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Rising Natural Gas Prices and Lower Hydroelectric Power Supplies Expected to Increase Electricity Costs

Release Date: June 10, 2008
Contact: PG&E External Communications (415) 973-5930

Pacific Gas and Electric Company today alerted the California Public Utilities Commission (CPUC) that the skyrocketing price of natural gas across the nation and lower than expected hydroelectric power are resulting in higher costs for the electricity PG&E purchases on behalf of its customers.

Starting in October 2008, these factors are expected to increase electricity costs to PG&E customers by approximately $482 million, resulting in a roughly 4.5 percent rate increase, to be collected over a 15 month period through December 2009. In 2009, high demand for natural gas – one of the cleanest fossil fuels available to generate electricity – is expected to continue upward pressures on the price of natural gas and in turn lead to further increases in customer electricity rates. As a result, electricity costs in 2009 are anticipated to increase by approximately $340 million. This will result in a less than 2 percent increase over the rates projected to be in effect this October.

For the typical PG&E residential customer that uses 550 kilowatt hours (kWh) per month, October bill increases will be roughly 95 cents from $72.13 to $73.08. In January, the bill for a typical residential customer would increase by about 35 cents more. Customers with higher monthly usage will see even greater increases to their monthly bill as a result of California’s tiered rate structure.

“The combination of skyrocketing natural gas prices, increased electricity demand and lower supplies of hydroelectric power are having a significant impact on the cost of electricity,” said Helen Burt, PG&E’s senior vice president and chief customer officer. “To help protect customers from these price increases, PG&E has taken concrete actions, such as diversifying our energy portfolio and partnering with our customers on energy efficiency programs.”

Under PG&E’s rate structure, the company does not earn a profit on energy it purchases for customers; the energy is sold to customers at the same price at which PG&E buys it from wholesale sellers.

In 2008, natural gas prices have increased by 30 percent and are forecasted to remain high in 2009. Soaring natural gas prices are caused by a tight supply-demand balance in the national market, lower imports of liquefied natural gas, and the rising cost of crude oil. Because much of the nation’s electric supply is generated by plants using natural gas, increased gas costs are also affecting electric prices.

PG&E customers’ electricity rates have been affected by lower supplies of hydroelectric power and increased demand. In the last year, statewide rainfall has been approximately 70 percent of normal, significantly reducing hydroelectric production.

What Customers Can Do to Lower Their Bills


  • Focus on Energy efficiency: PG&E offers more than 82 distinct energy efficiency programs to help residential and commercial customers reduce their natural gas and electric use. For more information, please visit http://www.pge.com/myhome/saveenergymoney/energysavingprograms/.
  • Become a Demand Response Customer: Residential and commercial customers can participate in tailored programs that help save money and ease demand on the electrical grid during peak hours. More information can be found by visiting http://www.pge.com/demandresponse/.
  • Sign-up for CARE: Eligible low or fixed income customers can save up to 20 percent on their energy bill using PG&E’s low or fixed income discount program. For more information, please visit http://www.pge.com/care/.

Pacific Gas and Electric Company, a subsidiary of PG&E Corporation, is one of the largest combined natural gas and electric utilities in the United States. Based in San Francisco, with 20,000 employees, the company delivers some of the nation’s cleanest energy to 15 million people in northern and central California. For more information, visit www.pge.com/about/.

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