Editor’s Note: In this five-part series, NGI is taking an in-depth review of natural gas utility rates across the country and how – and why – they have escalated since 2021. Part 1 looked at the escalating consumer costs in New York and New England. Part 2 focuses on how natural gas rates on the West Coast have risen and what utilities and governments are doing as a result, and Part 3 looks at the costs consumers will be paying in the Southeast and Florida, which takes into account the fallout from Hurricane Ian. Part 4 goes on a trip to the Appalachian Basin to see how rates there are responding to winter fears, while Part 5 takes a dive into what consumers can expect in the coming months in the Midcontinent.
Higher natural gas prices are impacting West Coast utility rate filings this year, leading some opting to provide customers with bill credits, and state and federal governments to offer heftier bill assistance programs.
San Francisco-based Pacific Gas and Electric Co. (PG&E) provides natural gas to 4.5 million accounts across Northern and Central California. The combined utility has been working through the regulatory process for its 2023-2026 general rate case (GRC) since June 2021.
PG&E in February updated its filing to include the state-mandated Wildfire Management Plan, which was approved in March by the California Public Utilities Commission (CPUC). PG&E’s test year (TY) 2023 base revenue, which has yet to receive approval, would increase to about $15.34 billion, up $3.1 billion, or more than 25% from 2022 rates.
For residential customers, the proposal could mean a jump in monthly gas bills of about 11.9%, according to a CPUC fact sheet. In other words, a residential customer using about 33 therms/month would see their bill increase to $72.94/month from $65.17. Much of PG&E’s increase in natural gas costs in the GRC are driven by expenses related to gas distribution, and transmission/storage infrastructure programs.
“Commodity prices…have gone up significantly over the last year,” a PG&E spokesperson told NGI. The utility spokesperson noted that the cost of gas is passed on to consumers with no markup, and PG&E takes measures to manage natural gas and electricity costs.
“We use storage to procure during times of lower prices and then draw from that storage when prices increase,” the spokesperson said. “PG&E’s use of gas storage facilities enables us to moderate the impact of price increases for our residential and small business customers. This is an approach we’ve used year-round to help manage customer costs and supply reliability. It’s not specific to the uptick in natural gas prices.
“Additionally, we have pipeline access to many gas production basins to be able to access the lowest-priced gas and engage in financial hedging to limit price volatility,” the spokesperson said.
Data from PG&E’s average gas rate shows average gas bills for residential customers sat at around $151.20 in January for those using an average 64 therms/month. Compared with January 2021, when customers used an average 63 therms/month and were billed $114.26, the cost of natural gas increased by about 55 cents/therm.
In January 2021, procuring natural gas cost PG&E about 49 cents/therm. At the start of this year, however, procurement costs jumped to 76 cents. Transportation and gas public purpose program (PPP) costs also increased, though to a lesser degree, by 28 cents/therm year/year.
At the end of July, PG&E’s outlook for next January puts average residential gas use at 67 therms for $181.29. Compared with this past January, procurement costs could jump 23 cents/therm, with transportation PPP increasing by 12 cents/therm.
Speaking to the GRC, the PG&E spokesperson said “the costs for most products have increased due to inflation.”
SoCal Raising Rates
Sempra subsidiaries Southern California Gas Co. (SoCalGas) and San Diego Gas and Electric (SDG&E) also jointly filed with the CPUC to revise their natural gas rates and propose gas storage capacity.
The cost allocation proceeding (CAP) application and storage proposals “are predicated on effectively managing the known and unforeseen gas system challenges that may manifest over 2024-2027,” reads the September filing.
Such challenges may include “reduced capacities at SoCalGas’ storage fields, planned and unplanned transmission pipeline outages, impacts of weather, and the availability of intrastate and interstate gas supply,” according to the application.
Rates may be affected by the CAP, which now awaits the regulatory procedural process before being approved. Changes in bills would largely depend on transportation costs, as opposed to the cost of gas.
The CAP came following the SoCalGas’ GRC application in May for rates to be set from TY 2024, which would then be used to set rates from 2025-2027.
According to the initial filing, which has yet to be approved by the CPUC, core residential customers could see the cost of gas increase by 20.2%/therm from 2022-2024. In March, the residential gas rate was $1.599/therm, while the proposal suggests raising residential rates to $1.922/therm in 2024.
Forward basis natural gas prices at the SoCal Citygate, the benchmark for southern California gas, stood at plus $1.762/MMBtu in January. Basis prices represent the difference in price between a particular location and the U.S. benchmark Henry Hub.
According to NGI’s Forward Look, forward basis prices for January 2024 put natural gas prices at plus $2.300/MMBtu, as of this week.
Winter (Rates) Is Coming
Farther North, Portland, OR-based NW Natural has filed its purchased gas adjustment (PGA), as it does before each winter heating season (Nov. 1–March 31), with the Oregon PUC and Washington Utilities and Transportation Commission (WUTC). The PGA reflects changes in the expected cost of natural gas, and discrepancies between the estimated and actual cost of gas from the prior year.
In a message to customers, NW Natural said this year’s PGA “comes at a time when there are increases in the wholesale cost of natural gas because of inflationary pressures, global disruption and overall fluctuations in the energy market.”
NW Natural distributes natural gas to about 2.5 million people through almost 780,000 meters throughout Oregon and Southwest Washington.
“We recognize the hardship that customers are facing right now when the costs of everyday goods – from the grocery store to the gas pump – are going up,” said NW Natural CEO David Anderson in a WUTC filing. “That’s why we’re working with our regulator and stakeholders to help our residential customers better manage their heating costs this winter by offering a temporary bill credit that will defer some of the cost to warmer months when our customers typically see lower bills.”
If the utility’s PGA is approved, Oregon customers could see their gas bills jump by 15% from a year ago. In addition, if NW Natural is approved to increase base rates in Oregon, the two rate changes together could result in a 25% increase on customers’ bills year/year.
To lessen the impact of the PGA, NW Natural plans to offer customers a bill credit from November to March. Average residential natural gas customers using about 90 therms/month could see a monthly reduction of about $10.53 as a result of the credit. The credit would expire in April, at which point residential customers would see an increase of about $7.63/month through October 2023.
According to the PUC filing, the cost recovery tariff would decrease the Oregon utility’s annual revenue by about 6.74%.
For Washington customers, NW Natural’s PGA also would take effect at the start of winter heating season. According to the WUTC filing, natural gas consumers could see a monthly increase of about 18.3% for residential customers and 19.5% for commercial customers. This could translate to an added $12.41/month for a residential customer using about 57 therms/month. A commercial customer using roughly 242 therms/month would see an increase of about $52.69/month.
NW Natural is offering its Washington customers a rebate similar to the Oregon plan. Residential customers could receive a $6.00/month reduction from November-March, followed by a $4.00/month increase beginning in April through October.
State, Federal Governments Pitch In To Help
Meanwhile, California Gov. Gavin Newsom earlier this year struck a deal with lawmakers to deploy $9 billion through a Middle Class Tax Refund. When the bill was first announced in March, Newsom sought to hand the state’s registered vehicle owners at least $400/vehicle, as well as pause a portion of the sales tax on diesel.
Those payments began rolling out in early October, and support Californians with or without a registered vehicle. The Golden State had distributed $1.4 billion in utility bill relief during the pandemic, but the state is sending another $1.2 billion, Newsom said, “to support those who are still struggling amid rising costs.”
Customers can also seek assistance through income-qualified programs, such as the California Alternative Rates for Energy (CARE) program, which offers a monthly discount of 20% or more on gas and electric bills. A discount program also is available for households of three or more people.
“As of August 2022, more than 1.46 million customers were enrolled in…CARE… compared to 1.39 million in March 2020 prior to the pandemic,” the PG&E spokesperson told NGI. For reference, “at the height of the pandemic we had 1.55 million customers enrolled in CARE because we temporarily paused the recertification process.”
In addition, the U.S. Department of Health and Human Services’ Administration for Children and Families offers the Low Income Home Energy Assistance Program. The program provides assistance to manage home energy bills and crises, as well as weatherization and energy-related home repairs.
On a related note, the Department of Energy’s (DOE) Weatherization Assistance Program, with $3.16 billion earmarked in 2021 with the Infrastructure Investment and Jobs Act, may help low-income households reduce energy costs by increasing the energy efficiency of their homes.
“Home energy retrofits and upgrades – like electrification, heat pumps, LED lighting, insulation, and sealing up leaks – can slash monthly energy bills for families and improve the air we breathe,” said DOE Secretary Jennifer Granholm when the funding was announced.
