Warmer Temperatures, Improved Capacity and Storage Push Down Early Winter Gas Prices

By Jennifer Robison

What a difference a year makes.

PG&E customers are seeing noticeably lower natural gas bills so far this winter compared to a year ago. The typical residential customer’s gas bill ran 31% lower year over year in November, while December gas bills are forecasted to be about 5% lower than a year ago.

Prices have fallen compared to last winter because demand has fallen—the result of warmer temperatures and customers using less natural gas to heat homes and businesses; improved hydroelectric generation from a strong water year; greater natural gas pipeline capacity availability; and higher volumes of gas in storage.

PG&E’s six-city gas-temperature composite, which surveys temperatures in Sacramento, San Jose, Oakland, Fresno, Redding and Salinas, is running about five degrees higher than a year ago since the heating season’s November start. In contrast, November 2022 was one of the 30 coldest months recorded in the last 128 years.

That resulted in PG&E customers using more natural gas last winter than the five-year historic average, with November and December usage being 20% and 10% higher, respectively, in 2022.

What’s more, California’s hydropower generation surged in 2023 due to record precipitation, which eased demand from power plants using natural gas to generate electricity.

Third-party gas pipeline operators performed substantial maintenance this summer, so the pipelines that carry PG&E’s gas supply from Canada, the Rockies and the Southwest U.S. have more capacity available today.

Production and storage of natural gas have been more robust as well.

“At this point, we have plentiful amounts of gas coming out of our production regions, and we’re able to use pipelines to get that product where our demand centers are,” said Gillian Clegg, PG&E Vice President, Energy Policy and Procurement. “Nationally, gas prices are fairly soft and lower than we’ve seen in California in the last 15 months.”

PG&E does not control market prices for gas and electricity and, like other utilities, does not mark up the cost of gas and electricity it buys for customers.

Predicting where gas prices head through the rest of this winter is difficult.

The likeliest window for cold snaps in PG&E’s service area is mid-December through mid-February. Unforeseen geopolitical events and third-party infrastructure and storage maintenance issues could also emerge.

Regardless of those factors, PG&E works every day to provide energy at the lowest possible cost to its customers. PG&E keeps a diverse supply and uses storage such as McDonald Island in San Joaquin County to ensure reliability and to buy gas when prices are lower for use when demand jumps. Also, the company’s financial hedging program, which is similar to insurance, helps protect residential and small-business customers from price increases. These measures helped PG&E save over $1 billion for customers last winter.

Lower natural gas prices have arrived just as PG&E’s General Rate Case (GRC) changes are scheduled to take effect, on Jan. 1, 2024.

The GRC will fund permanent wildfire risk reduction, critical gas and electric safety and reliability work, and capacity upgrades to support new business connections and California’s bold clean energy goals. It will increase typical residential monthly combined gas and electric bills for customers not enrolled in the California Alternate Rates for Energy (CARE) program by about 12.8% in 2024 and 1.6% in 2025, with a 2.8% decrease in 2026.