The notice Southern California Gas Co. issued to its customers was unusually blunt: “There is no easy way to say this,” the company said. “January bills are likely to be shockingly high.”
Anyone who heats their home with natural gas is likely to see a January bill more than double what they paid a year earlier, SoCalGas said.
A typical peak monthly bill of $65 from last winter will likely reach closer to $160, SoCalGas said, a 146 percent increase. A $130 bill will be more like $315, up 142%.
The increases are the result of increased wholesale natural gas prices paid by SoCalGas and passed on to its customers. According to SoCalGas, that price, set by national and regional markets, is up two and a half times from the December price and is up more than 300% from January 2022.
Tom Cox of Westchester still hasn’t received his January bill, but he’s anxious. He said his family works hard to conserve energy, but saw his monthly bill jump from $22.46 in November to $100.56 in December. For December 2021, it was almost half that, $56.96.
“Our bill is not high compared to what I’ve heard” others with larger properties pay, 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, mainly 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 do electricity prices.
Natural gas consumption in Southern California typically increases during the winter months as homes and businesses use gas for heating. January is usually the peak month.
Gas prices are jumping across the state. In the territory served by San Diego Gas & Electric Co., a household that paid a $105 bill last January will pay about $225 this month, the company estimated. This represents an increase of 114%.
Edward Lopez, executive director of the San Diego-based Utility Consumers’ Action Network, said his organization began receiving complaints about higher gas bills before the holidays.
“If indeed SDG&E customers see that kind of upside [in gas bills]this is so unreasonable and so painful,” Lopez said. “It’s creating difficult and difficult choices for SDG&E customers in terms of not only how they pay their bill, but making decisions about what exact bills, including those of other essentials, they can afford to pay.”
SoCalGas and other utilities have attributed the sudden and dramatic price increase to unusually cold winter weather in California and the Pacific Northwest, which increased heat demand as well as supply and distribution constraints.
The US Energy Information Administration noted reduced capacity due to pipeline maintenance in West Texas that reduced westward natural gas flows. The EIA reported that natural gas storage inventories in the Pacific region in December were 30% below the five-year average.
Some parts of the country more closely tied to pipeline distribution systems are experiencing a decline in natural gas prices. So is Europe, whose winter is turning out to be warmer than expected.
Although colder winters lead to higher prices,[natural] Gas prices aren’t just doubling overnight because things got a little cooler than last year,” said Jamie Court of Consumer Watchdog.
The court said prices are rising in part because natural gas supplies have been shipped in the form of liquefied natural gas to Europe, which had been building stocks in the face of Russian natural gas cuts since that country invaded Ukraine in February.
“This is all the LNG we’re exporting to Europe,” Court said. “They sell our natural gas to Europe because they get a higher price.” The resulting inventory shortage leads to higher prices for U.S. consumers, he said, and companies can come under pressure because “consumers really need it.”
While the general reasons for price hikes are easy to explain through supply and demand, details about companies’ pricing decisions are hard to come by, as was made clear after the high gas prices last summer. Gov. Gavin News is pushing what has been dubbed a “price penalty” in the state Legislature that would, in effect, tax “excess profits” on gasoline refiners.
A SoCalGas spokesman noted that the company’s profits are limited by regulation and that the company 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 shipping LNG to Europe from the US.
California depends on other states for 90% of its natural gas, mostly from New Mexico, Wyoming, Texas and Alberta, Canada. Natural gas production in California continues to decline. Natural gas and oil production are closely related, and oil production in California 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 implement a ban on new natural gas heaters, water heaters and furnaces in the state by 2030. The Los Angeles City Council approved a similar measure last May.
This will reduce greenhouse emissions and relieve indoor toxins from gas heaters and stoves. But this will further reduce natural gas drilling in California. And California’s policies are forcing existing oil wells to shut down, said Kevin Slagle, a spokesman for the Western States Petroleum Assn. “With fewer wells, you have less production,” he said.
While the nosebleed level of natural gas prices now may turn out to be an anomaly, both the California Air Resources Board and the California Energy Commission expect average natural gas prices to trend higher high at least until 2030.
Both agencies, along with the Public Utilities Commission, the governor and the Legislature, are struggling to move away from fossil fuels without raising fossil fuel prices, meanwhile, so high that they spark a public outcry.
The utility commission “for some time has been trying to focus on trying to align energy costs, make them much more affordable,” said Lopez, the consumer advocate. “But we haven’t seen a significant difference yet.”
Mitchell is a writer for the Times. Nikolewski writes for the San Diego Union-Tribune.