SDG&E warned customers their bills would increase this winter due to the high price of natural gas back in December 2022. The utility cited a recent report from National Gas Intelligence describing a "perfect storm" of frigid temperatures across the West, low storage inventories, and other factors impacting supply and demand to push wholesale natural gas prices to "historically high" levels.
Sounding the alarm on cost of gas
Then, in early January 2023, SDG&E sounded the alarm that bills could double as the cost per unit of natural gas, also known as a therm, has more than doubled for the month of January, year over year, increasing from $2.36 per therm in January 2022 to $5.11 per therm in January 2023.
For gas alone, if your household peak winter bill was $105 last January, you could expect your January 2023 bill to be $225.
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But, it appears as though natural gas prices are going down.
So, why are our bills so high?
“There's no conspiracy here. It's a function of the market,” said Robert Yawger, Executive Director and Energy Futures Strategist at Mizuho Securities.
Yawger is based in New Jersey and said one of the main factors behind the high cost of natural gas here is the cold weather, which made the demand for it spike to historic levels.
"You just got blasted with a cold weather front that people haven't seen in years," said Yawger.
Delivery costs also play a role. SDG&E buys much of its natural gas from other states, such as Texas, which is more challenging to transport than other parts of the country.
"You gotta go across the desert-not a lot of infrastructure support there, or you gotta go through the Rockies and go uphill," said Yawger.
In addition, a significant pipeline exploded in 2021 and hasn't been repaired.
Why doesn't California produce more natural gas?
When CBS8 asked Yawger why California doesn't rely more on producing natural gas here, he said companies are hesitant because of our commitment to green energy in the future.
"If you're a fossil fuel producer, crude oil or natural gas, your incentive to drill a new hole in California to bring fossil fuels to the surface is not all that good."
Another factor-the Pacific Northwest exports hydroelectric power to California. Still, because of the recent cold weather, Oregon and Washington needed more for themselves, so we had to rely on power plants fueled by natural gas.
Despite all those reasons, many people still want to know why we do not see a discount on natural gas when global charts show prices dropping daily.
No markup on natural gas
When asked about this issue for a previous story, SDG&E told CBS 8 they sell natural gas for the price they buy. There's no markup, adding:
".....the current prices for gas that customers are seeing are for January only. Gas prices are updated monthly based on forecasted market conditions. If prices come down, customers will see that reflected on their bill."
The contracts for natural gas are purchased at an index price set each month, so the price customers pay isn't reflected on daily price charts-it's delayed.
New prices will be set on February 1.
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