Californians are expecting skyrocketing natural gas bills this month, but it can’t all be blamed on the weather, according to industry insiders.
First, North American inventories fell below the five-year average last year. Second, the national supply was also strained by Europe’s steady demand for American natural gas during the Ukraine conflict.
Third, the Biden administration restricted licensing and drilling in the country for fossil fuels, and investment for such production has lagged behind the rapidly growing demand for natural gas over the past year, according to the report.
Lastly, the growing electric power sectors nationwide also consume natural gas, the company reported.
Climate Goals Restrict Production, Grow Demand
Besides the recent storms that have crimped national supplies, California’s poor storage planning and aggressive climate action goals played a part in driving the prices skyward, Mike Umbro—an oil and gas developer in Kern County, about 150 miles north of Los Angeles—told The Epoch Times.“In the past 20 years, our in-state production was cut in half … We rely on other states around us to supply the difference of what we need,” Umbro said.
The Golden State and its neighbors are “feverishly working to decarbonize the electricity grid,” he said.
“California is adding renewables while other states are shutting down coal power plants—both of these trends are increasing the usage of natural gas for power generation,” he said.
Low Inventory Amid War, Storms
Natural gas inventories are typically filled during the spring and summertime. Last year, however, fuel prices were soaring during that time, and utilities held off buying it.To worsen matters, national supplies began flowing to Europe during the Ukraine conflict, leading to California’s storage levels dropping to the lowest in the country—41 percent—at the end of 2022, Umbro said.
“We thought we were bailing out Europe from these high prices, and we forgot about California over here,” he said. “It appears utilities didn’t want to buy natural gas, so they went into the winter very vulnerable to supply shocks.”
Then, a series of storms pummeled the West Coast, and residents began turning on the heat, not only in California but also in the surrounding states of Colorado, Oregon, and Washington, which contributed to price spikes.
Additionally, the Golden State imports fuel through pipelines, two of which were down for maintenance in West Texas and the Rocky Mountains.
Supply shortage in California—which sits at the end of the pipeline, according to Umbro—could get much worse as other states also begin to decarbonize, he said.
High Bills to Continue if Conditions Persist
The President of the California Public Utilities Commission Alice Reynolds told commissioners Jan. 12 “these high bills could continue if these market conditions persist.”While the commission doesn’t regulate gas prices or producers, it will hold a hearing to explore “potential actions that can be taken” to address the price spikes, spokesman Christopher Chow told The Epoch Times.
The commission also might consider issuing the yearly California Climate Credit as soon as possible to provide immediate relief to customers. Residents usually receive a credit on their bills for natural gas in April. The funds come from a state program that requires industries that emit greenhouse gases to buy carbon pollution permits.