The cold snap, the drought and Russia’s war in Ukraine are fueling huge winter rate hikes.
Southern California residents, get ready for a severe case of sticker shock as your natural gas bills across the region soar more than double this winter, according to the region’s two chief utility companies.
Southern California Gas Company — a subsidiary of Sempra Energy that serves more than 21.8 million customers in Central and Southern California — along with Long Beach Utilities, the city’s independent gas provider, recently warned customers to prepare for unavoidable increases in their gas bills this month.
“There’s no easy way to put this: January bills are likely to be shockingly high,” SoCalGas said in a Thursday, Dec. 29 announcement. “As a result, our customers can expect to see higher gas bills in the coming weeks.”
Long Beach Utilities put out a similar statement on Wednesday, Jan. 4.
Then on Jan. 6 SoCalGas announced a $1 million contribution to the Gas Assistance Fund, its program to help lower income customers pay their natural gas bills. Gillian Wright, senior vice president and chief customer officer at the utility, said, “We know that these higher prices have a real impact on our customers.”
SoCalGas rates are expected to more than double over the cost of last winter. If a customer’s natural gas bill totaled $130 last winter, for example, that household can expect a $315 bill this winter, according to the gas company. And the average Long Beach single-family residential customer should prepare for an increase of $200 or more on their bill, that city’s utility said.
“Facing the highest natural gas prices in Long Beach’s history, Long Beach Utilities took swift action to mitigate the impact on customers as much as possible,” the department said. “These actions will save customers $10 million and bring the average bill in at about 4 percent less than those of SoCalGas.”
Though gas bills tend to increase slightly during the winter as more gas is used to combat cold weather, both companies attributed the rate increases to corresponding hikes in the market cost of natural gas — which, for a slew of interconnected reasons including the California drought, unexpected severe cold snaps across the country, and Russia’s war in Ukraine has jumped about 128% since November.
“Our customers are understandably shocked by these high market prices suddenly experienced throughout Southern California,” Long Beach Utilities General Manager Chris Garner said in its announcement. “While there are legitimate market forces that have resulted in the cost increase, that does not ease the financial impact to our residents, who rely on natural gas to heat their homes, cook their food and warm their showers.”
Since late November, lower-than-usual temperatures have stretched from Western Canada to California, fueling an increased demand for natural gas. Natural gas consumption in both residential and consumer sectors throughout California and the Pacific Northwest was up 23% in the first three weeks of December, according to the U.S. Energy Information Administration.
To make matters worse, natural gas supply has not kept pace with the increased demand and U.S. natural gas exports to Europe are up significantly, putting an even greater strain on availability.
“Europe relies heavily on Russian gas for its energy needs — especially during the wintertime with heating,” said Brian Peck, the University of Southern California’s Transnational Law and Business Center director in a Thursday, Jan. 5 interview. “And so as part of the U.S.-led effort to provide Western support for Ukraine, they have asked Europe to wean itself off of reliance on Russian gas.”
Earlier this year, President Joe Biden signed a deal with the European Union to increase American exports of liquified natural gas to Europe by 15 billion cubic meters. The deal came after both the U.S. and Britain issued bans on Russian oil — and pressured the EU to join the effort to undercut a major source of Russian revenue.
But for the EU, which gets more than 40% of its liquified natural gas from Russia — an outright ban on the fuel wasn’t possible without major economic consequences for its residents. Biden’s deal to expand gas shipments to the EU, Peck said, aimed to help wean the collection of countries off of Russian natural gas over the next five years.
“The U.S. has pledged to support exports of liquefied natural gas to help Europe wean itself off and become less reliant on Russian oil, which would then decrease gas revenues to Russia’s regime,” Peck said. “(It also) help(s) insulate Europe from Russia’s restrictions on gas until Europe can wean itself off the supply.”
International relations aren’t the only factor stressing the supply of natural gas in Southern California. Along with the new year, the state celebrated a much more grim milestone: Its fourth year of severe drought.
Though the recent storms have brought much-needed water to the state’s reservoirs, the situation remains bleak — with the Metropolitan Water District’s Board of Directors recently declaring a regional drought emergency, and asking its 26 member water agencies to consider implementing mandatory water conservation measures, in early December.
Though a majority of California’s electricity is still generated using natural gas, according to the state’s Energy Commission, about 10.2% of all California electricity is created with hydropower. The state’s shrinking water supply, though, has forced an even heavier reliance on natural gas for electricity production in recent years.
“We’ve seen a lot of reservoirs and dams that produce hydroelectricity struggling because of the drought,” said Long Beach Utilities spokesperson Lauren Gold Howland on Thursday. “There’s been more natural gas used to create electricity because of that.”
And because 90% of California’s natural gas supply is imported — largely from West Texas, the Rocky Mountains, and the Four Corners area — the state relies heavily on the health of a vast interstate of transport pipelines to receive its share of the supply.
Long Beach is slightly insulated from that issue with a few local natural gas suppliers, Gold Howland said, but those sources only account for a mere fraction of what’s needed to serve the whole city.
Capacity along that crucial interstate pipeline has suffered in recent months, according to the U.S. Energy Information Administration (EIA), as wholesale suppliers in West Texas, one of California’s main importers, have dealt with a series of maintenance issues.
A fire last June at Freeport LNG — one of Texas’ major liquified natural gas exports terminals — shut down that hub’s operations. Officials there have set, and then pushed back, a full reopening several times. The company most recently estimated a March 2023 operational restart.
And several other pipelines were shut down to undergo maintenance for normal wear and tear, according to Gold Howland.
“That makes a big difference on how much gas can be coming into the state,” she said.
Natural gas storage capacity in California’s underground reservoirs — three of which are in the Los Angeles area — has also been greatly reduced in recent years.
That’s partially due to the consequences of the massive natural gas leak at the Aliso Canyon storage facility in 2015, the biggest natural gas leak in U.S. history.
The Aliso Canyon facility shut down completely following the 2015 incident that released about 100,000 tons of methane and other chemicals into the air, and resulted in hundreds of lawsuits that cascaded into a $1.8 billion accord in 2021. SoCalGas and Sempra Energy agreed to settle claims filed by more than 35,000 victims.
Two years later, the California Public Utilities Commission and Department of Conservation reopened the facility at greatly reduced capacity.
“The issue there is still kind of a residual impact from the leaks that they had a few years back,” Gold Howland said. “It took a toll on the storage fields — and they’re trying to recover, basically.”
But the problem isn’t limited to Aliso Canyon or Southern California.
Natural gas levels in storage facilities across the Pacific Region — which includes California, Washington state, and Oregon — were 25% lower in December than a year earlier, according to the EIA, and 30% below the five-year average. “In Northern California, Pacific Gas and Electric’s injections, to rebuild natural gas inventories, have not kept pace with previous summers,” the EIA added.
SoCalGas and Long Beach Utilities, meanwhile, assured consumers that the bill increases won’t spike their own profits — and offered a series of tips to help consumers prepare for the inflated January bills.
Both companies advised natural gas users to lower their thermostats three to five degrees — which can result in up to a 10% reduction in heating costs. Washing clothes in cold water, limiting hot showers, turning down the temperature on your water heater, and limiting use of non-essential natural gas appliances may also help slightly.
“Resources are available to help customers manage higher bills, including payment plan options and reduced rates for seniors, those with disabilities and other income-qualified customers,” Long Beach Utilities said. Information about those programs is available on that department’s website.