Freeman Spogli Institute for International Studies Program on Energy and Sustainable Development Stanford University


March 9, 2006 - In the News

Mark Hayes says in a February 2, 2006 article in The Mercury News that things will get marginally better next year, but we are not going to get back to the natural gas environment we had in the 1990s any time in the foreseeable future.

Natural gas bills may hit $100

PG&E predicts 23% rise in heating costs this month

Appeared in The Mercury News, February 2, 2006

By Matthai Chakko Kuruvila

PG&E predicts the average home heating bill will top $100 this month, making it the priciest February for natural gas since the energy crisis five years ago.

Natural gas costs are expected to jump 23 percent this month compared with last year, Pacific Gas & Electric said Wednesday. Despite the pain, it's a far cry from the jumps of 71 and 50 percent the company projected for October and November.

Natural gas costs have been spiking nationwide. The devastating Gulf Coast hurricanes last fall hurt production, and utilities have paid top dollar to satisfy growing demand amid a limited domestic supply.

Residents have adjusted to the high cost of hot water and warm homes. They cut back their natural gas use by an average of 12.5 percent this winter, according to weather-adjusted utility estimates.

Barbara Moehrlin of San Jose knows all about cutting back.

Moehrlin never puts the heat above 64 degrees, she said. At night, she dials it down to 55. If she's cold, she'll put on a sweater or grab a blanket. She runs the dishwasher only when it's full.

Moehrlin, 63, wants to save money. Her January natural gas bill was $59, even though she has an 1,800-square-foot home -- far below PG&E's projection of an average bill of $156.42.

"When you're on a fixed income, you look at things more closely than when you're working,'' said Moehrlin, a retired public health nurse.

Utility officials said it will pay to trim energy use this winter.

Households and small business customers who cut natural gas use by at least 10 percent from January through March will receive a 20 percent rebate on their bills.

"Every little bit that customers can do to keep their use down is going to have an impact on their bill,'' said Christy Dennis, a PG&E spokeswoman.

Unlike electricity, where rates are approved by regulators and set on an annual basis, the cost of natural gas fluctuates every month. PG&E passes on the increased cost of purchasing natural gas, but is prohibited by regulators from making a higher profit when the price spikes.

That was a policy developed by regulators so consumers could reap the benefits of low prices, present for much of the 1990s. But the cost of natural gas has skyrocketed since hurricanes Katrina and Rita, which crippled nearly 20 percent of the nation's natural gas production output.

At the same time, demand for natural gas has grown steadily -- and not just by homeowners in cold weather. Newer power plants increasingly use the environmentally friendly fuel to generate electricity.

Perhaps the best example is San Jose-based Calpine, the nation's largest purchaser of natural gas, which has 73 gas-fired power plants around the country. It didn't have any of those plants a decade ago.

The bottom line is that natural gas prices aren't going to go down anytime soon, though Bay Area heating bills tend to drop as the temperature rises in March.

"We're basically at the energy crisis levels,'' said Mark Hayes, a research fellow at Stanford University's Program on Energy and Sustainable Development. "Things will get marginally better next year. But we're not going to get back to the natural gas environment we had in the 1990s any time in the foreseeable future.''

One way to expand the supply is to build ports for liquefied natural gas, which can be produced elsewhere and transported by ship rather than by pipeline. But communities have protested against having sites built near them, fearing a safety hazard and a highly explosive target for terrorists.

"There isn't a short-term solution to the current high-price environment,'' Hayes said. "The infrastructure can't be built fast enough to have a solution this year or even next.''

But while prices have spiked, consumers like Moehrlin have fought back -- with sweaters, blankets and shorter showers.

PG&E customers' December bills were nearly identical to the prior year, despite the expected 25 percent gas price increase. Households cut back their use by 20 percent that month. In November, households conserved by 26 percent, though the two months were roughly 3 degrees warmer than normal.

Still, though consumers are conserving, they don't necessarily like it. Moehrlin said it infuriates her that her home isn't as warm as she'd like it to be.

"You're in your own home,'' she said. "Why shouldn't you be comfortable?''

But she knows the answer.

"I'd rather take the extra money and do some extra things with it. I'd rather save what I can and take a trip. Last night, I went to the ballet. I'd rather do that than give the money to PG&E.''

Topics: Business | Electricity | Energy | Natural gas | Sustainable development | Water