The California Public Utilities Commission (CPUC), in its continued commitment to examine the causes of recent high natural gas prices on the wholesale markets, launched a proceeding to investigate the causes and impacts of the winter 2022- 2023 natural gas price spikes and the potential for recurrence; the impact of the price spikes on natural gas and electric prices and customer bills; the potential threats to natural gas and electric reliability and price volatility in summer 2023 and beyond, and potential mitigations; and utility communications to customers to determine whether they were sufficient or require modifications.
“The initiation of this proceeding will allow us to deeply probe the causes and impacts of these harmful natural gas price spikes and explore mitigations against such price volatility in the future,” said CPUC President Alice Reynolds. “This is a critical step to protecting consumers and increasing transparency.”
The wholesale price of natural gas in California, and throughout the Western U.S., has been extraordinarily high this winter, starting in late November 2022. In February 2023, natural gas prices trended downward but are still high compared to February 2022. As a result, customers have seen higher bills from their utility company, which pass on the cost they pay for natural gas directly to the customer without a mark-up. High natural gas prices can have an immediate impact to customers, and also a delayed impact when electric rates increase because the natural gas-related costs of running electric power plants are higher than earlier forecasts.
While the CPUC does not regulate natural gas prices or natural gas producers, given the impact of the high prices on utility customers, and given the role that natural gas plays in electricity production, upon seeing the price spikes in December 2022, the CPUC promptly took several actions. One of which was to hold a public En Banc on Feb. 7 at which important data was gathered. For example, the California Energy Commission (CEC) presented price comparisons between this winter and last winter, showing that natural gas prices for delivery on December 22, 2022, were nearly seven times higher compared to the same day in 2021. Additionally, the CEC showed that the price spikes were not unique to California and were experienced in other Western states.
The examination in the proceeding opened today (formally called an Order Instituting Investigation) will include whether factors beyond normal market forces were at play, determine whether action by the CPUC may prevent or mitigate future price spikes, and consider whether other entities have jurisdiction to mitigate high natural gas prices.
“I am in full support of this Order Instituting Investigation. It is essential that ratepayers and the CPUC acquire a full explanation of the root causes of the extraordinary high natural gas prices this winter that are unsustainable,” said Commissioner Genevieve Shiroma. “It is also essential that the CPUC determine if there is more that we can do to provide relief and understand whether other regulatory entities have the authority to do more.”
“The unbelievable cost of natural gas this winter hit Californians unexpectedly, and they were right to call these price spikes unacceptable,” said Commissioner John Reynolds. “While the state is still dependent on natural gas—and we can’t change the fact that California sits at the end of the national pipeline network— we can and should evaluate new safeguards to prevent debilitating price shocks in the future. I am particularly eager to see what this investigation reveals about market actors who contributed to this situation and have eluded scrutiny for too long.”
“The recent natural gas price spikes had severe impacts on the affordability of utility service, particularly for low-income customers,” said Commissioner Karen Douglas. “It is essential that we investigate the causes of this event and look for ways to protect customers from these kinds of events in the future.”
In further actions, Governor Gavin Newsom and other elected representatives have written to the Federal Energy Regulatory Commission (FERC) asking it to investigate whether market manipulation, anticompetitive behavior, or other anomalies have contributed or are contributing to the high prices seen throughout the West this winter. In response, FERC stated that it is conducting surveillance to determine whether any market participants engaged in behavior that contributed to, or took advantage of, the high gas prices.
The CPUC regulates services and utilities, protects consumers, safeguards the environment, and assures Californians’ access to safe and reliable utility infrastructure and services. For more information on the CPUC, please visit www.cpuc.ca.gov.
