Customers’ Heating Costs Expected to Increase this Winter with Higher Natural Gas Demand on West Coast


Customers' Heating Costs Expected to Increase this Winter with Higher Natural Gas Demand on West Coast

The prices that PG&E pays for the natural gas it delivers to its customers have been rising this year. PG&E wants its customers to know their energy bills are likely to rise as well.


Price increases have been driven by higher demand and tighter supplies on the West Coast, as customers use more natural gas for heating during cooler than normal temperatures. Power plants also use more natural gas to meet electricity demand.


PG&E customers have used more natural gas this winter than the five-year historic average. November usage was 20% higher, December 10% higher, and January to date about 3% higher.


Like other utility companies, PG&E does not control the market prices it pays for gas and electricity. In addition, PG&E does not mark up the cost of the energy it purchases on behalf of its customers.


"PG&E recognizes our responsibility to serve our customers safely and reliably while keeping their energy bills as low as possible," said PG&E Vice President, Customer Operations and Enablement Vincent Davis. "We're here to help all our customers save money by working with them to find the best rate plan for their household or business, sharing no- and low-cost actions to help them reduce energy usage and better manage monthly bills, and offering assistance programs."


How much higher could rates be?


As of January 26, 2023, PG&E projects that gas rates for small and medium-sized business customers who procure gas from PG&E, to be about 29% higher during the peak winter months —December through February—compared to the same months last winter. Similarly, gas rates for large business customers, who procure gas from PG&E, project to be 37% higher during the same period.


Compared to last December through February, electricity customers’ average rates will be impacted as follows:


  • About 13% higher for small and medium-sized business customers (non-Community Choice Aggregator or Direct Access)
  • 20.4% higher for large commercial customers on B/E-19 rate plan
  • 24.4% higher for industrial business customers on B/E-20 rate plan
  • 14.1% higher for agriculture customers

However, if the colder weather and natural gas prices moderate, then customer impacts could be less severe.


Prices higher in the West than nationwide


Natural gas prices change daily and have been much higher on the West Coast (California, Oregon and Washington) than the rest of the country since November.


Between January 19 and 25, California's average daily prices were five times higher than the U.S. benchmark Henry Hub prices and those in New York and Chicago, according to the U.S. Energy Information Administration.


Table comparing natural gas prices per MMBtu of Henry Hub, New York Chicago markets to California’s average daily prices for December 19, 20, 23 24 and 25. Prices for each market on each of the 5 days are: Henry Hub -2.93, 3.13, 3.39, 3.34, 3.08; New York-2.90, 3.25, 3.30, 3.12, 3.08; Chicago-2.94, 3.07, 3.17, 3.13, 2.97; California Comp average-15.32, 14.53, 15.88, 18.39, 15.85. Contract prices for each of the five days: February-3.275, 3.174, 3.447, 3.258, 3.067; March-3.124, 3.036, 3.222, 3.057, 2.915. Note: California’s Comp is the average of NGI’s reported prices for Malin, PG&E Citygate and Southern California Border average. Data source: Natural Gas Intelligence Daily Gas Price Index.

Colder temperatures in the West are causing customers to turn up the thermostat and use more energy.


"It has been colder than normal since the start of November. Temperatures during the period of November 1 through December 18 ran 2-5 degrees below normal, and have not been this cold during the same period since 2011. Temperatures statewide during November were the tenth coldest on record dating back to 1895," said PG&E meteorologist Ted Schlaepfer.


Lower-than-normal natural gas storage levels maintained by market participants at facilities owned by independent third parties are also impacting natural gas prices. Although storage levels held by PG&E for its residential and small business customers are at normal levels, storage overall on the West Coast is currently about 31% lower than the five-year average.


Additionally, issues on the Kinder Morgan El Paso Natural Gas Pipeline system have limited natural gas supply.


Annual gas and electric rate change


Beyond the changes driven by natural gas supply costs, customer gas and electric rates will change on January 1, 2023, as part of an annual process called the “true-up.” True-up consolidates rate changes authorized by the California Public Utilities Commission. These rate changes include charges for gas and electric delivery and electricity supply. They also include programs that fund state-mandated assistance programs for income-qualified customers, energy efficiency and public-interest research and development.


  • Average small and medium-sized business gas rates will decrease by 3.2% (for customers on schedule G-NR1 and does not include natural gas supply costs).
  • Average large business gas transportation rates will decrease by 2.6% (for customers on schedule G-NR2 and does not include natural gas supply costs).
  • Average small and medium-sized business electric (non-Community Choice Aggregator or Direct Access) rates will increase by approximately 3.3%.
  • Average large commercial and industrial business electric rates will increase by 4.0% and 6.4% respectively.
  • Average agriculture business electric rates will increase by 5.2%.

How PG&E is working to reduce costs


We use three key strategies to help limit the impact of dynamic natural gas pricing on its customers. The first is accessing the lowest-priced gas from three gas production basins. The second is withdrawing gas from underground gas storage when demand and prices increase. The third is using financial hedging products to lock in lower prices. These strategies are helping to moderate the impacts of current high market prices on PG&E customers’ bills.


We are also taking actions to stabilize customers’ bills overall in the long term, with a goal of keeping increases at or below assumed inflation.


We are working to reduce or offset investment costs in its energy system for customers. These efforts include selling licensing agreements to wireless providers to attach equipment to transmission towers to generate more than $970 million. They also include undergrounding powerlines to reduce recurring maintenance costs and pursuing federal funding to offset some costs of making the energy system safer and more climate resilient.


No- and low-cost ways to manage your business’ energy bills and reduce usage


Here are three tools that business customers can use now to manage winter bills.


  • Make sure your business is on the right rate plan. Get a personalized Rate Plan Comparison to find the best rate in line with your operations.
  • Keep bills predictable. Level out monthly payments and offset high seasonal bills with Budget Billing, a free tool that averages your annual energy costs to help manage monthly bills.
  • Flexible payment arrangements. Extend your bill due date or make a payment arrangement. Access your online account for details.

Energy efficiency actions


Take the energy efficiency actions below to lower your usage and make a positive impact on your business's bottom line.


Start with simple steps


Make an immediate difference in your energy costs with these easy changes:


  • Turn off equipment when not in use.
  • Verify that the timed settings on your heating and air conditioning system match when your building is in use.
  • Lower the thermostat on your furnace by one degree and save up to 3% in energy usage.
  • Close curtains, shades, and blinds at night, on weekends and all times when your building is unoccupied.

Find quick energy-saving fixes


Use this list when planning for upgrades:


  • Add weather stripping, caulking or foam insulation around windows and doors to help reduce drafts.
  • Caulk ducts, plumbing openings, recessed lighting fixtures and other spaces that leak air into walls, floors and ceilings.
  • Upgrade to products with the ENERGY STAR® label.
  • Ensure that the furnace damper works correctly to avoid heating cold, outside air.

Plan for big energy-saver projects


Start budgeting for energy-saver projects:


  • Hire a contractor to check your central heating and cooling ducts for leaks. Sealing and insulating air ducts can help improve system efficiency by up to 20%.
  • Replace windows with high-efficiency ENERGY STAR windows. Replacing windows can help reduce your heating and cooling costs by up to 15%.
  • Fix or upgrade defective plumbing, air ducts and pipes.
  • Locate contractors and trade professionals. Find local trade professionals and contractors who participate in our energy-saving programs for business customers. Visit our Find a Trade Pro contractor database.