How PG&E and Customers Can Help Reduce Higher Winter Energy Costs
Natural gas users across the country and other parts of the world are seeing an increase in their gas costs, driven largely by higher winter usage and natural gas market prices that are much higher than last winter.
In PG&E’s service area in Northern and Central California, natural gas market prices from November 2021 to January 2022 are 90% higher than last winter. And it’s not just a California concern. The U.S. benchmark, Henry Hub prices, is also up about 90%. Prices globally are even higher, with European natural gas prices up over 400% over last winter.
PG&E passes the cost of energy purchases — both gas and electricity — to its customers with no mark-up. What customers pay for the fuel costs is what PG&E pays.
“We haven’t seen a market price increase this big and lasting this long in a very long time,” said Martin Wyspianski, PG&E senior director, Electric and Gas Acquisition. “There have been short-term price increases lasting a few months due to cold weather like we experienced in 2018-2019 or tied to weather events like hurricanes, but nothing this large and sustained in the last decade”
Why prices are increasing
What’s fueling the price spike? The simple answer: supply and demand.
According to Jake Rubin, senior director at the American Gas Association, “In October, the U.S. saw contracts for natural gas in December rise due to the economic recovery driving greater demand, unfilled storage due to strong natural gas use in the summer and previous winter, and slower-than-anticipated natural gas production.”
The high cost of natural gas globally drove an increase in exporting liquified natural gas to Europe and Asia, which are also experiencing supply constraints, further driving up U.S. demand for gas.
Additionally, drought conditions last year negatively impacted hydroelectric generation in California and surrounding states. That, coupled with high temperatures last summer throughout the western United States, further drove natural gas demand to generate electricity to power air conditioners.
What this means for PG&E customers
In December 2020, it cost PG&E 48 cents per therm of natural gas. In December 2021, the cost was 82 cents per therm. Think of a therm like a gallon of gasoline. How many therms needed to heat a home to a specific temperature depends on factors like the size of the home and efficiency of the furnace, similar to how much gasoline a vehicle needs to go a certain distance depends on factors like the size of the vehicle and efficiency of the engine.
Natural gas prices change every month in PG&E’s service area. Those changes in natural gas prices are reflected in gas rates each month, up or down.
Rubin with AGA said that gas prices are expected to come down soon, “a response from an efficient natural gas market to prices that were perceived as inordinately high due to a warmer winter weather outlook and pronounced increase in natural gas production.”
Natural gas prices also impact the cost of market electricity prices, given that natural gas is used to generate some of California’s electricity supply, so customers should expect to see gas prices reflected in electricity costs this year, as well.
Electricity prices however are set on an annual basis. PG&E expects its electricity prices to change in the coming months.
PG&E takes actions to reduce costs
PG&E takes a number of actions to reduce the impact of volatile natural gas prices.
PG&E stores gas that it purchases during times of lower prices to use later. During the five-month winter heating season, when demand is highest, gas is withdrawn from underground storage facilities to meet the needs of customers. By using gas storage fields like McDonald Island in San Joaquin County, PG&E can maintain lower and more consistent gas prices throughout the year, even when prices are higher elsewhere.
PG&E also has pipeline access to gas production basins across the western U.S. and Canada to access the lowest priced gas.
And finally, PG&E’s financial hedging program helps protect residential and small commercial customers from natural gas price increases. Hedging works like insurance. PG&E pays a small premium to buy the hedges covering a portion of expected winter demand for gas, and if prices settle above a pre-determined level, the company receives a payment which is then used to lower customers rates and bills.
The company also has a hedging program to help limit electricity price volatility, and has a large and diverse electric supply mix, including nuclear, hydroelectric, renewable energy and natural gas-fired power plants, which helps minimize impacts of electricity market prices on customers.
How PG&E can help you manage energy use, costs
PG&E knows that any increase in customers’ energy bills can be challenging, particularly during the ongoing economic impacts of the pandemic.
“We recognize the impact all of these factors have on our customers which is why we are always here to help with practical ways to manage cold weather energy costs. Simple behavior changes, energy efficiency and weatherization can help save energy and money,” said Aaron August, PG&E Vice President, Business Development and Customer Engagement.
Customers can use a variety of programs and tools to help manage their energy usage and lower their bills this winter, from simple actions to energy efficiency programs to help for lower-income customers through reduced rates and one-time assistance.
Ways to save energy
- Save 2% on your heating bill for each degree you lower your thermostat, for example, lowering your thermostat (health permitting) from 70 to 65 degrees can save 10% on your heating bill.
- Set your water heater thermostat at 120 degrees or lower to save about 10% in water heating costs for every 10% lowered.
- Reheat leftovers in a microwave instead of an oven – it uses 80% less energy.
- Home Energy Checkup identifies sources of wasted energy and gives you a personalized savings plan.
- Home Intel is a no-cost energy savings program that provides an energy audit and a personal energy coach.
Help with past due bills
- Low-Income Home Energy Assistance Program (LIHEAP) offers up to $1,000 to pay eligible household energy costs.
- Relief for Energy Assistance through Community Help (REACH) Program offers one-time financial assistance to qualified customers with past-due bills.
- Arrearage Management Plan (AMP) offers up to $8,000 in unpaid balance forgiveness to qualifying customers who owe at least $500 or more on their gas and electric bill or at least $250 or more on their gas only bill and are more than 90 days past due.
- California’s COVID-19 Rent Relief Act helps income-eligible households pay rent and utilities, both for past due and future payments. Renters and landlords are eligible to apply.
Annual gas and electric rate change
In addition to the natural gas market increases impacting customer costs this winter, PG&E’s rates for safely and reliably operating and maintaining its gas and electric systems also recently changed.
On Jan. 1, 2022, an annual change consolidating various rate changes approved by PG&E’s regulator, the California Public Utilities Commission, went into effect.
These changes reflect gas and electric system investments to improve safety, reliability and resilience, including reducing wildfire risk.
For the average residential non-CARE customer receiving both gas and bundled electric (meaning electric customers not served by a Community Choice Aggregator or Direct Access), the overall bill change is about $18 a month.
Past due balances
PG&E automatically began enrolling all residential and small business customers with past due balances over 60 days in new extended payment arrangements last September. Customers will be automatically enrolled on an ongoing basis based on eligibility through September 2022.
To date, more than 810,000 customers are enrolled in the program helping customers reduce unpaid balances over time.
Email Currents at Currents@pge.com.
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