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Winter prices easing at SoCalGas after state loosens Aliso Canyon limits

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Winter prices easing at SoCalGas after state loosens Aliso Canyon limits

After seeing record high average natural gas prices last winter, Southern California Gas Co. customers should pay less for gas this winter after state regulators loosened restrictions on withdrawals from the utility's Aliso Canyon storage facility and a vital pipe in the area was repaired, the U.S. Energy Information Administration said Dec. 13.

With forecasts calling for a warmer and drier winter than normal in the region, gas demand in the region should also be down, reducing upward pressure on prices, the EIA said.

Last winter, repairs to the Line 235-2 connecting Southern California to the east after a 2017 explosion and fire clipped 270 MMcf of gas supply. Repairs to Line 235-2 were completed in October.

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At the same time the company was dealing with the pipe limitations, the utility was tightly constrained in how much gas it could pull from the 86-Bcf Aliso Canyon. After a massive multimonth leak at Aliso Canyon, the California Public Utilities Commission decided the utility could only use Aliso Canyon as an "asset of last resort" after exhausting other alternatives to get enough gas into the system. The regulator has since loosened some of those restrictions. In July, the commission allowed the Sempra Energy subsidiary to withdraw gas from Aliso Canyon under a number of conditions beyond "last resort" circumstances.

Colder-than-normal temperatures compounded the price pressure caused by supply limits last winter, the EIA said, pushing average winter prices to a record high of $6.93/MMBtu at the SoCalGas Citygate, with price spikes as high as $22.29/MMBtu in February.

The market is already pricing in the additional supplies and warmer weather, with the SoCalGas Citygate December contract rolling off the board at $6.66/MMBtu and futures prices averaging $4.07/MMBtu for January to March, according to S&P Global Market Intelligence data.