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California FocusOpinion

Elias: Major questions for state’s gas companies

Anytime one of California’s big privately owned utility companies doubles, triples and even quadruples the bills of its customers (compared with year-ago levels), it’s sensible to ask why. And to wonder whether that company is making windfall profits.

So it is today, when the nation’s biggest natural gas utility, Southern California Gas Co., over the last two months more than tripled charges to most of its 21.8 million customers.

Similar increases were inflicted upon gas customers of SoCalGas’ sister company, San Diego Gas & Electric, which serves 3.7 million gas meters. Both are subsidiaries of San Diego-based Sempra Energy.

For gas, these companies even serve customers in many cities with municipally owned electric utilities, like Los Angeles.

To all appearances, the gas price hikes have been far more severe in Southern California than areas in the north served by Pacific Gas & Electric. Here’s a key question: What part does the corporate positioning of SoCalGas and SDG&E play in this?

For PG&E, SoCalGas and SDG&E all get their gas from essentially the same sources: drilling and fracking operations in the Mountain West, Texas, Oklahoma and western Canada.

But where the price per therm topped out at about $2.30 in Northern California this winter, it has reached well over $3.40 in areas served by the Sempra-owned utilities.

A therm is a unit of energy equal to 100,000 BTUs. One BTU, or British thermal unit, is the quantity of heat required to raise the temperature of one pound of water by one degree.

SoCalGas has firmly maintained through the winter that its price hikes are purely the result of higher than usual wholesale gas prices, that the company has simply passed those charges along to customers. That may be literally correct.

But the claim raised eyebrows at California’s most effective consumer advocacy group, the Los Angeles-based Consumer Watchdog. The group put out a brief video contending Sempra’s utilities bought much of their recent supplies from the company’s own trading arm, which reaped large profits. The video is here.

At the same time, Consumer Watchdog claims SoCalGas and SDG&E were derelict in other areas and that the state Public Utilities Commission (PUC) must investigate its actions.

Similar calls for a thorough probe of the price hikes came from California’s Democratic U.S. senators, Dianne Feinstein and Alex Padilla, who called on the Federal Energy Regulatory Commission to step in.

Said Feinstein, “These sky-high and unpredictable rates have had grave effects on my constituents. … Many faced the difficult circumstance of having to pay higher heat and electricity prices at the expense of other necessities such as food or housing costs, or choosing to forgo heating and the use of home appliances.”

Consumer Watchdog President Jamie Court maintains that whoever investigates must ask at least a few questions: Why did Sempra’s utilities fail to hedge contracts or have long-term contracts necessary to deliver gas at cheaper off-season rates rather than having to buy at the height of the spot market in mid-winter?

He also asks why SoCalGas, for one, depleted its usually heavy inventories of gas in November and early December, when its per-therm prices were significantly lower and wholesale prices also far lower, rather than setting itself up to have need at the height of the market?

And he wondered how much parent company Sempra made from spot market transactions with its own companies in Southern California.

All are reasonable questions for which consumers need well-documented answers.

One other question also should be raised, given the way that California utilities like PG&E and Southern California Edison long have made up for penalties assessed against them for wrongdoing by raising rates after a bit of time has passed.

This is it: Are the winter’s huge price increases actually a way for SoCalGas to recoup all or most of the $1.8 billion it had to pay in damages for the 2015-16 leaks from its Aliso Canyon storage facility in the hills above the Porter Ranch section of Los Angeles?

And here’s a mandate for the PUC: Get solid answers to all these questions before ever granting another rate increase to either SoCalGas or SDG&E.

Email Thomas Elias at [email protected].