The California Public Utilities Commission opened an investigation March 16 into the high natural gas prices during winter 2022-23 that pushed up electricity prices. The commission is also closely watching whether the US Federal Energy Regulatory Commission takes any action following its probe into whether there was market manipulation.
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Wholesale gas prices spiked to more than 400% above year-ago prices in December, and while price rises have ceased since then they remain well above year-ago levels, in turn driving up wholesale power prices.
"It is essential that we better understand what happened," Commissioner Karen Douglas said. "I think it's very important that we look into the question of whether there was market manipulation."
Where it started
In February, the PUC convened an en banc meeting with the California Energy Commission, California Independent System Operator and market experts from across the country to explore what was driving price spikes and to look into how to protect electricity and gas utility customers.
The next step is the PUC's proceeding to formally examine five key issues:
- What were the causes and impact of this winter's gas price spikes
- What were the impacts on gas and electricity prices and customer bills
- Whether the utility communications to customers were sufficient or require modifications for future incidents
- What were the potential threats to gas and electric reliability and price volatility in summer 2023 and beyond
- What potential mitigation should the commission consider
"This investigation will help us understand the gas price volatility and other factors involved in the gas commodity market price spikes that hit the West throughout this last winter," Commissioner Darcie Houck said. "The drastic spike in gas prices affected the entire West."
The commission's actions complement other efforts underway.
California Governor Gavin Newsom sent a letter Feb. 6 to FERC asking for an immediate investigation on "whether market manipulation, anticompetitive behavior or other anomalous activities" led to the elevated gas prices.
"FERC possesses broad powers under the Natural Gas Act to investigate and penalize anticompetitive behavior in the interstate natural gas transportation pipelines under its jurisdiction," PUC Chair Alice Reynolds said.
In March, FERC said it is conducting surveillance to determine whether any market participants engaged in behavior that contributed to, or took advantage of, the high gas prices.
"While we do not have control over the cost of natural gas and we cannot change the fact that California is at the end of the national gas pipeline network, there are things that we could do," Commissioner John Reynolds said, adding he hopes the proceeding considers cost recovery safeguards.
The commission plans to resolve the proceeding within 36 months.
The following utilities must file comments within 30 days, responding to the commission's order: Southern California Gas Company, San Diego Gas & Electric Company, Southwest Gas, Pacific Gas and Electric Company, Bear Valley, Alpine Valley, West Coast Gas, Southern California Edison Company, Central Valley Storage, Wild Goose Gas Storage, and Lodi Gas Storage.
Comments are to include any objections to the preliminary scoping memo regarding category, need for hearing, issues to be considered or schedule. A workshop may be scheduled after comments are filed and parties should include in their comments whether they would want a workshop.
Prices started spiking in late November and were highest in December, but have remained well above year-ago levels.
Spot natural gas at SoCal city-gate averaged $19.121/MMBtu from December through February, a spike of 229% year on year, according to pricing data from Platts, a part of S&P Global Commodity Insights. Although SoCal city-gate dropped 58% month on month to average $7.626/MMBtu in February, prices are still 57% higher year on year, according to Platts data.
Likewise, PG&E city-gate spot gas averaged $18.547/MMBtu from December through February, a jump of 245% year on year, and reached a record high of $57.065/MMBtu Dec. 22, Platts data showed.
With gas generation accounting for roughly 43% of the total fuel mix in the California Independent System Operator footprint, higher gas prices pushed up power prices.
SP15 on-peak day-ahead locational marginal prices averaged $155.15/MWh from December through February, jumping 202% year over year, while NP15 on-peak day-ahead LMP averaged $164.10/MWh, a spike of 195% from a year ago, according to CAISO data.
In the Southwest, Palo Verde on-peak day-ahead averaged 266% above year-ago levels for December through February, according to Platts data.