Natural Gas Prices
Long Beach City Council
January 24, 2023
Residential Gas Bill
2 Fixed daily service charge,
about $5 per month
GAS SERVICE CHARGE
Volumetric charge applied against
the first therms used, up to about
52 therms during a winter month
TIER I USAGE
Higher volumetric charge applied
against any usage above 52 therms
TIER II USAGE
Actual market cost of the gas commodity,
passed directly to the customer without markup
COST OF GASAB 32 CA CARBON REDUCTION
In compliance with State legislation,
a fee related to greenhouse gas
emission reductions
Comparison 2022-2023
3 Natural Gas Commodity Price
4 The Cost of Gas
5 • Reflects current market price of wholesale gas
• Price is set on the first business day of each month
• Price is largely based on the published market price index — the average price paid by gas buyers at the California border • The “First of the Month” price sets the base price for nearly all gas purchased for Long Beach customers that month, including gas purchased under long-term contracts
• Long Beach also benefits from access to some locally produced gas The Cost of Gas
6 • Long Beach passes the cost of gas directly to customers, without any markup
• Price of gas is posted publicly each month for customers to see • Customers can adjust their gas usage to lessen impact to utility bill Long Beach Utilities does not generate any
profit from higher natural gas prices
High Market Prices Factors
7 • The gas market price is derived from supply and demand • California imports 90% of its supply from other states and Canada • Demand factors impacting current high prices include:
• Recent colder weather throughout California
• Increased usage of natural gas to fuel electric generation plants • Supply factors impacting current high prices include:
• Maintenance and repairs on interstate pipelines that have reduced supplies • Reduced storage capacity, lowest storage inventory in last five years Statewide Situation
8 January
Gas Bills
Average family
65 therms
$313
$303
$335 $330
Change in Purchasing Strategies
9 • Long Beach Utilities assumed responsibility of gas purchasing in January
• Took immediate action on Day One to adjust gas purchasing strategies, saving Long Beach ratepayers millions of dollars in gas commodity costs in the month of January
1. Maximized withdrawals of much less-expensive storage inventory, offsetting gas we would otherwise buy at full market rates
2. Invoked a clause in local gas purchase contract with the State of California, saving $4.5 million for customers
3. Applied $1.3 million in unused reserves to soften customer impacts Emphasizing Public Awareness
10 • The creation of Long Beach Utilities immediately created greater transparency and oversight from the Board of Utilities Commissioners • Multilingual outreach campaign:
• Press release, widespread media coverage and interviews • Direct mailer to all 150,000 customers in Long Beach and Signal Hill • Bill stuffer
• Robo calls
• Messaging via social media, including paid advertising • Messaging via websites
• Print advertising in Press-Telegram, LB Post, LB Business Journal • Spanish, English ad displays in 65 local grocery stores • Electronic billboard off the 405 freeway
• Direct outreach, flyers to council offices and community groups Customer Outreach
11 Media Coverage
12 Customer Assistance
13 • Payment Arrangement Plan
spreads charges over several
months
• Applications available online, in
person, or via call center
• Up to 36 months
• Moratorium on gas shutoffs
Customer Assistance
14 • Low-Income Discount: 20% discount for income-qualified customers • Home Energy Assistance Program: annual, federally-funded assistance for qualifying customers to pay past-due winter gas bills • Low-Income Senior and Low-Income Disabled Utility Users Tax Exemption Program: 20% percent discount on gas bill, six billing units of water use at no cost, $5 per month bill credit, exempt from utility users tax on gas, water, electric and phone bills • Medical Baseline Therm Allowance: additional allocation of therms at the lower Tier 1 rate for customers with qualifying medical needs Correcting Misinformation
15 THE FACTS:
• All of California is experiencing very high gas bills • Board of Utilities, City Council have not raised gas rates this winter • There has only been one gas rate increase in the past six years, in 2019 • The gas utility does not realize any profit from high gas commodity costs
• The utility merger did not cause, in any way, these high gas bills • The merger did enable ratepayers to see lower gas bills than they would have otherwise due to immediate actions taken by Long Beach Utilities • The merger has already increased transparency and enhanced communication, outreach to our gas utility customers
Looking Forward
16 • The current price of natural gas at the California border has dropped about 50 percent since the beginning of January but still much higher than normal
• Market prices in the rest of the country have normalized and prices in California are expected to follow
• Warmer weather and easing of current interstate pipeline constraints expected in coming months
• Federal Energy Information Administration projects a 25 percent decrease in basin natural gas prices in 2023
Looking Forward
17 • Long Beach Utilities is reevaluating gas buying strategies, to focus on both price stability and price protection for our customers • Revised strategies to include:
1. Maximizing storage injections to provide lower-priced gas during periods of high market prices
2. Implementing price hedging once market conditions are more favorable, to provide benefits of both market pricing and fixed pricing
3. Renegotiating local gas contracts to allow flexibility to adjust price paid if the market price drops during the month