Electricity Rates May Rise Again Too as National Gas Crisis Approaches

Pacific Gas & Electric (PG&E), the utility that serves Northern and Central California said consumers can expect to pay up to 30 percent more for heating and cooking this winter because of the higher cost of natural gas. The increase could translate into hundreds of dollars in extra costs over the next six months for many customers compared to last year. For businesses and homeowners alike, the cost of gas is about to take a dramatic jump. Last October consumers were paying 77 cents a therm, amounting to $19.18 a month to heat a house. This month gas jumps to a dollar a therm, running the typical home bill to $24.95, a business bill much higher.

The worst news of all for Northern Californians is that the 30% rate hike portends a second phase of California's electricity crisis in coming years. Because most of PG&E's electricity comes from natural gas-burning power plants, PG&E customers could soon see a dramatic increase in their electricity rates if the Public Utilities Commission approves them. And with PG&E still in bankruptcy while also trying to enter into new power power contracts and put their customers on the hook for them, California ratepayers now face the prospect of new, more severe rate shocks. Some sixty California cities, led by San Francisco are seeking to find a new supplier for their communities and invest heavily in solar, wind, conservation and other alternatives to gas-fired power plants. A new "Community Choice" law allows municipalities and counties to find new energy providers for their residents and businesses.

Increasing demand for natural gas is prompting the higher prices nationwide. Supplies are tight because dozens of new natural gas- burning power plants have opened around the country. During the past four years, 6200 MW of Gas plants have been built in California under Governor Gray Davis'' "permit streamlining" initiative. The California Public Utilities Commission is now considering PG&E's plans to enter into new long-term power contracts with gas plant owners and put their customers on the hook for the power.

PG&E expects the shortage to remain until new supplies can be tapped from foreign countries, because there are inadequate domestic reserves for the nation's rapidly growing fleet of gas plants. Canada, Australia and Angola are being targeted for pressurization and shipping much the same as petroleum oil. "We're in a high gas price scenario for the winter,'' Michael Katz, vice president for gas transmission for PG&E, told the San Francisco Chronicle. "And we're going to be in this situation for several years.'' After the volatile price of gas caused by market gaming was a major factor causing the state's recent electricity crisis, wholesale natural gas prices re stabilized for a short time, but rose again late last winter. Then, instead of dipping again during the following spring and summer they remained high. The price the company charges for natural gas is reviewed but not regulated by the California Public Utilities Commission, as the state's gas industry was deregulated prior to electric deregulation in 1996.

While businesses are in many ways hardest hit by already record-high electric bills (18 cents/kwh) and now a gas price shock, dramatically higher gas bills will also traumatize PG&E's low income customers, already suffering under an ailing economy and reduced welfare assistance. Those who qualify pay about 25 percent less than the public at large for natural gas through PG&E's California Alternate Rates for Energy program, but even those bills will rise. In the age of deregulation the only recourse for people who can't pay their energy bill because of a one-time emergency such as big medical bills, is a program administered by, yes, the Salvation Army.

Related Documents:

Comparison of Lynch Plan to Peevey and Walwyn Plans (January 20, 2004)

RAGE Comments to CPUC Supporting Commissioner Lynch's Procurement Plan (January 20, 2004)

RAGE Coalition, Cities Oppose Utility Contract Framework (Press Release Jan 5)

CPUC Delays Decision to Put Ratepayers on Hook for Power Contracts: January 8 Vote on Multi-Year Electric Utility Procurement Dwarfs Recent $8 Billion Bailout of PG&E (January 2, 2004)

Carole Migden Op Ed Against New Utility Contracts (December 31, 2003)

Letter to CPUC on Utility Contracts (December 30, 2003)

December 18 is "Double Dip Day" At California Public Utilities Commission with Proposals to Bail Out PG&E and Put the State's Ratepayers on the Hook Again for Utility Contracts & Power Plants (December, 2003)

Local Power Joined by Greenpeace USA, Public Citizen, and Local Groups in RAGE Coalition Opposing CPUC Plan to Put Ratepayers on the Hook for $ Multi-Billion Utility Power Contracts and New Gas-Fueled Power Plants (December, 2003)

Local Power Asks CPUC to Stop Monopolies' Plans to Block Comunities from Finding Alternative Energy Providers (Feb 2003)

Local Power News: In California, Cities Seek Alternative Power Providers, Fear Monopolies' Plans to Block Them (Jan 2003)

Natural Gas Power Plants: The Next Bailout Scandal? (Oct 2002)

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Founder and Director of Local Power, Paul Fenn is author of California's Community Choice law, AB117 or Chapter 838 of 2002, which allows municipalities to switch their communities to alternative energy providers - as well as author of San Francisco's 2001 voter-approved "Solar Bond" or "H Bond" authority, and a plan to use H Bonds and Community Choice aggregation to take 1/4 of San Francisco's electricity load off-grid by 2012 with solar power, wind power, conservation and energy efficiency technologies. Mr. Fenn is also author of new state "Solar Networking" legislation, Senate 697, sponsored by Pomona Senator Nell Soto. Local Power is based in Oakland, California and may be found at www.local.org

Copyright 2004 by Local Power.