California Gov. Gavin Newsom Demands Federal Probe Into Soaring Natural Gas Prices

California Gov. Gavin Newsom speaks during a press conference in Sacramento, on Feb. 1, 2023. Justin Sullivan/Getty Images

California Gov. Gavin Newsom has called on the Federal Energy Regulatory Commission (FERC) to immediately investigate the recent spike in natural gas prices in the state and establish whether they may be linked to market manipulation or anti-competitive behavior, among other things.

In a Feb. 6th letter (pdf) to Willie Phillips, the chair of the FERC, the federal agency responsible for regulating wholesale natural gas, the Democratic governor requested that the agency turn its “immediate attention to the matter of escalating wholesale natural gas prices impacting customers in California and other western states.”

The governor requested that the agency “immediately focus its investigatory resources on assessing whether market manipulation, anticompetitive behavior, or other anomalous activities are driving these ongoing elevated prices in the western gas markets.”

Newsom’s letter comes as millions of California families are battling against soaring gas utility bills, which have skyrocketed in the past month amid plunging temperatures and increased demand for heating, among other factors.

One of the most significant storms of the season hit Big Bear Mountain Ski resort, with 17" of snow in two days in Big Bear Lake, Calif., on Jan. 15, 2023. Big Bear Mountain Resort via AP

Wholesale Natural Gas Prices Soar

While wholesale natural gas prices have fallen about 50 percent since the end of October across the nation, they have shot up 63 percent in California, where around 70 percent of homes rely on gas for heat, Bloomberg reported.

In January, SoCalGas, the primary provider of natural gas to Los Angeles and Southern California, warned its customers that bills were likely to be “shockingly high.”

Citing “market conditions,” as well as below-average temperatures, high natural gas consumption, a reduction in natural gas flows, and pipeline contains, including ongoing maintenance in West Texas, the gas company said that natural gas rates had increased 128 percent since December alone.

SoCalGas noted in its message to customers that it does not set gas prices and does not profit from rising prices.

Alongside his letter to FERC, Newsom—who in December unveiled a proposed price gouging penalty on excessive oil refinery profits—also announced that millions of Californians will soon see relief from high utility bills, and will receive credits of $90 to $120 in their utility bills as soon as next month.

The $90–120 credit will be applied to residential utility bills beginning in March for customers of Pacific Gas and Electric, Southern California Edison, San Diego Gas & Electric, and Southern California Gas Company.

Bear Valley, Liberty, PacifiCorp, and Southwest Gas customers will also receive an accelerated credit of “varying amounts” Newsom said.

Blue flames rise from the burner of a natural gas stove in Orange, Calif., June 11, 2003. David McNew/Getty Images

‘Necessary Enforcement Actions’ to Be Taken

According to the California Public Utilities Commission (CPUC), the credits will provide an estimated $1.3 billion in relief to customers across California.

In addition, Newsom noted that CPUC and the California Energy Commission will hold an en banc hearing on Tuesday which will bring together market experts to examine what may be causing the natural gas price spikes and look into potential state actions that can be taken to address the issue. An en banc hearing is when all the judges of a court hear a case.

“Millions of California families are opening their utility bills to sticker shock—and we’re taking action now to provide relief to help with those high gas bills,” said Newsom in a statement.

“We know this provides only temporary relief from soaring bills. That’s why I’m asking the federal government to use its full authority to investigate the spike in natural gas prices and take any necessary enforcement actions. We’re going to get to the bottom of this because Californians deserve to know what’s behind these exorbitant bills.”

PG&E and Southern California Gas Co. said they support Newsom’s call for an investigation, adding that they do not set the price of gas, Bloomberg reports.

FERC spokesperson Mary O’Driscoll confirmed to The Los Angeles Times on Monday that the agency had received Newsom’s letter and will be reviewing it.