Many consumers were shocked by their January 2017 utility gas bills, which skyrocketed to disturbingly high levels, and have called both TURN and PG&E in confusion. I admit I was confused myself at first, especially since my own relatively small bay area gas bill had shot up. Is it just colder weather, or is it also skyrocketing PG&E gas rates? It took some figuring out, as I describe below. But ultimately I concluded that while colder weather and higher wholesale prices do impact bills, the biggest driver are the high rates the CPUC has allowed PG&E to charge.
To make sense of this I looked closely my own bills and the information on PG&E’s “my account” website. According to PG&E my gas bill was about $25 higher than the same month last year. PG&E broke down the bill for me online, although it wasn’t necessarily helpful.
“Weather” accounted for only about 5% of the increase. What does PG&E include in the “cost of gas”? And what are “other energy uses” I am being billed for? TURN has heard that consumers calling PG&E in shock often receive responses that are not terribly helpful in explaining why bills are so high.
Looking at my history of gas bills and consumption provided some clues. I found that in the past year my gas bill had gone up 34%, though my consumption of gas went up only 17%, so I can blame higher PG&E rates for about half of the bill increase this year.
But there’s more to it. PG&E’s gas “rates” are actually made up of two parts – the “procurement” rate and the “transportation” rate. PG&E buys natural gas from oil and gas companies that drill for gas in New Mexico, Texas, Wyoming and Canada. PG&E does not control the commodity cost of gas, which is the “procurement” rate reflecting wholesale prices. PG&E makes no profit from the gas itself, it merely buys the gas and passes on the costs without any markup.
The “transportation rate” on the other hand includes all of PG&E’s costs to build and run its gas pipelines, read your meter, deliver your bills, and do everything else necessary to maintain the system and deliver the gas. PG&E controls all of these costs in the “transportation” rate. It also includes the “authorized return” or profit that PG&E makes off building or replacing pipelines, and other “capital” projects.
Digging further into my bill and consumption history, and playing with the numbers (not a game I’d recommend to the average consumer):
|Gas Consumption (therms)||61||56||53||62|
|Average Total Rate||$1.23||$1.43||$1.38||$1.59|
|Procurement Rate (from Tables)||$0.53||$0.50||$0.39||$0.43|
|Calculated Transportation Rate||$0.70||$0.92||$0.99||$1.16|
|% Change in Transportation Rate||32.93%||7.19%||17.09%|
Transportation rates went up much more than gas prices last year. In fact, over the past three years gas prices actually decreased by 20%, while PG&E’s transportation rates increased by a whopping 67% (from $0.70 to $1.16)! It is because of the increase in PG&E’s transportation rate that I paid $99 this January for exactly the same amount of gas that I paid $75 for in January 2014.
Even though TURN fought these increases because we feared bill shock, I was still surprised at how much I’d been impacted by the increase, so I double-checked
PG&E’s own numbers from regarding the changing procurement and transportation rates, which told the same story. The commodity “cost of gas” has fallen but PG&E’s transportation rates have increased by about 70% over the past three years. For example, the Tier 2 rate has increased from $0.85 in to $1.42 per therm. from January 2014 to January 2017.
The numbers may seem complex, but the conclusion is a simple one. PG&E’s gas transportation rates, reflecting prices that are fully under PG&E’s control, have skyrocketed. These increases reflect primarily the results of PG&E’s gas rate cases at the California Public Utilities Commission. When I started working on natural gas issues back in the early 2000’s, the rule of thumb was that the “procurement” and the “transportation” rates were each about half of the bill. Today, the transportation rate, which is wholly driven by spending under PG&E’s control, is more than two-thirds of the total rate. So it is not the “cost of gas” which is driving our higher bills. It is the cost of PG&E’s neglected pipeline maintenance. More on that in a future post.