Natural gas prices are way up, so brace for higher SDG&E bills

Wholesale natural gas prices across the country are soaring. That means San Diego Gas & Electric customers who heat their homes and businesses with gas will see their monthly bills go up as well.

SDG&E officials warn that typical natural gas users should expect to pay at least $20 more in January than they did in the same month this year.

“Due to the tumultuous nature of the market, it’s expected to be higher,” said SDG&E spokesman Anthony Wagner. “The uncertain part, on top of the volatility, is how high it is going to go.”

From November to December, SDG&E’s price per therm of natural gas jumped about 19 percent, from $2.15 to $2.55.

A therm is a measurement of natural gas use. It equals 100,000 BTUs, or British thermal units, which is the quantity of heat needed to raise the temperature of a pound of water by 1 degree Fahrenheit.

Weather in the San Diego area is usually at its coldest and gas use is at its highest at the beginning of the year.

A typical SDG&E residential gas customer uses an average of 31 therms in December, 45 in January, 39 in February and 35 in March.

Natural gas prices have been rising around the country this year as low gas inventories and months of reduced hydroelectric output due to drought conditions in the West have strained output. Also, colder-than-usual weather in California, the Pacific Northwest and the Rockies in recent weeks has led to consumers turning up the heat in their homes.

In October, the U.S. Energy Information Administration forecast that retail gas prices would rise 22 percent in the country this winter.

The commodity price of natural gas plays the biggest part of the overall cost per therm that utility customers pay.

SDG&E’s natural gas is purchased by Southern California Gas, a sister subsidiary of San Diego-based Fortune 500 energy company Sempra. The price for what’s called “core procurement” that goes to residential and small commercial customers jumped from 64.9 cents per therm in November to slightly more than $1.05 on Dec. 1 — an increase of 62 percent.

Of SDG&E’s 3.6 million customers, about 873,000 have gas meters.

Higher natural gas prices can have a trickle-down effect on customers who don’t have natural gas hookups. That’s because gas prices affect overall electricity rates. SDG&E relies on natural gas for power production, such as the 500-megawatt combined-cycle Palomar Energy Center in Escondido.

“We’re not just sourcing electricity from inside our region,” Wagner said. During the heat wave around Labor Day that nearly led to statewide power outages, SDG&E was “sourcing electricity from as far away as Montana, and most of that baseline power was from natural gas-fired power plants,” Wagner said.

In October, SDG&E estimated that typical residential electricity customers who don’t have gas hookups will see an increase in their bills of about $28 starting Jan. 1 ($15 for delivery of the electricity and $13 for generation costs). Despite the most recent spike in gas prices, Wagner said the increase will remain “generally the same as our original estimate of $28.”

“We care and we want to arm our community with the information that they need to make the most informed decision about how they use their energy,” Wagner said. “Unfortunately, rates are going up in a myriad of utilities, including gas and water.”

San Diego has the highest average electricity price of metropolitan areas in the 48 contiguous states, according to the U.S. Bureau of Labor Statistics. In November, urban Hawaii posted the highest price at 45.4 cents per kilowatt-hour, ahead of San Diego’s 41 cents.

The average price in the United States in November was 16.3 cents per kilowatt-hour.

“An increasing number of customers are struggling to pay ever-rising utility bills,” said Mark Toney, executive director of The Utility Reform Network, or TURN, a consumer watchdog based in San Francisco. “This shows that the [California Public Utilities Commission] has to do more to control the costs and make essential electricity and gas affordable to all customers.”

The utilities commission approves rates charged by SDG&E and the other major power companies in California.

“This is another challenge and another price hike for SDG&E customers,” said Edward Lopez, executive director of the San Diego-based Utility Consumers’ Action Network, or UCAN. “Twenty dollars a month is a significant hike.”

Meanwhile, SDG&E finished next-to-last among large-segment utilities in the West region in recent satisfaction studies of residential electric and gas customers conducted by J.D. Power, the nationally known consumer research, data and analytics firm. J.D. Power officials pointed to higher monthly utility bills as a big reason.

Per PUC rules, investor-owned utilities such as SDG&E do not make a profit on the price of electricity or natural gas. The cost is a direct pass-through — meaning if a California utility pays $1 for natural gas in the commodity market, that’s what customers pay.

High natural gas prices come as companies like Sempra are building liquefied natural gas, or LNG, facilities that export gas to markets around the world. Asia has been a prime destination, but Europe has been especially hungry for LNG in the wake of Russia’s invasion of Ukraine.

Russia’s state-owned natural gas company, Gazprom, supplies about 40 percent of the gas that heats homes and powers businesses in Europe. But with winter bearing down, European countries are increasingly relying on LNG shipments from foreign locations to displace Russian gas.

Paul Cicio, chief executive of Industrial Energy Consumers of America, a trade group for manufacturing companies, opposes LNG exports, saying they drive up domestic natural gas prices.

“The domestic consumer should take priority,” Cicio said. “If we have plenty of gas left over, a surplus, sure. But if there’s not sufficient gas to keep prices reasonable for the consumer, then we shouldn’t be exporting.”

The American Gas Association, a trade organization for gas companies, said export growth is “steady, predictable and not likely to impact prices for residential consumers given its size relative to our other energy needs. The United States has more than enough natural gas to satisfy the current level of exports and more while keeping prices affordable and stable for natural gas customers.”

Cost-cutting tips

SDG&E offered suggestions on ways to save energy and reduce monthly bills:

• Keep your furnace clean. Dirty air filters can increase costs and cause problems with equipment, so check furnace filters each month and replace them regularly.
• Wash clothes in colder water. Using warm water instead of hot can cut the energy use of a load in half, and washing clothes in cold water saves even more money.
• Lower the thermostat on the water heater. Reducing the thermostat to 120 degrees Fahrenheit can save energy. ◆