the country. In the area served by San Diego Gas & Electric Co., a household that paid $105 last January will pay about $225 this month. This is an increase of 114%.
Edward Lopez, executive director of the San Diego-based Utility Consumer Action Network, said his organization began receiving complaints about higher gas bills before the holidays.
“If SDG&E customers are actually seeing that kind of growth [in gas bills]it’s just unwise and very painful,” Lopez said. “These are tough, tough choices for SDG&E customers not only in terms of how to pay their bills, but also in terms of exactly which bills they can pay, including bills for other essential items creates.”
SoCalGas and other utilities attributed the sudden and dramatic price increase to unusually cold winter weather in California and the Pacific Northwest, which increased demand for heat as well as supply and distribution constraints.
The U.S. Energy Information Administration pointed to a power outage in West Texas due to pipeline repairs that have reduced westbound natural gas flows. The EIA reported in December that natural gas storage inventories in the Pacific region were 30% below the five-year average.
A decrease in natural gas prices is observed in some regions of the country that are more closely connected to pipeline distribution systems. The same is true of Europe, which has experienced a warmer-than-expected winter.
Although cold winters cause price hikes,”[natural] gas prices aren’t doubling overnight because things are a little colder than last year,” said Consumer Watchdog Jamie Court.
The court said prices were rising in part due to supplies of natural gas sent to Europe in the form of liquefied natural gas, which has been hoarding supplies in the face of Russian gas cuts since the country invaded Ukraine in February.
“This applies to all the LNG we export to Europe,” Court said. “They sell our natural gas to Europe because they get a higher price.” The resulting lack of inventory has led to higher prices for U.S. consumers, he said — and companies can squeeze because “consumers really need it.”
While the broad causes of price increases are easy to explain through supply and demand, the details of company pricing decisions are hard to come by – as was evident in the results of high gasoline prices last summer. Gov. Gavin Newsom has introduced what is known in the state legislature as a “price hike penalty” that would tax “excessive profits” at gasoline refineries.
A SoCalGas spokeswoman noted that the company’s profits are limited by regulation and that the utility does not benefit from higher wholesale prices. The wholesale or commodity price of natural gas accounts for more than 90% of the increase paid by utility customers.
SoCalGas and SDG&E are owned by energy giant Sempra, a major player in transporting LNG from the United States to Europe.
California depends on other states for 90% of its natural gas, mostly New Mexico, Wyoming, Texas, and Alberta, Canada. Natural gas production continues to decline in California. Natural gas and oil production are closely related, and California’s oil production is about two-thirds of what it was in 1985.
To combat greenhouse gas emissions, California’s political leaders are aggressively shifting the state away from fossil fuel production and consumption toward solar and wind power. The California Air Resources Board plans to ban new natural gas heaters, water heaters and furnaces in the state by 2030. The Los Angeles City Council passed a similar measure last May.
This will reduce greenhouse emissions and reduce indoor toxins from gas heaters and furnaces. But it would further reduce natural gas drilling in California. Kevin Slagle, a spokesman for the Western States Petroleum Assn., said the California policy effectively forces existing oil wells to be shut down. “With fewer wells, you have less production,” he said.
While the nosebleed level of natural gas prices now proves to be an anomaly, both the California Air Resources Board and the California Energy Commission expect average natural gas prices to rise through at least 2030.
Both agencies, along with the Public Utilities Commission, the governor and the Legislature, are fighting to move away from fossil fuels without raising fossil fuel prices so high that they cause public outcry.
The utilities commission “has been trying for some time to try to bring energy costs into line, to make them more affordable,” said Lopez, a consumer advocate. “But we still haven’t seen a significant difference.”
Mitchell is a contributor to the Times. Nikolewski writes for the San Diego Union-Tribune.