Business

California’s soaring energy bills are its own fault


(Bloomberg) — A cold, rainy winter in California has revealed the challenges that can arise when a child who represents the clean energy transition isn’t quite ready to take the leap from nature. fossil material.

Most read from ​Bloomberg

California residents who rely on natural gas have complained of monthly electricity bills of up to $800, Governor Gavin Newsom has called for an investigation into prices and producers of everything from steel to cement. said the only way to cut costs is to move to another state .

The problem: limited storage, damaged main pipelines and soaring demand have caused the state’s natural gas prices to more than double the price of gas purchased elsewhere in the country. While California has long been at the forefront of promoting cleaner energy, its ambitions have not materialized – on some days, gas-fired power generation could still account for more than half of the electricity supply in the world. region and it burns more methane -Rich burns per year than France.

“Unfortunately for Californians, they’re going through this bumpy energy transition where things don’t quite match up,” said Eugene Kim, research director at consulting firm Wood Mackenzie Ltd. . urgent need.”

For years, California politicians and regulators have supported ambitious climate proposals that aim to invest in the energy transition, while moving away from natural gas and nuclear production. while discouraging significant investments in storage capacity and pipelines.

At the same time, a multi-year drought followed by a wet and cold winter at first hampered the state’s hydroelectric capacity and then briefly crippled solar production. . The gap has left California ill-equipped to deal with any surge in demand or supply disruptions, both of which have occurred in recent months.

Colder-than-normal temperatures mean residents have ramped up heating and left operating gas stocks in the Pacific region, including Oregon and Washington, at their lowest levels at the time. this in the year since at least 2010.

Read more: The global energy crisis is the first crisis in the era of clean energy

Unlike oil, which can move in its natural state, gas must be pressurized and transported through a complex and expensive network of pipelines. Incentives in California to expand and update the system are low, as demand is expected to decline as the energy transition accelerates and opposition from environmental groups could be harsh. Many pipelines are decades old and susceptible to damage from extreme weather.

California relies on federal pipeline imports for more than 95% of its supply. Much of that comes from the Permian Basin in New Mexico and Texas, where producers sometimes have to pay buyers for their gas because limited pipeline capacity keeps supply trapped in the region. area. Problems have been exacerbated by lengthy disruptions from a deadly 2021 explosion in Coolidge, Arizona, that hit the extensive pipeline network run by Kinder Morgan Inc. Management helps deliver to the Los Angeles area.

Other places including New York, New England and countries in Europe have been similarly troubled, especially since Russia’s war in Ukraine disrupted international supply chains. While some areas did not experience a predicted blackout after a milder-than-expected winter, California is an example of what can happen when the opposite happens, a phenomenon that is likely to repeat itself. as climate change makes weather patterns more unpredictable. Meanwhile, governments around the world are committing to climate goals, making the need for alternative energy sources all the more urgent.

In California, Newsom is looking for more explanation: On February 6, he asked the Federal Energy Regulatory Commission to look into whether market manipulation, anticompetitive behavior or other practices made it worse. natural gas price hike or not. At a hearing held by the California Public Utilities Commission the next day, the speaker of a state representative said that high energy bills top the list of issues voters are calling for. In December, the highest spot wholesale electricity price was up 270% from a year earlier, data compiled by Bloomberg showed.

According to the state’s grid operator, that inflated price led to an estimated additional cost of nearly $4 billion in December and January.

Under the state’s regulatory regime, utilities cannot raise fuel prices to make money and must pass on any costs or savings to their customers. However, a consumer watchdog has called on the California attorney general to review utility company Sempra’s role in doubling gas bills and whether its operating subsidiary SoCalGas has been approved. full for winter or not. Tariffs have increased for customers of many utilities.

SoCalGas infrastructure director Rodger Schwecke said at a regulatory hearing Tuesday that the utility meets the state’s pre-winter requirements. The company said it supported Newsom’s investigation into the gas price hike.

Rising natural gas prices also add to the cost of producing goods in California.

Lance Hastings, executive director of the California Association of Technology & Manufacturers, said that while residential customers can limit their gas use in their homes to offset price increases, businesses there is no such option. They can either skip it or, in what he calls “worst case”, move somewhere cheaper.

“We’re basically stuck with natural gas prices in California,” he said. “It is admirable to lead us to a future that will depend on different sources of energy. We just don’t have the technology at the moment, or the partnership with the government and others, to get there.”

Most read from ​Bloomberg Businessweek

©2023 Bloomberg LP

news7f

News7F: Update the world's latest breaking news online of the day, breaking news, politics, society today, international mainstream news .Updated news 24/7: Entertainment, Sports...at the World everyday world. Hot news, images, video clips that are updated quickly and reliably

Related Articles

Back to top button