Momentarily, thank you for your patience.
Good morning. This is the time and place for the California
Public Utility Commission's En Banc Hearing (inaudible) natural
gas market conditions and the impacts of natural gas
prices on electricity markets. My name is Leuwam Tesfai and
I serve as the CPUC's Deputy Executive Director
for Energy and Climate Policies.
In this role, I serve as the head of the CPUC's Energy
Division. I would like to thank all of the (inaudible) California
Election Commissioners and CAISO CEO for joining us on the
dais today. I would also like to thank all of our
panelists and members of the public for your participation
in today's En Banc. The purpose of our En Banc is to
discuss the recent high natural gas prices, that have
been present throughout the West this Winter. We have
already started to see the human impact of these prices
in customer bills. That have skyrocketed due to these
gas commodity costs. So the Commission has responded
quickly by directing the utilities to enhance customer
communications. Starting back in mid-December and last
week acceleration of the California Climate Credit
from the States Cap and Trade Program. We are leaving
no stone unturned to address this crisis.
Through the diverse panels we have curated for today's
hearing, we will be examining possible drivers of these
prices and impacts on (inaudible). While also exploring
potential measures to mitigate the impact of natural
gas and electric market volatility. I would also like
specifically thank the following Staff for preparing this
important event. Christina Aborigine, Jean Spencer,
Bruce Kaneshiro, Molly Sterkel, Michelle Keto, Lynn Mosley,
Simon Baker, Robert Stanford, Joe Haga, Perry Prosper,
and Allison Brown. With that, I want to turn things
over to our MC for the day Christina Aborigine. A senior regulatory
analyst on our Gas, Policy and Reliability team. Over
to you Christina.
Thank you so much Leuwam, and thank you for everyone for joining
us um, at our En Banc today. Uh, next slide please.
Uh, one more thank you, perfect. Before I turn the proverbial
mic over to President Reynolds and the rest of the
dais. I just wanted to go over some quick logistics
for today's meeting. So the agenda and presentations
are available on our website at the URL link shown
here. Uh, there will be three panel discussions today,
followed by a 15-minute Q&A after each panel.
Only moderators and dais members will have an opportunity
to ask questions of the panelists. There will be an
opportunity for public comment at the end of the En Banc.
Uh, to make a public comment during the public comment
portion of the En Banc, please call 800-857-1917 and
the access code is 1767567#. If you wish to not make
comments, um today. You may also email your comments
directly to us. The email address is GasPolicy@
cpuc.ca gov. Uh, as a reminder this
En Banc is being recorded. Next slide please.
So this slide is just some instructions for our participants
today. Please mute yourself, when you are not speaking.
To self-mute, you may press *6. To unmute, please
press *0. Or you can press the mute button on
your Iphone. Um, for the members of dais, if you have
a question during the Q&A portion of each panel
discussion. Please utilize the "Raise Hand" function
on Webex, and then unmute yourself when the moderator
has called your name. With the panelists, if you would like
to respond to a general question that's coming from
the dais. Please utilize the "Raise Hand" function, and
unmute yourself once you're called upon. Uh, with that next
slide please.
All right, it is now time for remarks from the dais. So
I will turn it over to Commission President Reynolds.
Thank you. Thank you very much Christina, and welcome
to everyone who is joining us today. Um, I wanted to
start by thanking my fellow members of the dais and
welcoming them to the workshop today. We have all five
PUC Commissioners here today. As well as California
Energy Commission Chair David Hochschild, Vice Chair
Siva Gunda, and Elliot Mainzer the CEO of the California
Independent System Operator, so welcome everyone. Um,
as you heard from Ms. Tesfai's introduction. We're
here today because wholesale natural gas prices have
risen to alarming levels this Winter. At the height
of the gas price spike, this past December 2022. The
commodity natural gas price in Southern California
was almost 8x as much as the average price
the previous December. And it was also greatly, it
also greatly exceeded prices in the rest of the country.
Since these costs are passed directly to customer bills.
The fact is that customers are really hurting here.
And as we've heard at the CPUC Voting Meeting last week.
People have experienced severe sticker shock on their
energy bills. With average residential gas bills in
Southern California increasing 2 to 2 1/2 times what
they were compared to the same month a year ago. To
provide immediate relief, uh the CPUC voted last week
to accelerate a $90 to $120 energy bill credit
to customers of PG&E, SDG&E,
SoCalGas and SCE. As well as to provide an
expedited credit to customers of Bear Valley, Liberty
uh, Pacific Core and Southwest Gas. But we recognize
that, that was a short term band-aid and this is a
longer term problem. While the CPUC, um and
neither the CPUC nor any other state agency here today
regulates natural gas prices. We are determined, um
are determined entirely by the regional spot
markets. This issue really is critical for ratepayer
bill affordability going forward. And because of that
we've rapidly convened this En Banc to get, to get to the bottom
of what's going on here. Today, market experts will
discuss some of the known drivers of the price spikes
including exceptionally cold weather early in the Winter
season, outages on multiple interstate pipelines, and
limitations to natural gas storage. Panelists will
also be exploring other possible drivers behind these
unprecedented natural gas price spikes. Because frankly
we don't know all of the pieces of the puzzle, and this
issue is critically important and needs to be examined
further. Finally, I want to stress that we need to
be mindful that we are undertaking a really monumental
transition in California to decarbonize our economy
right now. Which means transitioning away from our
dependence on gas. There are a lot of complex interactions
here between gas and electric, electricity usage and
impact to customer bills. And we need to be considering
the big picture when we think about mitigation strategies.
So I'll end with a thank you to the Energy Division
Staff, that were previously mentioned by Ms. Tesfai.
Who stood up this En Banc and lined up market experts,
regulators and advocates to speak today, um in really
record time. This workshop was pulled together very
quickly. And I would like to give a special things to
Christina Aborigine for the heavy lifting, and from moderating
this event. As well as Leuwam Tesfai for doing so much
of the organization. And uh with that, I will turn to the
other Commissioners on the dais. Starting with the
CPUC Commissioners, um for anyone who would like to
make some opening remarks. Um, let's see. I'll go first
to Commissioner Shiroma.
I thank you, President Reynolds. Good morning, I'm also
very appreciative of the team that has put together
this En Banc. All the speakers and panelists who will be educating
us today and filling our questions. It is very important
that the CPUC and our sister agencies conduct this
En Banc. For fully understanding the root cause of the extraordinarily
high wholesale natural gas prices. I'm glad that the
Commission accelerated the Climate Credit last week. For
helping Californians with high bills, especially low-
income utility customers. I'm also glad that this Governor
has asked the Federal Energy Regulatory Commission
to investigate the soaring prices. Meanwhile, I'm looking
forward to hearing what more can we do here in California.
Uh and also want to remind the viewing audience that
there are customer programs, for low-income customers
for discounts. There are rules for disconnections.
There are monies that are being, um pushed out through
with something called arrearages. Towards helping to defray bills
that uh where customers have fallen behind. We also
have some programs for looking at, uh spreading out
bills so that they are more manageable. With that, thank
you, and back to you President Reynolds.
Thank you, Commissioner Shiroma. Um, let's see. I'll go next to
Commissioner Douglas.
Thank you, President Reynolds. Uh, appreciate your comments
and I just and, and Commissioner Shiroma's. And I just wanted
to add, that this is a really important topic. I'll
be listening closely to the discussion. I really appreciate
uh, Energy Division and Leuwam Tesfai efforts to pull
together this fantastic uh, En Banc. And uh dais,
panelists and speakers. Um, as the Governor noted in
his letter. It's concerning that the um, as we look
at the many factors that clearly are contributing to
high natural gas prices. It's just really very difficult
to understand what the factors are that has led to
this extensive price spike. And, and so I'll be listening
really with great interest to the discussion of causes.
And also, um yeah I think it's incumbent on all
of us. To just try to understand how we can protect
consumers against these kinds of dynamics, today and
into the future. So thank you.
Thank you. Let's go next to Commissioner Houck. Commissioner Houck you're on mute.
Can you hear me now? Yes. Okay, thank you. Thank you
President Reynolds. I want to thank our Staff. Especially
Christina Aborigine and Leuwam Tesfai. As well as Molly
Sterkel, Michelle Keto and Bruce Kaneshiro for all
of their work. Um, and expediting and making this on
En Banc happen so quickly. I want to thank Robert Stanford
and Lynn Mosley for providing IT Support today.
I concur with the comments of my fellow Commissioners.
And um, I just want to recognize given these dire,
the dire situation and the unusually high gas prices. Um,
that I recognize and support the Governor's request
to federal regulators. To investigate the causes and
activities that are driving the ongoing elevated prices
in the Western gas market. And today, I hope we can
explore options to bring stability to an unregulated
gas commodity market. And prevent um, price volatility
thereby ensuring stable and affordable utility gas
prices for Californians. And the first step there is
I think today's En Banc to listen and to hear from
those um, that are going to be presenting today. So
um, I want to again thank all the panelists for being
here. And I will be carefully listening, um to the presentations
today. And with that, will close my remarks. Thank you
Commissioner Houck. Commissioner Reynolds.
Thank you President Reynolds. I will echo the thanks
of my colleagues to PUC Staff for putting on this
En Banc so quickly. As well as responding so quickly to
um, to the price spike and bill spikes that we're seeing.
To provide some relief to Californians through the Climate
Credit. Um, thank you to my colleagues both on the dais
here from the PUC, from the ISO and from the Energy Commission.
For their attendance and focus on, on the impact that
these prices are having on Californians. Um, it's really
not, not hyperbole to say that. A bill price spike of
this amount makes Californians, puts Californians in a position
where they've got to make some really tough choices.
About what bills they can pay and what they can afford
for their families. Um,
I think that today's discussion is, is really important.
I'm looking forward to further evaluation of some of the key
market drivers. I also think that there are a couple
of lessons that I'm, I'm really keen on the gas utilities
taking home and, and to heart. Um, first I think there's,
there's an important question about how we can protect
ourselves from the vulnerability we have to the natural
gas commodity market. And I think that's a long term
question that we should all be focused on. And second
and really importantly, I think the gas utilities have
a lot of room to improve how they communicate with their
customers. Um, I think that when we look at other types of
services that Californians rely on. Um, you know, in
advance how much (inaudible).
I think that's uh, that's utilities and utilities more
probably should really be thinking about how they can
communicate much more proactively with their customers.
About an impending um, spike (inaudible) so their customers can
take action in advance. Like reducing their thermostat,
like (inaudible) temperature on their hot water heaters. And I'm really looking forward
to how we can all collaborate on making that a reality.
So that Californians have a chance to take action before
they get their bills in the mail and uh (inaudible) prices. Thank
you so much. Thank you President Reynolds. Thank you. I'll
now turn to um, a fellow members of the dais. Let's
start with is Chair Hochschild on? I can't see you. He is on but uh,
only by audio. Having a weather issue, but you're not missing much. I've
been told I have a great face for radio here. Wonderful. So, I
wanted to, I want to just begin by thanking President Reynolds.
Um, you and your team for leadership and pulling together
this important conversation. About how we can best protect
Californians from these price spikes. Thanks to Leuwam Tesfai and um,
all my colleagues with the PUC. As well as um, Energy
Commission Vice Chair Siva Gunda for all his work.
There's obviously many forces that are kind of conspiring
to drive up the,
to drive up prices right now. Including the war in
Ukraine and the cold snap, among other things. Uh,
and so it's a great moment to come together and explore
what else we can do differently. I do want to stress
there are some things that we need to continue doing.
We rank number one in the United States on energy efficiency
and that's something we have to maintain. To avoid,
you know, waste and additional costs for ratepayers.
And we're absolutely committed to, to do that and continue
to decarbonize. Uh, but look forward to exploring all the
other things we can do to, to best protect Californians.
Look forward to the discussion today. Thank you. Turning
now to Vice Chair Gunda. Thank you President Reynolds.
Uh, just also want to extend my thanks to the Staff. Uh, specifically
Leuwam Tesfai, and Christina Aborigine and all the other
Energy Division Staff that work in natural gas. Um,
and specifically work collaboratively with the Energy
Commission. So big thanks to everybody for helping
pull this, uh En Banc together. And, and to you President
Reynolds and all the Commissioners at PUC. For, for
the comments you just noted. I just want to reiterate
um all the points that you, that you made extremely
important. And just recognizing that we are in this
energy transition in this moment of, you know, ambitious
climate goals. And as we go through this inflection
and transition of the climate goals. It is extraordinarily
important for us whether it's petroleum, natural gas,
electricity and, and also the combination of the
interactive effects of all of those things. To ensure
that we are as a state, all the stakeholders, the agencies
are providing additional transparency and communication
to people. To understand and know how exactly we are
transitioning and what the implications are. And it
becomes more important that we have those answers today.
So looking forward to learning for this En Banc. Uh, thank
you so much for including uh, CEC on this workshop. Thank
you so much. Thank you. I'll now, now turn to Mr. Mainzer
for any opening comments you'd like to make. Thank
you President Reynolds, and Chair Hochschild, and all the Staff that uh, pulled
today's En Banc meeting together. You know, the CAISO really
appreciates uh, the opportunity part of this very important
discussion. I think like everyone here today. We are
very concerned with the high natural gas and electricity
prices that have been occurring across California and
the West, since December and through the new year. And
also very sensitive and concerned about the impacts
of these higher prices on both gas and electricity
customers. So we've been uh, since December we've
actually had a internal strike team stood up. Where
we've been closely monitoring the impact of high gas
prices on the electric market prices and wholesale
electricity costs. And we're going to continue to do
that as the Winter progresses. We've also tried to
make transparent how gas prices are impacting electricity
markets through regular reporting, including the report
we provided to CPUC just this past week. And these data
and observations will hopefully help inform policy
and investment choices. Members of my CAISO team have also met
several times with several Staff members, and groups
of the Federal Energy Regulatory Commission. To discuss
natural gas markets in the West, United States and
the conditions that may be affecting natural gas prices.
And we've also of course been engaging consistently
with the CPUC, the Energy Commission and other entities.
To identify the main factors that are driving high
gas prices and to identify potential solutions. So
we remain in touch with FERC and others in the regulatory
community. Uh, with responsibility for ensuring that rates
remain just and reasonable. And of course, uh the CAISO
stands ready to work with California agencies. As well
as other state utility commissions and entities throughout
the West on this very important and timely issue.
So, thanks again for the opportunity to participate
today.
Thank you and that concludes remarks from the dais.
So I'll turn back to you, Christina.
Thank you President Reynolds. Um, Francisco can we
show the slide. Thank you, perfect. Um, before I introduce
our moderator for the first panel. I did just want
to know, if you have joined us via adminmonitor and
you are having audio or video difficulties. Um, please
send us an email. It's help@adminmonitor.com
That information is also located on the bottom of the
adminmonitor page. Thank you. All right with that,
I'd like to introduce Jean Spencer, who is going to
moderate our first panel of the day. Jean is the Supervisor
with the CPUC's Energy Division. Jean, whenever you're ready.
Thank you Christina. Next slide please.
But before I jump into the panel, I just wanted to
take a minute to set the stage. Next slide please.
And as that everyone's been saying. The high gas prices
in the West have been very high. This has really been
a situation of gas prices for the West of the Rockies.
Um, this figure shows the prices uh from November 1,
which is the start of the gas Winter. Um, the actuals
prices through February 3, and then futures prices
heading out into June. Um, and futures prices are just
what the market thinks prices are going to be. It's
not a guarantee that they will actually see that price.
So if you look at this figure you can see that um,
that these prices are are high across the West. Um,
it includes different gas hubs which are listed here.
There's the PG&E citygate, the SoCal citygate, Northwest Sumas
here at the border between Canada and Washington. Opal
is in the Southwest corner of Wyoming. El Paso San
Juan in the Northwest corner of New Mexico. All these
gas hubs that you see in this chart, we're experiencing
quite high prices in the last few months. Next slide
please.
And I won't belabor this, because people are very aware
of what their bills have been like. Um, this chart shows
actual average bills for 2022, and forecasted bills for
2023. Uh, this has been particularly, January was particularly
um high in the SoCalGas service territory. Where average
bills were expected to be almost $300, and more than
double where they had been the previous year. Um, in
the PG&E service territory there are about 30% higher.
Heading into February, um they will be lower. They're
expected to be lower than January, but still significantly
higher than last year. Um, next slide please.
So among the questions that we ask, that all of the
panelists. Uh, where we asked them to comment on the analysis
that's been provided by the U. S. Energy Information
Administration. And they put out two posts on the high
gas prices in the West, and they came to the same conclusions
both times. Um, they said the drivers were widespread
below normal temperatures, high natural gas consumption,
lower natural gas flows from Canada, pipeline constraints
including maintenance in West Texas, and low natural
gas storage levels in the Pacific region. So we've
asked all the panelists to consider this analysis as
they're preparing their response. You know, kind of
indicate whether they agree that this is correct? Whether
they think it's correct, but that there's some more nuance
that we should all understand? Or whether there's points
where they diverge from this analysis? So with that,
we'll move into the panel. I just want to note that
I'm going to give, we have a lot of panelists. So I'm
going to give very abbreviated bios for everyone. But
if you would like to see their full bio, they will
be posted on the website. So I'm gonna turn it over
to our first speaker, Aleecia Gutierrez who is the Director
of the California Energy Commission's Energy Assessment
Division. Which forecasts and assesses energy demand
and supply. Aleecia?
Good morning. Uh as Jene said, I'm Aleecia Gutierrez. I'm
the Director of the Energy Assessment Division at
CEC. And appreciate the invitation to participate
in today's En Banc. And for the opportunity to present
information on natural gas prices in the West over
these recent Winter months. That's the topic of today's
En Banc. I look forward to hearing the perspectives and
insights shared today. Next slide please.
Next slide.
Uh, there we go. Uh, this slide sets the stage by providing
a snapshot of the gas system in the Western States,
and how gas goes into California. California imports
about 90% of its natural gas from out of state sources.
And this graphic shows a percentage breakdown, actually
it does not show all. I'll tell you the percentage breakdown
of supplies from Northern American Production Basins.
So, California receives about 30% from Western Canada,
30% from the Rockies, 30% from San Juan Basin, and about
10% from West Texas-Permian Basin. As you can see
California is dependent on gas imports, insists at
the end of a pipeline network that transports the gas
from these out of state sources. This makes California
vulnerable to natural disaster, pipeline maintenance
or other outages. And other events that could cut off
or greatly reduce our natural gas supplies. Next slide please.
This graphic focuses in on the topic of today. Showing
the pricing situation in California and compares average
gas prices at California hubs. To prices at Henry Hub
which is the national benchmark in Louisiana, over the
past two Winters. The solid lines show the prices for
Winter 2022-2023. And the dotted lines show prices for
Winter 2021-2022. The key takeaways here are prices
for California began to climb in early November, as
Jean was pointing out. And started climbing more rapidly
towards the end of that month. Prices hit a peak of
$53.11 per MMBtu on December 22. This was 7 times
higher than Henry Hub on that date. Next slide please.
We gain perspective on what has been happening with
prices in California, by comparing to other price hubs
in the West in greater United States. This graphic
shows uh, some key takeaways that are um price spikes
were not unique to California. Prices throughout the
West and Southwest were elevated during November 2022
through January 2023, with December prices being the
highest. In comparing Western U.S. with the rest of the
country. Shows that Eastern hub like Chicago and Boston
had much lower prices and did not experience the same
price surge. Kingsgate, which is the main delivery
point for Canadian gas to California. Is a Western hub
that did experience the price spike in December, but
has since come down to normal range in January. Next slide
please.
This side is just uh, the same data as slide 4 in a
map graphic. Uh, giving you a visual, visual perspective
on locations with price comparisons for each month
at each location. This map gives us some perspective that
price spikes were seen in the Western region and impacted
neighboring states. Next slide please.
This slide presents information about intrastate and
interstate pipelines that supply gas to California.
The map also shows the approximate location of the
EPNG Line 2000 explosion that occurred in August
2021, which impacted supplies to Southern California.
I will share some observations and trends regarding
pipelines and capacity in California. The state's pipeline
system has remained relatively unchanged in the last
10 years, and many pipelines in California are over
50 years old. Southwest Gas stopped deliveries in California
in 2019, due to lack of business. But this did not notably
impact supplies to California. In recent years, several
pipelines that supply natural gas to California experienced
unplanned maintenance events, in addition to their
planned maintenance. For example, EPNG was severely
hit when Line 2000 suffered an explosion in 2021, resulting
in loss of capacity throughout that segment. The explosion
resulted in a loss of 591 BCF per day of capacity through
the area, and a loss of total delivery capacity to Ehrenberg
of 21% for 468 BCF per day. It is key to note
that the posted available delivery capacity at Ehrenberg
is 1779 BCF per day. If all shippers along EPNG South
mainline decided to deliver to Ehrenberg. The pipeline
is still out of service, although repairs are complete
and repressurization plans are being, are pending
approval. Five additional force majeure events happened
on the EPNG gas system that delivers gas to California
from November 18-December 19, 2022. All but one
has been resolved as of January 31, 2023. Some other
notable pipeline events that affected pipeline capacity
includes Transwestern force majeure event on November
15, 2021, uh resulting in a loss of 1195 BCF per
day of capacity. Gas transmission Northwest maintenance
at Kingsgate, uh in December, reduced capacity uh through
the compressor station by 8%. BC Pipeline experienced
unplanned maintenance events reduced, reducing capacity
to 70% of normal capacity at different times throughout
December 2022. An unplanned maintenance event severely
impacted the takeaway capacity in the Permian Basin,
uh was severely impacted November through December
2022. Natural gas produced in the basin cannot get
out to a market which resulted in prices at Waha Hub
West Texas to drop, and even become negative at different
times. Next slide please.
The top two graphs in this slide compare PG&E and
SoCalGas storage for the last two Winters. And show
that storage volumes are lower for both utilities.
The bottom graph shows volumes of independently owned
storage facilities. These volumes are also shown. We
have some general observations about storage trends
in California. Storage capacity increased in California
from 2005 to 2015, according to EIA data. It has been
flat, flat since 2015 except for a (inaudible).
CalGEM regulations went into effect in 2018, which
implemented new safety rules for gas utilities regarding
inspection and testing schedules, and pipeline construction
and maintenance. PG&E reclassified 50 MMcf
of natural gas from working based, working gas to
base gas. Base gas is used to keep pressure up in
a storage fill and not used in injection withdrawal
operations that is not available for use. Next slide please.
So our observations for this Winter, our natural gas
prices have been volatile in the West, notably in California
in the past couple of months. The Eastern U.S. did not
experience the same price volatility. Prices increased
at the end of November and peaked on December 22nd,
which was 7.6 times higher than Henry Hub. Prices seem
to be trending lower in the past couple of weeks, but
are still high compared to previous Winters. California
gas prices are about to 2 times um, higher than Henry
Hub as of uh, January 31, 2023, but still turning downwards.
A combination of factors contributed to these higher
Winter prices, including cold weather in the West,
higher gas demand for heating was required. Um, interruptions
to supply as I mentioned, the pipeline maintenance
such as Line 2000, lower storage volumes in California.
And uploaded earlier, the West also saw record high
natural gas usage for electric generation due to the
lack of alternative resources. These challenges highlight
the importance of energy agencies examining the gas
electric interconnections further. Next slide please.
Uh, collaborative planning efforts provide a pathway
for addressing challenges with, and reducing vulnerability
to high gas prices. As part of the CEC 2023
IEPR process, the CEC will hold public workshops to
tee up gas planning issues, including prices and affordability.
The CEC will also continue to work collaboratively
with other energy agencies on both near term and long
term strategies that will help manage overall system
costs.
And I believe that is it for me. I will now turn
it back to Jean, to introduce the next speaker.
Thank you Aleecia. Next up is Rodger Schwecke, who is the Senior
Vice President and Chief infrastructure Officer for
SoCalGas. Go ahead Rodger. Yeah, thanks Jean. Good
morning everyone. Um, let's go to the next slide please.
I kind of want to cover some some high level points
and I'll dig a little deeper, uh into a few topics. You
know, when we look at our investment in infrastructure,
operations and maintenance. We strive to uphold several
main principles safety, reliability, affordability,
and efficiency for our customers. As a prudent operator,
you try to plan for every reasonable eventuality. Our
goal is to always uphold system integrity. Against this
backdrop, as we go into a Winter. You know, we want
to have certainty that our pipeline infrastructure
and storage facilities are prepared for what the Winter
might bring us. And this Winter, they were prepared.
Uh, when I look at our pipeline system, our capacity
to receive gas from the out-of-state, that was mentioned
earlier. We get 95% of our gas, uh from out-of-state
but we were at a five year high. Uh and, you know,
I'm really proud of my team and what they've done. To
bring that pipeline capacity and maintain that pipeline
capacity to be able to do that. When you look at our
storage inventories, uh they were at a 6-year high
and I'll get a little more into that. You know, the
level we had going into the Winter on November 1st,
the start of the Winter season um we're at the highest
level. You know, and with CPUC approval, you know,
there's some other things that we might be able to
do. Uh for example, and I'll go a little more. Increasing the authorization
and use of Aliso Canyon, pipeline enhancements, compressor
station modernization and ultimately on a longer term
basis, Angeles Link. Now in the short term and near-
term, we've been utilizing a wide variety of tools
with the CPUC's assistance. You know, help customers
navigate this unusual period with early and frequent
communications. I mean our communications on Winter
preparedness to start back in October. Uh, promoting energy
efficiency, bill assistance through our payment plans,
a gas assistance fund. And as was mentioned, the recently
approved acceleration of the Climate Credit. From later
in the year, to earlier in the year. To give customers
immediate, uh relief. You know, while we procure gas
for our core customers. For SoCalGas and San Diego
Gas and Electric to support reliability and affordability.
The longstanding policy of decoupling, um removes the
connection, the direct connection between commodity
sales and profits. Now, commodity sales are set on
a regional and national level. And we don't mark up,
SoCalGas does not mark up the cost of energy at
purchase on behalf of its customers.
I want to straight, stress one thing the importance
of reliable and unrestricted gas infrastructure cannot
be overstated. Building and maintaining infrastructure
is critical to the reliability and affordability of
energy. The assets infrastructure including pipelines,
compressors, storage facilities need to be maintained
to help gas and electric service reliability during
peak periods of demands, and to mitigate price volatility.
That's not only the Winter, but also it looks at Summer.
So if we go to the next slide please.
This, this shows basically depicts our system with
what we like to call is our zones. And these are zones
where we have certain received points and that's interconnections
with interstate pipelines. And pipelines in our system
that somewhat interact with each other. And you have
capacity limitations for the entire zones. I want to
point out one area, the Southern zone which is really
critical. I get a little, little left on that. But again,
natural gas storage and local reliability help mitigate
prices and provide the reliability. Um, so as we go
in, you know, we prioritize safety uh, first and foremost
and we try to maintain capacity. And as I mentioned,
our receipt capacity and that is best to bring guests
in the interstate uh, at a 5-year high. You know,
additional sources from Aliso Canyon and our storage
fields, you know, help dampen effect on price volatility.
Let's go to the next slide please.
This slide will depict and how much gas that was actually
being delivered into our system on an annual basis,
on a daily basis through the month of December. You
see it was fairly level, it did increase in some periods
of time. Uh but yet, what I'd like to point out this
actually showed that there was capacity still available,
uh to bring gas in the system. Now SoCalGas, we
rely heavily on the El Paso system. Especially that
Southern system that I mentioned because that's the
major pipeline is connected, that system. And we don't
have storage fields located on our Southern system
that we can, uh work with. So the restriction on the
El Paso pipeline really exacerbated the already tight
conditions in the Southwest. Good news is El Paso completed
the work and just recently posted that teams approved
them. Placing Line 2000 back in service, as original
pressure, which is targeted for February 15.
Let's go on to the next slide.
I wanna, I wanna highlight when I looked at this storage,
uh we talked about the EIA report. Um and this
really shows that were SoCalGas, where we started
was above a 5-year average and above last year.
But then you can see the drop that we had in the
November and December timeframe flattening out, and
they continue for the remaining part of January. You
know, as we turn to uh price volatility, EIA analysis
this is several factors. Lower than normal temperatures
in the West, reduced natural gas flows from the interstate
pipelines and below average storage levels. And this
graph shows, that we were actually above our historical
levels, but it does also show how the weather dependent
and worked on storage. I would like to mention that
there's also a purple line that you see there, which
is a different potential maximum for Aliso Canyon.
And I'll touch on that as we go forward. Um
let's, let's go to the next slide, as time is short.
You know, the West and the cold temperatures EIA mentioned
and increased demand on the West. You know, 23% higher
core and commercial demand, you know, higher demand
for electric generation. In our service territory alone,
the average demand for November, December and January
averaged over 200 million cubic feet a day more than
the 5-year average. This is a graph that shows just
how high demand was during the November 2022 period.
And that required the pull on storage that I showed
on the storage graphs. So let's go to the next slide
please.
This then shows the December profile. And the December
profile was really acute during the middle, the 2nd
and 3rd week of December, where we saw some very cold
temperatures. And where at the withdrawals that we had
from our storage filled almost equated to 8 BCF
withdrawal. Just during that one week, one week and
a half period. So you can see how going into the Winter,
we were prepared. We were hit with colder than normal
November weather, and then further colder than normal
December weather. So let's go to the next slide. I'm
sorry, stay there. I just wanna kind of touch on a
couple things in looking forward. You know, in the
near-term, I talked about what we've done as far as
communication, bill assistant programs, gas assistance
fund and the Climate Credit. Um, which is great for
that moving April to February, the Climate Credit
for gas customers. You know, we donated a million dollars
for a gas assistance fund to help customers with their
bills. Some of the other good news as was mentioned,
gas rates for February had been reduced about $11
a dekatherm, which is much more in line with December's
numbers. So and, and when you look at a
forward price basis. The prices are set to go down
even further in the coming months in March and April.
And I would say current daily prices are probably the
lowest I've seen in a long time in the $4-$5 range,
those are the spot prices. Uh, if we look at opportunities
to improve and what we can do on both the short term,
long term. Obviously, I already mentioned the El Paso
Line 2000 coming back on February 15th. You know, will
help us this Winter, but will help us for the coming
Winter and Summer periods that we have for 2023. I think
it's also appropriate that we look at some are constrained
assets. Uh, one in particular is Aliso Canyon and we
shouldn't reevaluate the appropriate inventory level of
Aliso Canyon. Uh, we currently have an established limit
that was at 41.6 BCF. In the decision that set that
the Commission decision. It said it was an interim
limit that should be evaluated in the future and maybe
now is the time to look at that. Also simulations that
have worked through some of the other proceedings has
shown that. You know, limits up to the CalGem established
limit of 68.6 BCF is necessary for, you know, reliability.
The 1 and 10 scenario and can help further mitigate
prices. Also recently updated in 2019 Aliso withdrawal
protocol, for how we and when we can use Aliso Canyon.
May be needed to look at it and consider not only
just for reliability. Because the conditions that we
have in the withdrawal protocol are based on when we're
already in a constrained condition. Not looking forward
for price suppression per se. So create flexibility
and use, uh we're good. So I'll wrap it up there. Again, thank
you for your time.
Thank you Rodger. I'm going to announce the three PG&E,
there's three speakers from PG&E. Uh, I think they
wanted to each go to their area of expertise. So I'm going
to announce them all at once, and then they can just
announce the next person, um to save time. So the first
person up is Gillian Clegg, who is the Vice President
of Energy Policy and Procurement. Lucy Redmond will
go second. She's the Director of Facilities and Storage
Engineering. And Alfred Musgrove is the Director of
Gas Control for PG&E. Um, so to Gillian please.
Good morning. Thank you for your time this morning,
and for the invitation to speak on the at the En Banc today. As my
introduction indicated, um I oversee all gas procurement
at PG&E. That includes gas procurement for two distinct
teams. The Core Gas Supply Department that purchases
gas on behalf of residential and small commercial customers.
As well as our Electric Gas Supply Department that
purchases gas to serve our utility owned and contracted
gas fueled power plants. I want to point out, you will
hear from other speakers from PG&E today. The Gas Procurement
teams that I oversee are totally separate and independent
from the PG&E Gas Operations and Engineering teams.
That own, operate and maintain PG&E storage and pipeline
assets. Today, I plan to talk about prices. You've
heard a little bit about it already. I'll try not to
duplicate what you've already seen. Um, and some drivers
of those prices that we have observed this week, this
Winter. And a little bit more on one in particular that
hasn't been hit on much so far. So the next slide is
gonna show a very familiar looking price chart to you
by now. It's gonna show high and spiky prices. Thank
you. Um, four of these lines they, and the point I wanted
to make with this chart is roughly been made already.
That it was really a West wide issue this Winter, not
just a California issue. Though many of us here today
focused on the California market. So these price points
represent a point near the Canada-US border in Northern
Washington, Wyoming, Colorado, New Mexico and of course
Northern California. The brown line on the very bottom
that's very flat and stable as the U. S. benchmark
known as Henry Hub. And so again, it has been very wild
in the West this winter. So as you may know and uh,
the SoCalGas speaker mentioned it as well. But PG&E
does not mark up the price of gas. We pass through
the cost of gas to customers at the same price that
we buy it in the market. We also started customer communications
early this Winter, dating back to October. There
have been several press releases. Uh, we've sent emails
even mid-billing cycle. To indicate whether a customer
was on track to have high usage that month, and I myself
have received one of those. Next slide please.
The slide is gonna talk a bit about the drivers that
we've seen and we've heard some of this already. Cold and
early start to Winter. That drove up the gas demand
we had. Um, and one that hasn't been focused on quite
as much is the prolonged drought that we've been in.
And the last 45 days aside in California, where we've
been left with a lot of precipitation. We have seen
a really a drastically lower hydro electric generation
output in the market, compared to last year. Um, that's
been true in the CAISO market, and I believe as well
in the BPA and the Pacific Northwest. What that
has meant is that, that electricity has to be replaced,
and it's been replaced by gas fire generation. Increasing
the demand for gas to be used for electric generation.
The table shows just the PG&E gas demands. And
so if you look at this on a wider footprint, you would
see probably larger numbers. But year over year, we've
had a 19% increase in demand, that's our portfolio alone
has needed to generate electricity. So the other items
on here, lower Pacific region storage has been touched
on. The El Paso pipeline delivery constraints been touched
on. I don't know that any one of these in isolation
would have caused the impact to prices that we've seen.
But the accumulation of both increased demands and
decreased supply. Like in any market, those factors
combined would increase prices and we have seen that
this Winter.
I also just included in this table a cumulative change
in BCF billion cubic feet. To try to show you the impact
of each one of these drivers in scale, relative to each
other. So obviously recognized for the gas generation
that, that would uh sorry, gas demand lines would be
larger if you looked at a larger footprint across the
West. This is just the data we had easily accessible.
So on the next slide. I thought I'd dive in a little bit
more into the storage picture. And kind of talk about
why we think there has been lower inventories in storage
year over year, and also relative to the 5-year average.
The first thing I would point out is that the two gas
procurement groups that I oversee started out the Winter
November 1st. More than 90% full in their contracted
storage. And as of November 30, our Core Gas Supply team
had 99% of their contracted storage capacity filled.
That's because PG&E is highly focused on reliability. And
in fact, the Core Gas Supply team has CPUC Winter reliability
requirements that they must meet. Part of that is having
gas storage at the beginning of Winter. Both of my
team's contract for gas storage capacity with the independent
storage providers in Northern California. Meaning those
four storage providers that are not owned by PG&E,
but that do connect to PG&E system. Then PG&E Core Gas
Supply also holds storage capacity with the PG&E owned
storage fields in our service territory. But this chart
dives a little bit more into the independent storage
providers. They specifically because they have such
significant capacity available to the market to store
gas. The slide on the right shows a year over year
usage of gas. As well as the black bar at the top,
shows you the top, the capacity of that field. Both
of these lines you can see are below the capacity. And
the starting point for the blue line, which is this
winter was roughly 25 BCF below the capacity. Meaning
there was empty space in the ground at the beginning
of Winter, that could have held gas but didn't. Now
the role of the storage provider is to sell that capacity.
Sell the empty space to market participants like
PG&E Gas Procurement teams. But also say independent
merchants, gas fired power plants or marketers which
are banks or others who play a middleman role. Buying
and selling gas in the market to make money. Then it's
those market participants who actually buy the gas
and put it into the ground to later serve load or to
sell. I mentioned that winter reliability is one of
the reasons to use storage, but another reason is to
provide price protection. Typically, gas market prices
are lower in the Spring and Summer when gas demands
are lower. And higher in the Winter, when gas demands
are higher. So what market participants will do is
buy gas in the Spring, inject it into storage and then
pull it out in the Winter when its value has gone up.
So that price spread between Spring and Winter is a
very strong driver as to how much gas gets injected
into storage. Especially by those market participants
that are out there maximizing profits. But we didn't
see that Spring-Winter price trend in 2022. The chart
on the left shows a flat forward curve as of May 31, 2022.
That basically tells you that last Spring, if you're
looking, should I buy gas and put it in the ground
to pull out later and make money. The market's telling
you, don't do that. You can buy it later at the same
price as the wind in the Winter or even maybe a slightly
lower price. My teams are less motivated by that seasonal
price, price spread because of our regulatory and reliability
requirements. So I mentioned already that we had our
storage filled at the beginning of Winter. And so I don't
know for sure why others didn't. But this lack of economic
price spread might have been one of the reasons that
storage capacity was not filled by the other market
participants. So that was my last slide and I will
pass it over to my colleague Lucy Redmond.
All right, good morning. Thank you Gillian and thank
you, um CPUC for having me today. My name is Lucy Redmond
and I am the Director of the Facilities and Storage
Engineering at PG&E. And my team is responsible
for managing the integrity of the well and reservoir
assets at our storage facilities. As well as PG&E's
gas transmission and distribution facilities. We can
go ahead and advance to the next slide please.
So today, I will be addressing the reclassification
of base gap, of the gas to base gas. As well as
how recent CalGEM regulations have impacted storage
operations. As part of PG&E's 2019 Gas Transmission
and Storage rate case. PG&E redefined its storage offerings,
reducing what was allotted to firm, introduced reserve
capacity and increased inventory management for system
balancing as part of the natural gas storage strategy.
Aligning to these new service offerings, 51 BCF is PG&E
owned gas was reclassified from working to base.
And this did not remove gas from inventory, rather
it was an accounting adjustment. And had no impact on
the total inventory, nor was there any to backfill or replace
the supply as it has remained in inventory since
reclassification. The working natural gas inventory effectively
has been acting as base gas. Even before the reclassification
formalized this change. And over the last 10 year period
there are only two times that any of the 51 BCF was
utilized for as available service, prior to the reclassification.
This reclassification effectively committed the gas
for ongoing pressure support. And for those of you who
are not familiar with reservoir dynamics or the term
pressure support. The reservoir can be thought of as
a balloon and so the more full it is, the more force
there is pushing gas out of the well. And this is
especially important to have this pressure support.
When the well flow area is reduced or in turn reduces
the amount of that well can deliver, as we've experienced
implementing the CalGEM regulations. And this in fact,
this reclassification of base gas has enabled PG&E
meet its obligations. Despite the year over year capacity
losses we've experienced. And we continue to expect
to see those losses this year in '23. As we continue
our work program and further in 2024. Next slide, please.
All right, to address the impact of the CalGEM regulations
on storage really, there's two main areas to discuss.
The first is the well construction requirement and
the second's the mechanical integrity frequency. In late
2018, CalGEM regulations became effective and required
that all gas storage operators bring existing wells
into conformance with a duel barrier construction. On
the left, you can see example of historic construction
of the wells that allows gas to flow in both the tubing
and the casing flow areas. This is affected by the
yellow highlight. Now, as you look to the figure on
the right, you can see a converted well and it shows
the restriction in the gas flow area. And is limited to
only that interior tubing string, which is a dramatic
reduction. PG&E on average has seen about a 40% decline in
our well capacity with these changes. Um however,
it's been step changes as the implementation has occurred
year every year. But begins to maintain our deliverability
obligations to date. Next slide please.
The second area of regulation is the well mechanical
integrity testing or more commonly known as well inspections.
In performing these inspections has a great impact on
well availability. As you can see in the picture on
the right, this is a typical operation to perform the
inspection. And the footprint is rather large and includes
taking several wells out of service. PG&E is exacerbated
due to our facility layout, where wells are spaced 25
ft on center.
Um again, we maintained our deliverability obligations
each Winter while conducting the phase in of this construction
requirements. And well inspections that started in 2019
and continued through current day.
The other part of the CalGEM regulations that we're
still working through is a reoccurring frequency, that
wells need to be inspected. CalGEM regulations allow
for CalGEM to approve an alternate frequency. From
the default and highly prescriptive, um infrequent
cycle of 24 months. To be clear PG&E would not be able
to provide a storage service if a 24 month inspection
cycle was required. Just due to the magnitude of the
outage impact, And we're currently awaiting a decision
from CalGEM on the applied reinspection methodology
that we've presented to them in 2019. And this approach
balances while safety, gas system reliability and the
costs associated with these major capital projects.
This completes my presentation and I'm gonna turn it
over to my colleague Alfred Musgrove. Thank you.
Hi. And Alfred no pressure, but you only have a minute
left. So if you can make it as quick as possible.
Okay, let's go down two slides.
So I'm the Director of Gas Control, Gas Control's responsible
for remotely monitoring the transmission, transmission
and distribution gas systems. As well as um, remote operations
as required to 24/7 operation, 24/7 operation that I
oversee. Um, I'm gonna address the two questions that
were given to me. First question, what patterns have
you seen in customers deliveries of gas to the system?
Uh, generally market supplies are in alignment with
our end use and we manage our system inventory with
pipeline balancing. Um to define, to define that um
system inventory is the volume of gas that holds transmission,
holds are thousands of miles of transmission pipelines.
Uh, it's continuously being updated through computations
with our SCADA system. And PG&E storage is not considered
part of system inventory. Um, the flexibility allows
gas control to maintain system integrity and minimize
calling what we call operational flow orders, which I
can speak to shortly. With that being said, there are
times when customer imbalances are large and pipeline
balancing isn't sufficient. To prevent our forecasting
system inventory levels from exceeding thresholds.
The expected result of the action of an OFO is
to bring the system back into balance. Uh, on this slide
here, you can see that our OFO Winter activity at the
topped November of 2022 through February 3rd of this
year. Uh, next slide please.
Uh, next question was have operational flow orders performed
as expected to incentivize deliveries? I like this
slide, because this shows the evidence of the effectiveness
of calling an OFO. From our experience, OFO's
To provide enough incentive to bring our system inventory
within acceptable levels. Um, the upper red area is
when the system inventory is too high and unsustainable.
The red area below is when the system inventory is
too low, inviting risk. On this instance here, you'll
see on the left side, our plan for forecasting for
the next day was showing 3.98 BCF. Um, and ultimately
in calling the OFO, we were able to get the
supplies to come in, bringing it back up to 4.265. So
at that level, um the OFOs we fill in gas control
are effective. And I'll turn it back over to, sorry Gillian.
So that it for PG&E slides?
I've turned it back over to Gillian. I believe there's
one more slide, but many of the points on that slide
have been addressed already. And so I'm happy to turn
it back to you, moderator.
Great, thank you. And thank you that was a lot to get
through. So next up is Mark Pocta, who is the Program Manager
with Public Advocate's Office. Which is part of the
CPUC and his focus is on energy costs and natural gas.
Mark? Thank you Jean and Good morning Commissioners.
My name is Mark Pocta and I'm a Program Manager with the
Public Advocate's Office. And I thank you for inviting
me to hear to speak today. And I'll get uh, I know
we're short on time. So uh, you've heard from the other
speakers what these price run ups have been attributed.
Due the El Paso situation, colder than normal temperatures,
uh, all those factors impacting storage. Which was
drawn down in November and December. Um, so what's
different here, a little bit different observation
here. Is we've seen some, you know, in the past we've seen
price run ups at the border. Um, but we really never
experienced them to the extent in the producing regions.
And especially what happened this year, where there
was a run up has already been noted of 8 times.
Uh, the Henry Hub price, and that leaked over into bid week.
So we've had, so we really haven't had these price
run ups in the San Juan Basin, the Rocky Mountains. So
in that respect, our division does support the request
of Governor Newsom. Uh, for the Federal Energy
Regulatory Commission investigate this matter. You
know, because we saw such a huge run up. Uh, so we
saw that observed the prices increasing through the
early year. But it was on December 29 when SoCal and
San Diego filed their monthly tariffs for January.
That uh, you know, we saw these shockingly high
prices. Uh, which were well beyond our pessimistic expectations
for January. Already following uh, what we've seen in
December daily prices. So we acted, we filed the motion.
Which proposed to move the cap climate credits for
gas customers to February. To mitigate the high gas
prices that we expected. And we propose, made another
proposal that each of (inaudible) customers and
budget billing. That uh, spread the cost over a few
months. Um so going beyond that, just a general observation
is. It appears that setting everything else aside. There's
um, more price volatility associated with weather. It's
just an observation I, I hasn't been investigated in
detail by us. But it's, it seems you see a lot more
price movements and associated with the weather. Now
with the sustained weather it just, um increased the
volatility in the Western markets. So with that being said,
what do you recommend that some consideration by the
Commission? Well, the utilities have talked about storage
and, and that is an asset within, uh the Commission's
oversight. And it's important that these assets be
optimized, because going forward with, you know, as
the state decarbonizes. Um, actually storage assets
are going to become more important to you as an asset.
To utilize efficiently by the state and to mitigate,
um these gas price movements. So a few matters for
the Commission's consideration. I'm not trying to come
here advocate, more for your consideration today. The
first is Northern California, specifically. Um, there's
the PG&E Los Medanos gas storage facility. Originally
PG&E had proposed to close that a number of years
back. Our division did not support that irrespective.
Um they, they were authorized by the Commission to either
sell the facility or decommission it. However, in the
intervening years, um PG&E reconsidered that
sale. And recently, uh I believe it's in the rate case
proposed to continue the operation of that facility.
So that's one issue for the Commission's consideration
going forward. Uh, turning to Southern California. Uh,
the Commission, uh set a range back in 2021 for
Aliso Canyon. That they can operate between 0
and 41 BCF. At that time, there was a concurrent proposed
decision by Administrative Law Judge. That would have
proposed that the interim range at a higher maximum
from 0 to the 68.6 BCF. So you saw that on the
SoCal charts, so that additional capacity would provide
more storage capacity for the market. Um so again,
the utilization of Aliso Canyon. Is a matter
that the Commission will need to, um consider closely
uh moving forward. So, um I'll just because of time
I'll just go ahead and wrap it up here. Um, you know,
when you conduct, just a few things. When you conduct
dynamic modeling, it's hard to do any type of dynamic
modeling. And I know the Commission's been looking
at different types of modeling with regard to uh, the
use of storage, storage facilities in Southern California.
And uh, you know, you can model for, you know limited,
limited situations. But it's hard to dynamically model
over a number of months. For the whole a larger time
frame and for all the caveats, uh situations that may
occur. Such as limitations and capacity coming into
state. So um, you know, you have to keep that in mind
also. And so as I was saying earlier, I think moving
forward as the state, uh does decarbonize. Um, that
storage facilities are likely to be made to relied
upon more for gas customers and electric generators
at peak times. And that'll remain a valuable, important resource
for the integrity of the gas system. Um, and to support
the demand of customers in the State. And the Commission
will need to, uh consider how to appropriately utilize
the gas asset resources. And in closing, I just like
to say, reiterate our divisions, uh support of the Governor's
request. That the FERC investigate the matter of the
significant price spikes that took place, um in the
Western markets. And uh, those are my comments today.
And I'd like to thank the Commission again for letting us
speak. Thank you.
Thank you Mark. The last person to speak on this panel
will be Michael Williamson, who is the CEO of Williamson
Energy, Inc. Michael? Good morning. Um, my perspective
and comments today are going to come as a trader. That
purchases natural gas at PG&E and SoCal Citygate
on a daily basis. And that's what the job that I do
for my clients. So I have to understand why prices
are either falling, rising. It's just temporary. This
is long term for me to get the most economical supply
for my clients. Uh, we've already gone through all
the industry publications and experts on, on all the
reasons. I mean we hadn't had new pipeline capacity
in the state for 10 years. I think the last was Kern
River or GTN. You're scheduled and non-scheduled
pipeline interruptions and curtailments are always
going to continue. And that will always reduce existing
pipeline capacity. Uh, and that even includes explosions
like Enbridge in Canada years back. Uh, all of these
issues, especially at the non-scheduled during peak
demands are, are gonna affect prices. Uh, then you have
of course the weather. We've all talked about it. November
is uh, most of November, the first three weeks of December
all the way from Western Canada, all the way down to
California. Now the deal is it's not an excuse. You
can't do anything about the weather. And that's why
the U.S. has a national storage system that balances
all this demand from the extreme temperatures. And we
all know when we inject storage and we withdraw storage.
And again, this is gonna bring me to the final contributing
factor. Uh, that we can look as a group to try to
make things better in the future for California. And
let's pull up the first, uh sorry.
The low storage levels in the Pacific region.
All you have to do is look at a year ago and
5-year average of the Pacific region. We're 34.3%
below the 5-year average and 28.9% below last year.
And most of all of that deficit belongs to PG&E.
And we know about the summer of 2021 and the reclassification
of 51 BCF a working gas. And I agree, the gas didn't
go anywhere. It just got reclassified and it was in
the county measure. However, the market as a whole especially
the basis market, does not see it that way. And they
were clearly expecting PG&E to inject more gas, which
they did not. I mean you have publications, Natural
Gas Intelligence, the EIA, RB Energy. Have all
written articles about these extreme prices this Winter.
And they have all spoken and written about this whole
reclassification as a contributing factor in this
whole current market scenario.
What?
Yes, while it was initiated back in the summer of 2021.
Basis market the current surge, current storage levels
were not adequate. And only by the fact that last Winter,
especially November and parts of December were above
normal temps. If we do not experience prices back above
$10 a dekatherm.
Now in my opinion, this whole situation and its effect
on the basis market, which is the delivery points. Can
also be compared to the explosion of Freeport LNG plant
in Texas, and its effect on the NYMEX market. At the
time, NYMEX this was June 8th. NYMEX was trading above
$9. We had this explosion. The subsequent information
suggested also that this LNG plant was offline until
2022. It sent the NYMEX market down, as low as
5.36 by the end of June. And because all of that
gas then went into storage, instead of being shipped
via LNG to Europe. Now the market is back to normal
in California. Debut prices this morning were both below
$5. But if we don't do something now, then this same
thing will continue to happen again and again. And
one of the solutions again, we have to look at this
specific storage region. Whether PG&E reclassifies
back some or all of that 51 BCF to working gas. Since
it never left the storage system anyway or fills working
gas storage back to prior 5-year averages. This
extreme market is apt to play out again, especially
with the below normal weather. And again, this is the
market telling everyone. That something that's 30% below
a 5-year average cannot be sustained.
Yeah, I heard PG&E maintain the stance one. They don't
make money on natural gas and of course they don't
make the market. And, and both of those statements
are true. But I'll add a third. They don't lose money
on the natural gas either. And as I stated above on
the Freeport LNG issue. Uh, they didn't make it, they
don't make that market. But instead, it became a major
contributing factor which caused the NYMEX to lose
some $4 in less than a month. The reason I'm participating
on this panel. Is to represent my clients and other
end users and be the voice before this group. As these
high natural gas prices have greatly affected their
businesses and bottom lines.
Thank you for allowing me to be part of this discussion.
Thank you. Um, I have a couple of questions. That concludes
our panel. I have a couple of questions for the panel
and then I'll turn it over to the dais. I don't want
to take too long, because I want to leave plenty of
time for uh, Commission questions. My first question is
directed towards, uh Mark Pocta. And I was hoping
you could explain a little bit more something you said.
You noted that the peak in the spot gas market coincided
with bid week. And that, that led to it having a big
big impact. And I was hoping you could explain a little
bit more about what happened there? And, and how bid
week prices impact customer bills. Thanks. I don't
know how much I can add. Um it's all, you know, it's
all, it's tough. Because I'm aware of information, because
I get it confidentially, unfortunately. And so, um
but basically if you look at the daily prices. If you
go back to the gas daily and you look at the daily
prices. If not one of the earlier speakers pointed to
it. I think it might have been the CEC speaker. Um, about
the 20th or 21st. You can see on the day market, I
mean, prices were outlandish. They were like $40-$50.
Um, and they were incredibly high. Not only at the border
points but in the basin, back in basin uh, San Juan
and uh Opal. And so that was coinciding with bid week
and so I'm just assuming, and I've studied. Can you explain what bid week is, and the impact that it has Mark? I'm sorry to interrupt. So bid week
is basically, you know, the utilities buy gas on a, on
a monthly basis. And bid week is when, you know, the contract.
It's a shortcut of the deals are being underbid too. Sometimes
utilities have already have, um entered into contractual
arrangements ahead of time. But the prices of those
contractual arrangements a lot of times will be tied
to the bid week prices. So you have the daily market,
that's just moving along on a daily basis. So um, you
have a lot of participants, participating in that daily
market. But the utilities are typically in a monthly
market. They're buying their gas a month ahead of time.
And um so generally, generally speaking that, that
doesn't mean they don't, buy gas in the daily market also.
But prevent the bulk of the gas for the month is bought
during bid week, purchased during bid week. Or it's
based on the bid week prices. Uh and I, in the past
I don't know. We just haven't seen that where the daily
market was spiking, you know, in its coinciding with bid week.
And you have another thing happening in December, that
was a little bit. Uh, you did have cold weather, the
national market, there was some cold weather also.
Um, I believe in the Midwest, that's when they had
their little cold snap go through. Which kind of moved
into the, that was about that same time frame. It was
actually ending I think at that time frame. And then
and that's what I was talking about earlier with, with
this volatility associated with the, with the, uh
weather. I mean again the weather, the weather. Um,
but just the amount of price movement that, that you
see in the market. If you're following it on a daily
basis is pretty significant. Whether you're looking
at, you know, the Western United States or other markets
throughout the United States. Um, so that, um. Yeah,
so would you say a fair summary would be that. The price
spike coincided with bid week. And then the bid week
prices locked in those high prices for the month of
January. I guess were influenced in some way, I'll
just say influenced I guess. Because again, I'm not a trader.
I'm just somewhat of an observer of these prices. And
so I'm not in the market, I'm just like anyone else.
I could read the periodicals, I could look at them.
I can meet with the utilities, but not really, um
you know, I'm not a trader. So just put it that way. Okay.
Thank you for helping clarify that point. My second
question is for Michael Williamson. And, and my question
for you Michael is. Um, you do note that the, the change
in the overall storage level seems to have really affected
the market. Um, one question I have for you. If there
was storage capacity available in, at the independent
storage field that wasn't filled? Um, PG&E states
that they mostly filled their fields. Um, and that their
core customers had their, their contracts 99% full.
So there was space for non-core customers to fill storage.
Um, so I'm curious how you feel about how that
interplays with the 51 BCF class. When there was more
capacity available if people had chosen to fill it.
Well, it's two different issues. The uh, the private
storage is going to do exactly what uh, the lady at
PG&E said. Uh, if the spreads don't work out, they're not
gonna fill it because it's a business decision. Then
you have PG&E which is a utility. Have to look at their,
their storage system as a reliable, reliability issue,
big time. And again your, your basis market had the
perception that once the cold weather hit in November
and continued into December. That there may or may not
be ample storage period. And that's why the bids in
the basis market continued to go up and up. And went
from normal a $1 to $2 going into the PG&E Citygate.
All the way up to as much as $20-30. And again, they're
they're hitting those bids. And whether they're doing
it on a speculation basis, it really doesn't matter.
It still impacts the market and it makes prices go
up.
So it sounds like what you're suggesting then. Is that
utility customers would need to have storage available
in a way almost to subsidize the non-core customers.
Who are making their decisions on a market base, you
know, basis is only. Well. Is that correct? Still impacts,
it still impacts the utility. Because inevitably, if
you're making if, if the basis market continues to
go up. Your, whether it be your core group or your
group buying for electricity. The power demand is still
going to be impacted. How would that be different?
Thank you for your perspective. I think it's time to
move to questions from the dais.
President Reynolds, do you have a question? Thank you.
Jean, maybe to start out. I think that last point you
were making about storage and the impacts on the market.
Of the PG&E changed from working gas to base gas, which
to me was really a marketing mechanism. But did have an impact
on market perception. I'm wondering if you could just
explain briefly Jene. The difference between core customers
and um, non-core customers. And the distinction that
you were making about the independent storage facilities
not being full and that those serve, uh non-core customers.
Could you just explain that for folks who are listening?
Sure. So in the in the gas utility world, there's core
customers which are mostly residential and small business
customers. And for those customers, the utility purchases
gas for them, or they can purchase gas through a core
transport agent. But someone else purchases gas for
them. Non-core customers are large commercial, industrial
and um electric generation customers. And they're generally
considered to be sophisticated customers. Um, they make
their own purchasing decisions, so they use the utility
infrastructure to move their gas. But they purchase
the commodity themselves or through marketers. Um and
they can choose um for example, how much storage to
hold. Whereas the CPUC requires, uh the utilities to
hold certain amounts of storage, and pipe from pipeline capacity
for core customers to ensure their reliability. Um,
So that was the first part of the question and now
I'm forgetting the second part. What, what did I forget?
I just wanted to make sure that everyone gets that
distinction between core and non-core, and the role
of the utility. Um, and I guess now if I could turn
to PG&E. Um, and thank you for explaining the, um the
market. The accounting mechanism on working gas versus
base gas. And we've heard about and Jean I think flushed
this out a little bit. The fact that there was storage
available, um at independent facilities. And I was wondering
if, if PG&E had any ideas about how to incentivize independent,
um storage facilities. To uh to, to increase their levels
of storage. Um, rather than pushing it back on utility
customers to, uh create that cushion for market. Um, to
keep markets calm. Um so PG&E, I was wondering if you
had any ideas about incentives?
Gillian, here from PG&E. Um,
I wish I had a great idea. The incentives are largely
market driven and market price incentives. That given
that we don't, and you don't regulate the natural gas
price markets. That's a tricky one. And the second
one is for reliability. So we fill ours for reliability.
If other market participants built into their expectations
that reliability is a higher priority. Then they might
be incented to fill it. But unfortunately I don't have
I don't have a very good answer for you.
Okay, thank you. Um, and then I also have a question
for SoCalGas. Um, was interested in the chart that you
showed with the correlation between demand and temperatures.
And I was wondering if um, and you made the point that
we had high temperatures, especially early in the season
this year. Um, is the demand increase uh, fully explained
by the temperatures as far as you can tell? Or do you
think there are any other factors that play on, uh that
affected the increased demand that we saw? Uh, thanks for
the question Commissioner. I think it was primarily
driven by the colder weather we had in November and
December. Uh, not only was it on the residential and
small commercial customers. I mean that, that residential
heating load. Um, but also there was some increasing
associated electric generation load above the historical
average. Uh what draws that may be more, you know,
that's a question for CAISO than SoCalGas. But it was
driven by weather. Uh, there wasn't anything else that
really stood out as driving additional demand. Okay,
thank you. And then another question for you. Um, you
talked about storage and the limitations on storage,
as well as of course the pipeline situations. Um, is
there anything that could, could you explain a little
bit more? Um so, you know, this situation occurs at
because the prices increased when you have to buy gas
on the market. So you can't pull from storage or storage
facilities obviously weren't empty. Um, but so is there
anything that you can do to mitigate. Uh for those the
prices that you pay when you're forced to buy from
the market? In other words, could you describe that
a little bit more? It's not like you fill your storage
facilities and then you just slowly pull from them.
Which that we wouldn't have seen these price spikes,
I assume. If they're your own storage facilities, you're
buying on the spot market. And so is there anything
that you can do to mitigate those prices, the times
when you do have to buy? It's a very complicated question.
Um, you know let me, let me start with. Um, the stories feel
is that we have, were originally put in to mitigate
Winter price swings. To inject gas during the Summer
when prices are lower and withdraw when the prices
are higher during the Winter time. Um, whether you
can then have in today's environment, and I mentioned
you know, Aliso Canyon. Having more storage, more gas
in storage, that can be drawn upon. Because the critical
nature of storage in today's environment has been driven
by reliability. And that's why we have the Aliso withdrawal
protocol that calls on almost at a constraint situation.
If you had more gas in the ground, then you can draw on
during those periods of cold weather. That could help
avoid having to buy gas on the daily spot basis. Uh,
because you can buy it during the summertime and be
repaired. I would also like to add that when you look
at the market. If it's held by uh, market participants
other than the utility, they are driven by the economics.
The utility holds storage we're also driven by reliability.
So you can't necessarily fully deplete storage in one
particular month. Because if it's November, you still
have December, January, February and March to go. You
can't fully pull down storage. But if you start at
a higher starting level, you would have the ability
to pull more down. Hopefully that answers your question
Commissioner.
And I'm sorry to note that we're out of time. Um, Commissioners
I'm really sorry to have to cut you off. If you have
more questions, um you can email them to Leuwam Tesfai. And
she will work with Energy Division to get answers for
you. I'm gonna turn it back to Christina.
Thank you Jean and thank you panelists. Um, Francisco
could you pull up the deck please? We are now turning
to our second panel of the day. That is moderated by
Bruce Kaneshiro, who is the program manager with CPUC's
Energy Division. Bruce?
Thank you, Christina. Can everyone hear me?
Okay, great. Good morning all. Um, it's my pleasure
to moderate the second panel. Uh, as discussed in our
last panel. Pipeline constraints in, in West Texas
was one of the factors for the high gas prices that
we saw in California. And nearly 90% of California's
gas is imported, uh from out of the state production
facilities such as in Canada and New Mexico and Texas.
So, given the importance of interstate pipelines to
a gas supply. We have a panel that can provide more
details as to what happened, uh to the El Paso pipeline.
As well as provide us an overview of federal rules
that ensure the safe operation of these interstate
pipelines. So let me introduce our panel. First,
we have Matt Epuna, who is a Supervisor in the Gas Safety
and Reliability branch of the CPUC Safety and Enforcement
division. And he will lead us off with a presentation
on what happened with El Paso Line 2000. And that will
be followed by Mr. Alan Mayberry, who is the Associate
Administrator for Pipeline Safety. For the Pipeline
and Hazardous Materials Safety Administration, also
known as PHMSA, which is part of the U. S. Department of Transportation.
And Alan will provide a presentation on stems of safety
regulations. So thank you gentlemen for your participation
in today's panel. And I will now turn it over to Matt.
Matt, I see you, um speaking but we can't hear you. I am terribly sorry.
Perfect, we can hear you know. Okay, great. Good morning everyone. Good
morning Commissioner Reynolds and everyone else in
attendance. And thank you Alan for attending. Anyway
um, today I will talk a little bit about the rupture
of Line 2000. And as well as talk about two things.
Um, but I want to begin by giving you a brief uh
explanation of what I learned about the Line 2000 outage
rupture. Anyway, on August 15, 2021, pipeline 2000 a 30 inch
diameter natural gas transmission pipeline. Owned and
operated by Kinder Morgan Inc. Ruptured in Coolidge,
Arizona. The rupture resulted in an explosion and fire.
The fire destroyed a farmhouse near the site of the
rupture. The fire resulted in two fatalities and one
injury that required hospitalization to the family
that lived in that farmhouse. Kinder Morgan's Line 2000,
was installed in 1985. Um, this Line 2000 transported
crude oil initially after it was installed or put into
service. But was converted to transport natural gas
about 20 years ago. Uh, NTSB records indicated the gas
pressure just before the rupture was below the maximum
allowable operating pressure. Which at least gave us
uh information that this was in. The rupture was not
caused by uh, you know, maximum allowable pressure,
operating pressure exceedance. So that's one information
that we can at least gleam from that. (inaudible)
I'm gonna interrupt you. Can, I think we need to advance that slide.
And can you just queue the operator to advance the slides
for you? There you go. I'm sorry. Yes, go ahead. Uh
okay, that's good. So this is just a picture of the
Line 2000. It runs from McKinney, Texas all the way to
Ehrenberg, Arizona where it terminates and then feeds into
uh, Line 2000. That comes into California, well it goes into a header
and that header uh, feeds part of Line 2000, SoCalGas
Line 2000 that comes out of Blythe, California. Anyway,
um this uh, this Line 2000 was originally owned by
El Paso Natural Gas System, which was acquired by Kinder
Morgan. The line is approximately about 745 miles in
land. As I explained, it started from Texas, Mckinney,
Texas to Ehrenberg, Arizona. The isolated segment of
the pipeline that ruptured is approximately 19 miles.
PHMSA Office of Pipeline Safety and the Arizona
Corporation Commission, immediately initiated an investigation
of the incident. The National Transportation Safety
Board also began an investigation. In addition to what PHMSA
and the other agent, the other partner was doing. And
NTSB's investigation is still ongoing. PHMSA joining
its investigation more typically, I'm sorry. PHMSA
during its investigation will typically assess and
determine whether a pipeline facility is or would be
hazardous to life, property or the environment. And if
there is a likelihood of serious harm to life, property,
or the environment. PHMSA will issue an order to
the operator to perform some corrective actions.
Then, excuse me. So PHMSA did issue a corrective action
in this case. Uh, the corrective action covered the
isolated segment, and as well as uh, the affected pipeline
which is the entire pipeline. The covered segment
was shut down. The other segments were ordered to have
a, what we call pressure reduction. To take a 20% pressure
reduction from its um, normal operating pressure.
Um, others haven't explained this. Other factors that
may affect, may affect safety and cause pipeline outages.
Are in addition to the force majeure in this case.
There are other issues where operators are required
to perform certain scheduled operation and maintenance
activities. And those can also impact pipeline outages.
And some of those activities are scheduled pipeline
integrity assessment uh, scheduled operation and maintenance
activities. Um, safety related conditions which may
come as a result of the operation to performing the
scheduled integrity assessment. In other words, if
the operator discovers a hazardous condition during
that assessment. They will have to take either pressure
reduction or shut that line down, to perform required
uh, remediation. And in addition to that um, there are
recent federal rules requiring uh, things like a maximum
operating pressure, reconfirmation and pipeline material
properties verifications. So some of these safety related
um, maintenance and assessment may result in or contribute
to pipeline outages. Beyond besides the force majeure.
Could you go to the next slide please? Um, Matt this is
Bruce. I think we're almost out of time for your, your
slot here. Can you wrap up your presentation? Yes, I
will do that quickly. Anyway, this is just the timeline
of the Line 2000 outage. And as I said, the
event of the rupture occurred on August 15, 2021. And then
after that, PHMSA issued a corrective action in August of
19, and had a subsequent uh, amended uh, um corrective
action. Then in September and NTSB opened a docket.
Next slide please.
Then in December 2nd of 2022, PHMSA approved restart
of the isolated segment. And January of this year Kinder
Morgan requested um or rather informed of its
completion, completion of its required work. And then
uh, requested the uh PHMSA to approve its request to
lift the pressure restriction on the entire segment.
Anyway, um one of the panelists on the prior panel indicated
that uh PHMSA has approved that. My slide does show
it's from public information I have. Alan can talk more about
this. That PHMSA was reviewing it, but from what
I heard this morning it's been approved. Anyway, that
concludes my presentation. So I would like to hand
over the virtual mic to Mr. Alan Mayberry.
Oh I'm sorry to Bruce Kaneshiro.
Thank you Matt. Uh, so I will hand it off to Alan
who will represent PHMSA here. So go ahead Alan, mic is yours. Okay
thanks, thank you Bruce and Matt. Can you hear me okay?
You can, awesome. Well again I'm Alan Mayberry, it's a pleasure
to join you today. To talk a bit about our role related
to pipeline safety in the United States. And specifically
um, how it impacts the topic here today related to gas
prices. Might I add, I bring greetings, greetings from Tristan
Brown, our Deputy Administrator. He's my boss here
in Washington. You know um, our focus is pipeline safety
and protecting the environment. Where we do see price
impacts when a regulated entity fails to adhere to
our regulations or if there's an unexpected failure.
So strengthening and updating our regulations really
reduces what we refer to as low probability at high
consequence events. My goal here today is to give
you a quick summary of the regulations involved. How
we perform or conduct investigations at a very high
level. Um, and then uh wrap it up with some Q&A
at the end. But anyway, I hope you find this informative,
but it will be quite quick. Um, if you can move on
to the next slide. Just you know, who is DOT/
PHMSA,
is a mode of transportation within the USDOT,
and you can see some of our sister agencies. Um, you
know like that, say that you're familiar with Federal
Highways, Federal Rail. Um again, our focus is safety.
We were created out of the Natural Gas Pipeline Safety
Act of 1968. And we were basically put in business to
create a National Uniform Standards for Pipeline Safety.
Which we uh, published in the form of 49 CFR, Part 192.
Which is the federal minimum safety standards for
gas pipeline safety. Uh, I might add that informing
the pipeline safety. Congress directed that we partner
with the States. I, we appreciate our partnership with
California. Specifically the California Public Utilities
Commission, as well as the California State Fire Marshall
Office on the liquid site. But we value that relationship
when we appreciate the uh, oversight that CPUC provides
on our behalf for intrastate pipelines. You move on
to the next slide. And by the way, before I get into
our incident investigations. But the topic here relates
to gas transmission, gas transmission pipelines or pipelines.
And of the 3.3 million miles of uh, pipelines across
the United States. About 300,000, little over 300,000
miles of those or what are um considered transmission
lines. And um similar to Line 2000. Um, so fairly small
subset and those include intrastate and interstate
pipelines. The intrastate tends to be regulated directly
by the states, like CPUC. The interstate is under federal
oversight, which we have about 300,000 federal oversight.
Um, so based on this slide here really depicts um,
key aspects of how we investigate an incident. So,
and then this is how it happened, really how it unfolded
for the incident in Coolidge, Arizona. Based sort of
did you uh, really a premiere in how we do this at
a very high level. First off, the reports of an incident
are received by the National Response Center in Washington
D. C. That's how we receive our notifications. Uh,
we also share those with states. And in this case, the
case of Line 2000, we share it with the uh, state of
Arizona Corporation Commission. And they also responded
as our interstate agent in Arizona. So we have a protocol
which we use to respond and NTSB may also respond. And
if NTSB responds, NTSB has premise primacy. And so
we become a part of the, to the investigation
much like the States, um as well. Um, there's a response
phase very soon after the accident. Where we're anxious
to really um, prevent the spread of that type of an
issue that happens. So in response phase, we're looking
at what kind of tools we might use to um, insert control
over the action scene. I'll get into that in a minute.
And then there's a recovery phase, the more long term phase.
And certainly in the specific to say the line in question
here, we're in the recovery phase. And um well into
that. There is enforcement tools for use in the aftermath
very quickly after an accident happens. We often issue
what we call corrective action order. And Matt did a
great job of describing that. And so I won't review
that, because you know that uh where there's an imminent
hazard um designated. We, we have to demonstrate that
for that type of order. And so we issue this, but that's
a very common order. We issue in the aftermath of an
accident. Now there's a certain anatomy of those orders
they follow a pattern. And they're listed there in the
sub bullets, it's kind of high level aspect. There's a
statement of facts like what happened, particulars
of what failed. Uh and typically there's an associated
restriction of operations until the issue is resolved.
And typically that comes in and I know it's impactful
here in the form of what we call a, a restricted operating
pressure. At 80% of what pressure the pipeline operated
at when the failure happened. Uh, and that is done as
a factor of safety. Because we know what the failure
the pressure was at the failure time. And we had a buffer
that's equivalent basically to a hydrostatic test pressure,
um to to add for for a margin of safety. And then
we require, the operator had to have a remedial work
plan that's presented to us. Uh, we think that over
the last several months and probably the last bit of
information. Specific to Line 2000 was given to us around
January 25th. And as of yesterday we gave Kinder Morgan
the go ahead to return Line 2002 to um, to their normal operating
pressure. And then lastly I just want to indicate we
do prepare a failure investigation report for accidents.
And uh the one for Coolidge is still pending, but I
expect that to be finished within the next, within this
year. You can move on to the next slide. Let me give
you a summary of some of the regulations that come
into play here. Um, in particular that what was referred
to in the agenda is the mega rule. And uh, I have
three slides on this. It's very concise history of
that rule. But you know, harkened back to September
of 2010. That fateful day when the PG&E accident
happened in San Bruno, California. In the aftermath,
there was certainly a call for, for action for us to
take action and update regulations. But um, very quickly
we and later in 2011 we issue will be calling advanced
notice of proposed rulemaking. Where we uh, basically
it's asking questions and getting feedback for how
we should develop certain policy. And the issue at the
heart of that failure was uh, grandfather pipelines.
Which I know the CPUC is dealt with in the
aftermath of San Bruno. We worked together with you on
that. So um, and it was an issue that wasn't addressed
when we first issued our first code, back in 1970. But
that's 4 to 2010. And the incident in San Bruno, we
had to deal with these pipelines that were installed
before the code. The federal code was promulgated.
I'm trying to go quicker here just, because I know there's
real value here. It's probably gonna be in the Q&A.
This is really historical and it's here as a reference
for you. Um you know, NTSB later issues a number of
recommendations to uh, to us. Um and then, um we were
also up for reauthorization our new Pipeline Safety
Act of 2011. We have a number of um, mandates that told
us to update our regulations. Related to dealing specifically
with record keeping, with grandfather pipelines, with
automatic and remote control shut off balance, and the like.
Which we uh, started working on it after that. So
the next slide we um. As you can see these things take
some time as you'll see the history of the rulemaking
process. But we also were dealing with another accident
in West Virginia. Um, uh resulted in um fortunately
no fatalities, but property damage. We had a number of recommendations
that NTSB came out with after that. Um, and then that
and I bring that up only because in the so called mega
rule. We also included aspects of those recommendations.
In the mega rule had specifically to do with pipelines that
across major highways. Um, and the concern that they
were outside of the realm of integrity management.
But we finally issued a proposed rule making 6 years
after San Bruno April 2016. It was one big rule. Um,
obviously by the comments you can see we had a lot
of interest in that rule. Again, we were making big
changes. It was the biggest change to the gas code
since the original gas code was promulgated back in
1970. Can move on to the next slide.
Um in 2018, because the uh we had so many moving parts.
We divided it up into three and what we call, it's
just jargon. Well rulemaking jargon, RIN-1, RIN-2, RIN-3. That stands for
Rule ID number. Those you may know and the federal government
we love acronyms. But RIN-1 was the first branch
if you will and that dealt with Congressional mandates.
Um, that were specifically responsive to accidents including
San Bruno. Um, and then RIN-2 basically covered number
number of NTSB recommendations. But um so again,
RIN-1 dealt with uh, say the grandfather clause issue.
It established a new type of moderate consequence area.
We already established high consequence areas. This
was a new classification for pipelines. Um, but then and
then RIN-2 NTSB recommendations. You can see what
that covered there. And then RIN-3 was gas gathering.
But I don't think that's a topic of discussion for
today. But anyway, if you move on to the next slide.
My apologies for going fast. But
wait, this is somewhat clear. But be glad to clarify
anything going forward. This really just talks about
how we revised 192. Uh, the key aspects of the new final
rule that we developed. Um, one was to require operators
to confirm MAOP. And that was a particular interest
for grandfather pipelines, some of which didn't have
good records. There was also a record keeping aspects
of rule, consider seismicity. Um, we codified grace
period for integrity assessments. I won't go through
all these. Let me see uh, some of interests related
to this. Um, item seven, there required operators
to access certain non-HCA lines at least once every
10 years. The concern there was before this was put
in place. That some of the assessment periods were really
getting um, way out there in time, years and years.
Um, and there was a need to kind of control that. Um,
and if you could uh, and the 8 is a really big one.
I've already mentioned it, but record keeping was a huge
aspect of, of the gas transmission. Moving on to
the next slide.
Um, this is really a summary. So there, there you had
a nutshell of the regulation and this is my last slide
with content. But this is just a summary of enforcement
that we've taken on the federal level over the last
year. Um in 2022, we had a record year of issuing civil
penalties, $11.6 million. Um we uh, issued notices a
probable violation. And that's the typical enforcement
action we issue in the aftermath or in many times in
the aftermath of the failure. But typically that's
also um, after we've inspected an operator and found
compliance issues. There's typically our enforcement
action that we will, will issue. But again it was uh,
high number that was tied with 2021, which was a high
previous high. We've also worked to make our enforcement
more timely. So there's some statistics on how we work
to do that. Um, timely enforcement is critical to ensuring
safety. And then the last item there consent agreements
or orders. Um, in response to our most recent reauthorization.
Um, we have been encouraged by Congress to consider
various avenues for settling cases. So we've entered
into a number of consent orders or which so with their
agreements that I signed into order. Um, and that's
one way that we resolve cases. And probably during in
response to the pipe sector 2020, doing many more of those
these days. Um anyway with that, I would like to just
close. And say you know again, I appreciate the opportunity
and I look forward to answering any questions you may
have. Again, my apologies for running through that
so quickly. But I'm gonna probably have a few questions.
Anyway, back to you Bruce. Thank you Alan and thank
you Alan for that confirmation. That seems that has
approved the restoration of that pressure on Line 2000.
That was of great interest here. Um, so I'm going to
open it up for questions from the dais. Um, but I thought
I'd just ask one. And that goes back to, it's really
more for Matt. Matt, you know, you mentioned there's
um PUC safety rules that we put in place um, years ago.
Actually quite a long time ago, and then since then
has approved its federal rules. Can you speak a little
bit to how these rules interplay with each other? Um,
Are there places where there they duplicate? Where
are there gaps and how they cover our safety? Um,
and any thoughts on how we can better align them?
Our PSC. And I think they're referred to as Pipeline Safety
Enhancement Plans or PSCP. And can you keep that
to maybe a minute and then we'll get time for the Commissioners
to ask.
That for me or for Matt?
Well, I was gonna ask Matt. Uh since he does, is familar with the PSCP. Um.
Okay. Thank you very much Bruce. Um PSCP as you said
is the California PUC Pipeline Safety Enhancement.
That was started immediately after the San Bruno incident.
Essentially this, the Commission began a rulemaking
and had multiple decisions that came out of that rulemaking.
And in addition to that California Legislators uh, proceeded
to
and that then build a bill. But now it's a statue we call
PU. It's in the PU Code section 958. That section
958 sort of it's part of our governing law. So um,
we use the PU Code section 958, in addition to
the decisions that came out of the rulemaking. Plus
our general order 112-F. So these three combined sort
of guide PSEP program, Pipeline Safety Enhancement
Program. So we used that. The PC Code, Section 958 is
that each gas corporation shall prepare and submit
to the Commission. A proposed comprehensive pressure
testing implementation plan for all interesting transmission
lines. To either pressure test those lines or to replace
all segments of that transmission line. That lack what
we call post construction hydro test. So if it does
not have the post construction hydro test record. Then
it's considered to be either pressure tested or replaced.
For Aquazone 2, two options. Pressure tests are replaced.
However, the PHMSA
rule that Alan talked about
Under win one. Uh, it's related to the uh issue of the
pipelines that lack post construction hydro test record.
So that rule PHMSA's rule, gave more options than
the to the PU Code has. In addition to the pressure
test or replace PHMSA's rule that, that an operator can use
what we call engineering critical assessment method.
To, uh to address this issue.
Uh, perhaps(inaudible). To interrupt, it sounds like there's a more
flexibility on the federal side than our original California
rules initially established them.
Yes, there is an a symmetric fact. We identified a
gap, particularly in regulated stations. That are impractical
to either pressure test. The only option for those
will be to replace it and the cost and the, um other
issues. It's what we are looking into, um the gas safety
and reliability branch. We are currently deliberating
on how to align this gap with the, uh meaning aligned
the PU Code, Section 958 Gap from the 49 CFR
Part 192, the Federal Codes.
Thank you, Matt. Uh, I'm going to with our remaining time. Just open
it up for questions from the from the dais.
I see Commissioner Shiroma. So go ahead Commissioner. Thank
you. I raised my hand.
Okay, so from our representative from PHMSA. Thank you so
much Alan. On your slide, Outlining Revision to Part
192. Can you back from lay person requiring operators
install safety features on ILI launchers and receivers.
What is that? Okay, that is um, we've had a number
of incidents. Where um, the lack of safety devices on
launcher and receiver enclosures. Um, and uh led to
a sudden opening of those closures and related fatalities.
If it swings open under, you know, such high pressure.
It's it's um, very catastrophic to the person who's
on the other end. And so that was just to ensure that
safety measure um, was put in place. (inaudible) Is it
equipment?
It's a, it's a device to ensure that the pressure is
not in the, in the barrel, if you will. The receiver
itself, um, to make sure there's a positive means of
knowing that there's no pressure. Uh, within um, within
that device that's receiving or launching a peg. Typically
it's happened as seen on say where it's been received.
It is very quickly for that. Did I understand correctly
that for the um El Paso Pipeline. That the maximum allowable
operating pressure was not is not the cause?
Of the? Well, the cause is actually still under investigation.
But I would not uh, you know, the condition with, we're
dealing with. That I wouldn't attribute to the, the
MAOP. Um, it was probably more related to methods
of assessment.
For the condition and making sure that um, you know,
we're looking for the right threat, with the right tool
or method. But other than that, I really can't comment.
on the. Because we have pending enforcement in that area as well.
Commissioner, uh Vice Chair Gunda had his hand raised. Thank you. Welcome. Thank
you, Commissioner Shiroma. Thank you Mr. Mayberry, and
uh for your comments. Just wanted to ask one question
given uh, the reliance of California gas system on the
imports and transmission uh, pipeline safety. Do we
currently do uh not just, not looking at, you know, the
current pipelines were working on. But in terms of
mid to long term reliability risk, especially given
that some of these rules do not apply to Mr. Mayberry.
I think you said about the some of the grandfathered
older pipeline systems. Just wanted to understand is
their report or general update work that we do on.
Just the risk assessment, specific geographical areas
/California.
Generally a big aspect of the gas transmission will
rent one in particular was to deal with the grandfathered
pipelines. Which were installed pre-code or pre-1970,
which was when the first gas code was published. That
required, um being service hydrostatic test pressure
test, test on pipelines. Um, that said there are other
um. Yes, we learned more as technologies evolved, you know,
we're leveraging that. And that's contained also contained
in the rule. I would say more so perhaps and RIN-2
the second tranche of the rule. That provides other
alternatives for assessing the integrity of the pipeline
such as engineering critical assessment, that Matt referred
to. Um the other incidentally, the lining question
was, was a postcode pipe. Um, it was a 1985 vintage pipe.
Hopefully that answers your question.
Thank you Alan and thank you Matt. I think we are out
of time. So appreciate your participation again on
our panel. And I will turn it now to, back to Christina.
Thank you Bruce. Thank you Alan and Matt. Um, so we
have time for about a 6-minute stretch break. So
please be back at 11:20, for our 3rd and final panel
of the day. Thank you everyone.
Time to get back to our 3rd and final panel of the
day. Uh, Francisco next slide please.
So this last panel is moderated by Molly Sterkel, who
is a Program Manager with the CPUC's Energy Division. Molly?
Hi, good morning everyone. Um, good morning Commissioners,
members of the public. Uh, thank you again for joining
us at today's En Banc. Um, my name is Molly Sterkel, and
I'm a program manager in the CPUC's Energy Division. Where
I oversee Electric Planning and Market Design. I'll
be your moderator uh, with the help of our third panel
of experts. Now we are going to shift our focus, um
to discuss the impact of the recent high natural gas
prices and what the prices are um, doing to California
electricity market. I just wanted to set the stage
a little bit. Um, our electricity markets are heavily
uh, interdependent on the gas market. Our natural gas
generators still provide about half of our electricity
generation. And it's still quite common for natural
gas generators to be the marginal resource in the electric
markets. What that means is that the natural gas generators
frequently act as price setters. Electricity prices
are commonly just a simple multiplication of the average
heat rate of gas plants at the time and the price of
natural gas. So as you've already heard, we had record
natural gas prices in December. And so it follows, uh
that we also had record wholesale electricity costs
in December. Unfortunately, as you'll hear in more
detail, the month of December was the single highest
month of wholesale electric costs that we've observed
in the past 5 years. The CAISO report, released a report
yesterday that showed that markets both saw additional
costs of $3 billion in December. Um, that would be $3 billion
dollars above what uh, they would have otherwise normally
seen. We do not yet know how these wholesale costs
will flow through to consumers. Because different market
participants, like the investor-owned utilities and
community choice aggregators have different hedging
strategies for their electricity portfolios. For example
earlier, you heard from Ms. Clegg from PG&E. And she
expressed that she oversees the gas hedging conducted
by PG&E on behalf of PG&E bundled electric
customers. So those hedges may help mitigate some of
the impact of these prices on electric customer bills,
in the coming months. We will hear on this panel from
Bill Walsh at Southern California Edison. And he can
go into more detail to explain the factors that will
determine the ultimate impact of wholesale energy costs
to consumers. So I asked each of our five panelists,
um all of whom are experts to offer their observations
on how the recent gas prices. As well as, you know, the
patterns and weather, gas operations, gas regulations.
How have those all impacted the electric markets in
the past two months? Quick answer is a lot, but the
details are much more interesting. So we're gonna get
a good bit of insight from this panel. Um these experts
as I said, they're going to touch on the costs, um and
and how and when these prices might flow through electric
consumers. So um, and I've also asked each panelist
to share their ideas, their suggestions about what
we should be considering in light of the current situation.
So without further ado, our first panelist is Amelia Blanke.
A Manager of Monitoring and Reporting in the Department
of Market Monitoring. Uh, the DMM is an independent
entity within the CAISO. Amelia's been at the
DMM for a decade. And together with her colleagues
she produces a number of annual and quarterly reports
that I along with many of my colleagues find incredibly
useful, and insightful. So Amelia, please take
it away. Um and uh and, and then turn it back to
me and I'll introduce Bill. Thank you Amelia.
Okay, thank you Molly. The purpose of this panel today
is to discuss the record high natural gas prices and
the impact of those prices in the electricity market.
I'll present a set of metrics today that highlight
the mechanism. That allows those gas prices to influence
electricity prices. But there are many, many more available
on our website and I suggest that if you're interested
you go check that out there. Next slide please.
This slide shows monthly average natural gas prices.
This is the same data that you've seen throughout the
panel today, except that it's going all the way back
to 2019. In addition to the very high, uh prices in
the last two months. I'd like to point out two things.
The first is the difference between the Henry Hub,
which was as explained earlier. The national, uh sort
of national benchmark and West Coast prices. You can
see SoCal Citygate there in red in Southern California,
and PG&E Citygate in yellow.
The second thing I would like to point out is the relative
stability of especially the PG&E Citygate price.
Um, if you extend this kind of graph, if you look at
the data, even going back a decade. PG&E is notable,
PG&E Citygate price is notably more stable than other
national indices. And, and that in large part has to
do with historically the use of storage resources. To
mitigate price spikes in the national natural gas market.
Um, and you can really see that, for example, in Winter
Storm Uri, back in February of 2021. When prices went
up in Southern California, they did not go up in Northern
California. One, one example there. Next slide please.
This chart shows the daily spot prices from December
1st through the end of January. Um again, two points.
Um, one is the deviation between prices in SoCal
Citygate and PG&E, particularly and the Henry Hub.
Um, but as has been mentioned before, prices also rose
in other parts of the West. And you can see that in
some of the same hubs that have been mentioned by other
speakers today. The second point is that this was an
extended period of high prices. Um, if you look at
for instance the, the East Coast over the last weekend.
When they have very, very cold weather. Very high demand
for natural gas, they had a price spike up to about
$135. But today that price is back down, the same kind
of pattern occurred with Winter Storm Uri. This was
different um, partially because those high gas prices
persisted throughout two months. Next slide please.
This slide shows the correlation between gas prices.
This is showing the SoCal Citygate gas price,
again a monthly average in the dash line. Compared
to electricity prices in the wholesale energy market.
As Molly mentioned in the kickoff for this panel. Uh,
there's an estimate published in the ISO's recent gas-market
report, which was published I think yesterday. That
the wholesale energy cost in December alone is $3 billion
dollars higher than it would have been. If natural
gas prices had been lower. So that's a comparison
essentially of December's wholesale energy cost estimate.
To the estimate of December a year, in the year previous.
This chart is set at a relatively efficient gas resource
implied heat rate. The axis on the left hand side shows
the energy price. And the axis on the right hand side
shows the gas price. You'll note that one is about
10 times the other, so that's about a 10 heat rate.
That implied heat rate is a very standard measure of
market efficiency. That I think is telling because
what it shows you is that it's very typical for gas
prices to be one of the primary determinants, determinants
of energy prices. And obviously that's something we're
seeing in the California ISO market. Even as more renewables
are integrated into that market. Um, I'll note a couple
other things on this chart while, while it's on the
screen. But first is that there are instances when
implied heat rates do rise. When prices are higher than
you would predict based on gas price alone. For example,
in August and September of this year, during the extended
heatwave. Or in August of 2020, during that extended
heatwave. There are other months when the average price
is lower than you would predict based on gas prices
alone. For instance, in December and January of this
year. Next slide please.
This chart really I think highlights some of the
mechanism. By which gas prices end up being reflected
in energy prices. The panel on the left shows the day
ahead supply bids in the California ISO market. On
December 22, 2022, in red that as a reminder of the
day we have the highest spot prices, in the gas market.
So prices on that day were above $45 at all of the,
all of the CAISO Hubs, gas hubs. The blue line shows the supply
in the bid into the market on December 22, December
22, 2021, um in the same hour. Which is uh, the hour
between 5 and 6pm. So obviously you see the
supply code shifting up. As supply bids are increased,
reflecting those higher marginal costs. One other note
is that there was actually less supply offered in the
market, um on in 2022 compared to 2021. The chart on
the right shows is a subset that just shows the gas
resources. So these obviously are showing that there
is an increased fitting reflecting those higher marginal
costs, that those resources are are facing. Next slide
please.
This shows the same data again showing December 22,
2022, on the left December 22, 2021, on the right. Same
supply curves showing the resource fuel type
of those resources offered in the market, 1-year compared
to the other. Um, the red is and I realized the font is
small on this. The red is gas and the green are financial
only bids Some of the blue is showing other generations.
So that includes renewables, wind and solar. Many of
whom are are offered in the market as price taking
very low, low bid resources shown in blue there. We
are also showing separately storage resources, which
are here shown in, in purple. Um, in this particular
hour in 2022. Um, we saw prices at about $600. So the
demand bit into the market was then intersecting with
the supply curve. At roughly the place where the, where
the gas resources and. Next slide please.
This chart shows the change in generation dispatched
by the market. In, on average in December 2022, dependent
compared to 2021. What this is showing is, and the
uh what this is showing is that we had fewer imports.
And those imports were substituted with gas shown in
blue. As well as storage into some degree, uh solar
and other other resources.
That to me highlights the impact that some of these
high gas prices and other, other factors may be having
outside of the California ISO market. Next slide.
This shows the same data for January. Obviously a very,
very different story in January. What we saw was lower
demand and in fact lower levels of dispatch for gas
imports and solar, that had to do with the weather. And
with that, I think my time is up. I'll pass the mic
back to Molly. Okay. Uh, thanks very much Amelia for
showing us what was actually happening in the market.
Um, our next panelist is William Walsh. Uh, Bill Walsh
is the Vice President of Energy and Procurement and
Management Organization at Southern California Edison.
Bill is responsible for Edison's Wholesale Energy Contracting
and Management. And he is of course one of the first
people I wanted to hear from when I saw these high
prices. Um, since he is responsible for procurement
there. So take it away Bill.
Thanks Molly. Also thank you to the Commission for
allowing me to be here and talk on this important subject.
Real quick safety moment, you can see my face. Had a
biking accident, make sure you wear a helmet out there.
Um, if I had not been wearing it have been much worse, so.
Everybody stay safe out there. Um, wouldn't mind moving
to the next slide.
So this is just an overlay of the SoCalGas system.
With the red dots being the resources that we owned
or control through contracts. Um, it's roughly 12 gas
fired units are resources uh, totaling roughly 5,100
megawatts. Um, just started demonstrating our exposure
to the gas market from an electricity standpoint. We have these resources
as well as the number of contracts are settled on the
gas price. Under what are called qualifying facility
contracts. And then of course, whatever we pick up an
unspecified energy in the market where typically, as
was said by the CAISO earlier. Uh, the market clearing
price comes from a from a gas unit. Next slide please.
So there's a lot of discussion around some of the fundamentals
that drove all the high prices through December and
January. Um, I'm not gonna go over them again. They've
been sort of all been discussed. But I do want to mention
a few things that, you know, we just find a little unusual
during this period. One is the uh length of the, of the
period. So you have nearly a two months time, timeline
where prices are very elevated. You see here about
300%. During that time, Henry Hub, which is the national
benchmark was trading between 3 and 7, the entire
time. So you're not seeing gas being flowed or transported
over from, uh the Eastern half of the country into the
West. Um, so one thing you would expect or would hope
is that prices would eventually balance out, especially
at the time, timeline becomes longer and longer. There
was also talk about storage levels being particularly
low, that that is true. Um, another thing that we saw
was uh, (inaudible) that we did not have any market liquidity
issues. And so all this pricing kind of points towards
scarcity pricing, but for the most part, we did not
have any issues around market liquidity. Um, a lot of
discussion on some of the pipeline explosions and some
of the issues there. Um again, no liquidity issues as
well as uh, production levels across the U.S. were
high. I will note, um it's worth pointing out. That
the pipeline uh, explosion at (inaudible) on El Paso occurred
in August of last year. Um, so it has been in that
state for quite a while. In fact it was in that reduced
state during the heatwave event in September, over those
10 days. Um, there were tighter balancing requirements.
So on a daily basis, as non-core customers, uh for our
generating units. We need to balance out the amount
of gas that we nominate for, for burns on the next day
for electricity use. Um, they were tighter requirements
but we never got into emergency situations. Um, and
then we're still seeing elevated levels, but definitely
uh towards the end of the month, in January. But certainly
today and I think it's been sustained for roughly a
week. Um, they've really come down significantly to
more normal and even below normal levels. Next slide
please.
So we've seen this multiple times, you know, on the
top is SoCal and PG&E. On the bottom are Henry Hub and
then we've also added here the Permian Basin. Um,
one thing that just find interesting that I wanted
to point out. You know, in this first box here to the
left in December 9th. There's a cold weather front
predicted for most of California in the West, really
low temperatures. You can see how prices spike up uh,
and stay elevated during that time. Sort of interestingly
in December 21st, um there was really high, really.
Excuse me. Really low temperatures predicted in the
weather in the Midwest down the Permian Basin, as well
as Texas. There was risk of what's called freeze offs
on the wells. Um however, you did not see much price
response during that period. Um their, their
gas prices not gonna go up significantly. It's one
of the (inaudible) two situations between the different areas. Next
slide please.
So you know what's the impact at least on our electric
customers. The other IRUs will be positioned differently
based on where they sit. But we recently filed what's
called an era trigger application. And what that requires
is our, we forecast what our energy costs are gonna
be. You know, moving forward. We then have a revenue
that (inaudible) cover those costs. However, if the market it's
all in the forecast. If the market moves too much, um
we're required to file an application to request additional
rate increases. To hand, to take care of those expected
costs that are supposed to increase. Uh, we made that
filing here at the end, of the end of January. Requesting
close to $600 million, and a rate increase that would be effective June 1st. Now that's about a 4.4%
increase for our bumble customer and generation rates.
However what we did, because we're expecting those
the trigger rates to happen within 100 and 20 days.
We're also seeing the possibility that prices are coming
off, as I mentioned earlier. That we may self-correct
after that period. So what our intention is given the
volatility around prices in this sort of unique situation
we have. Where we have this extreme price increase and
then, um (inaudible) later on and have a self-correction. That we
will update our filing um April or May. And May determined
based off of our forecast that we will not need the
price increase. Excuse me. The rate increase come June
1st. Um, that's that's my hope. Um, we're hoping to provide
that relief to our customers. So they don't have to
see another rate increase. Uh, based off of what happened
here in the December-January timeframe. So but we'll
keep our eye on that and certainly keep, (inaudible)
um up to speed on that. As we get closer to be
able to make that call. Um I do know, you know, we
do, do hedging activities all throughout December and
January. That is our standard practice. Um, and it does
provide some protection from price volatility and obviously
many of our hedges during that period we're in the
money. However, it's very important. I think there's
two important aspects of it. One um, we can never fully
hedge against long sustained premiums. Um, it can't
be a full protection and there comes a cost with hedging.
Um, in a vacuum on a long run. Hedging will always be
more expensive than being, um just exposed to the
daily price. Uh, it's been pointed out the Climate
Credits will be going back to customers, to help provide
some relief. And then from a communication standpoint
we reach out to our customers and all, all types of
channels. Given the diversity that, that those customer
types. But we did send out a number of notices about
the rate impacts that we're about to occur. As well
as customer assistance programs that our customers
could avail themselves to. During this, this very tough
period. Um with that, I will move on from there. My hope
is ultimately, you know, the self-correction will make
it. So that's possible that we won't have to be too
much of an impact in the future on, on our customers.
So, so what are some of the mitigations we can do to
avoid this, uh in the future? Absolutely, number one
is reducing our reliance on natural gas in California.
And advancing those policies that will support California's
GHD emission goals. Especially around the building
transportation electrification. Making, making sure
we're on the path to get those reductions come 2030
and ultimately 2045. Or we can be net neutral in the
state. As part of that, that's on the demand
side, on the supply side. And I think the Commission
has taken a lot of really good efforts around shoring
up capacity. From a energy storage standpoint, we're
seeing a lot of that being built. But that needs to
be continued out, not just on the storage (inaudible). But as well
as the energy piece. I think as we get towards the
end of 2030, you're going to start to see the need
for more and more energy to fill these battery storage
devices or energy storage devices. And we want to do
that with clean energy, which would be more renewables
on the system. Um, I discussed hedging as being an important
part of our portfolio. Um, the other thing to consider
is uh, CCAs uh have their own, uh potential
hedging programs. So, but watching their financial
health as well as those activities could help reduce
the impact on their customers. Now, it doesn't impact
ours, but when I think about this from a California
perspective, um that's important. Something important,
something important to look at. Um I will note, that
the CPUC is looking at these issues in the provider
of last resort proceedings. So they are being actively
discussed but is another area that can help provide
protection for customers. Um, one question that was
keyed up to me is. You know, what about requiring gas
generators to be hedged to help mitigate prices. Um,
I would say, you know, if. One, I think it's probably
beyond the jurisdiction. However, um a lot of physical
generation out there that the owners of that are hedging
their positions. But again, this comes at a certain
cost and also limitations. I don't know, I don't think
the CAISO presentation got into it. But we did a reduction
in imports during the Wintertime, and an increase in
gas burns of in, in-state resources. And so net, net
even to the same amount. We're burning more in-state.
And I think that the forecast that we have and others
would have. Is not to have as many gas burns expected
to occur. So even if there was a requirement to be
hedged. Um, then we would not have missed, we would
miss that forecast. Because the burns would have been
much higher within the State of California. And we still
would have had quite a lot of exposure from that, from
that perspective. So it's a long way of saying that
I think it's, it's not the end all be all to solve
our issues. In terms of what can provide price protection
for customers. It does provide some against volatility,
but major market moves um, can be very difficult to
to deal with. Um I will say, you know, gas storage
is an important part of gas infrastructure. Assuming
it's safe. Aliso Canyon does help provide uh, manage
some of the price volatility that occurs in these markets.
Um a while back, there was real issues with operational
flow order penalties. And those structures, they've
been corrected by the Commission. I would encourage
that to remain in place and, and not be changed based
off of a lot of things that have happened recently.
Um, I think about additional areas. I will want to
say, I do want to say that. I applaud Governor Newsom
for requesting FERC to uh, request that they investigate
what has happened out here. I just pointed out some
of the unusual things that we were seeing. I have
um, no evidence or indication of something specific
happening. But I do think there's enough, there that's
worth looking into. Um, there are some other things
around the edges. You know, some something that has
to do with when we nominate gas for our units. And then
when the CAISO market clears, uh the timing doesn't match
up. So we have to nominate before we know what the
CAISO is gonna tell us what we have to do the next day. And sometimes
that stuff can be misaligned resulting in inefficient
outcomes, at least on the pricing side for electricity.
And then finally just thinking about what else could
be looked at. Um, just consider scrutiny around the
actions that, that are within the Commission's jurisdiction.
Um, that could have an impact on the market to make
sure. Um, everything was performed on a clean manner. So with
that, I will hand it back to Molly. And uh, look forward to hearing
your questions. Thank you.
Thanks very much Bill. Um, that was really helpful
perspective. Um, next up. We're gonna hear from another
utility. When I do not um, ordinarily call upon as a
CPUC Regulator. Um, but I am grateful that Marlon Santa
Cruz from Los Angeles Department of Water and Power
um, agreed to join us today. He's the Manager of Fuel
and Purchase Power, for Los Angeles Department of Water
and Power. Um, which is the country's largest municipally
owned utility. Um, Marlon oversees the economic acquisition
and reliable of delivery of fuel, and electric generation
to be LADWP's loads. So he is the Bill counterpart
at LADWP. Similarly um, observing and experiencing
these situations. So um, while he is not a jurisdictional
utility for the CPUC. Again, thank you. Warm, welcome
to Marlon. Um, please uh, take it away and I'm looking
forward to your perspective. Of course. Thank you Molly,
and thank you Commissioners for the invitation to be
here today. Let's go onto the next slide please. So
we're going to cover a little bit of background just
as to who we are, as you mentioned, Molly. That we are
not a CPUC overseen municipality or facility. So I'll
just talk a little bit about DWP background. And then
jump into the actual topics. Next slide please. So
we are the largest municipally owned utility in the
Nation. And as such, that comes with certain responsibilities
including that we are a load serving entity. We do
serve the load that is the City Los Angeles Proper.
And that also comes with the responsibility of balancing
a grid. So voltage and frequency regulation. As well
as making sure that we have economic access to power
for the Los Angeles ratepayer. To that effect, we have
structured ourselves vertically. Meaning that not only
do we have our own load that we have to serve. But
we also have our own assets, our portfolio of generation
assets for the sake of meeting that load. And then also
having some market participation. So yes, we do have
enough generation capacity, so to speak. To serve our
entire load. The majority of which is actually served
currently by renewable energy. But historically that
has been served by natural gas and there's still a
very large component of natural gas within our portfolio.
In addition to nuclear, a bit of coal, and hydro. In addition
to solar, wind and geothermal that is coming onto the
grid. And it's because of these environmental goals
that we have set out for ourselves. That we continue
to bring more renewable energy onto the system. That
we need to balance that intermittent energy with reliable
base load, dispatchable energy. Usually in the form
of natural gas. So these environmental goals kind of
also put us in a precarious position of inadvertent
risk exposure. And I say that only because renewable
energy gets the first right of refusal, it flows first.
So we have to plan on a certain amount of energy coming
from these assets on any given day. But if the sun
doesn't shine, if the wind doesn't blow. If they don't
behave the way that we had forecasted them too. We
now how to make up the energy to serve the load with
dispatchable generation. And that's why we're here talking
to you today. Because a good chunk of what we do is
still based on natural gas. So let's go to next slide, and
we'll talk a little bit about how this event has affected
us. So just for solidarity, there is a map of the Western
North American Natural Gas Pipelines. And Los Angeles
has capacity rights on two of them, No. 7. Which
is the Kern River Gas Transmission Company. And
sorry. If you could go back to the map, switch slides
on me. And also No. 18, which is Southern California
Gas Company. So we have access to the markets out in
the Northwest Pockies, primarily Opal. Which is the
large market hub out in that area. And I just want
to point out also Pipeline No. 20, TransCanada-GTN
System. Because we're going to be talking about
that a little bit further in the presentation. It is the
red line that connects from the border with Canada
down to the Northern border of California. More on
that later. Next slide please.
I guess it was a little bit of a delay with the
highlighting of pipelines. So current gas market conditions
obviously we've been talking about it all morning.
So I'll try not to delay or be too repetitive on what
has already been mentioned. Next slide, please.
Historical natural, natural gas prices. So in front
of you is a instagram that cuts off at January one
of 2020. The world before things got particularly crazy.
So you see that there's some volatility and we're used
to there being price spikes. This is a market that
responds to events, that responds to news. That whenever
either supply is diminished or demand is suddenly increased.
We're used to seeing a spike that will last maybe a
day or so, especially in the last few years since the
shale revolution. You see the polar vortex that happened
in 2014 was really just a couple of days event. And
also the Northwest pipeline outage that happened in
2019. But now let's go into the world that we live
in today. Next slide please.
Recent natural gas prices now the histogram covers
up to 2023 January. And you realize that this scale
had to change in its entirety. The polar vortex that
we saw in 2021 shot prices up beyond $160 in
the Rockies. I'm not talking about the highest price
that was seen in the Nation. And we see now the Western
crisis is, I didn't exactly know what to call it. So
we can call it whatever we want to and putting this
name out there for vote. But you see that several sustained
days of high prices. This is no longer a spike, this
is an event. All right, let's go on to the next slide.
So what caused this? The impacts of gas prices on electric
generation markets. Let's see how one thing led to
another. Next slide please. So this is not the normal
spike as I've been trying to highlight. Previously at
the end of November, right after thanksgiving. It became
dichotomy of East versus West. Boston was having cold
weather and the West Coast simply had to pay a little
bit more to get the gas to come over to us. But
then they settled, even Henry Hub normalized in the
$5 range. And we saw for the first time in several
years after being blessed with mild weather, the first
actual cold Fall, leading into a cold Winter. We had
sustained below average overnight temperatures in the
30s and 40s throughout the entire West Coast.
So everything West of the Rockies, all of a sudden had increased
demand. But what about supply? So one of the events
that has not been highlighted today. Everyone's been
talking about El Paso and we've known about that ever
since the event happened. But there was a force majeure
event on TransCanada-GTN Pipeline at Kingsgate. That
caused limited market access. Now yes, there was chatter
amongst the counter parties and amongst the marketers.
Which is very sophisticated way of simply saying that
this is hearsay. But I'd like to quote an article that
was published in NGI on December 8th. The day after
prices literally jumped, "Amid reports of a curtailment
and volumes flowing through grass, gas transmission
Northwest Kingsgate location along the US-Canadian
border. Pacific Northwest prices raced higher during
the period. Northwest Sumas, fixed prices jumped $5.99
to $20.57. While Mullen surged from $6.12 to $18.91."
So we saw that overnight prices didn't just
increase. They tripled or even quadrupled in some places
that we had market access to. And this was because
the forecast for cold weather was already there. But
this force measure was a bit of news that the market
took into consideration. Another bit of news, low storage
inventory. The same article and others were saying at
the time. That historically, compared to historical values
the Pacific stockpiles ready 23.6 deficit versus
the 5 year average. So I can't speak for PG&E.
I can't speak for SoCalGas. Everything indicates
that they did the right thing for the customers at
the time. How they responded to this deficit, whether
it be drawing from storage or going out to the market.
They did what they had to do. They did the right thing.
It was the markets that were selling to these large
buyers and other electric generators, us included. That
took this news and increased the price. Because all
of a sudden there was more demand for it. And to add
insult to injury. We were already aware of the ongoing
pipeline restrictions such as that happening on the
Southwest Pipeline. Excuse me. El Paso Pipeline. So
we saw that again, the market responded to news. It
was not the pipelines that were causing this. It was
not OFOs that were causing marketers to tack
on the penalty prices. This is simply the commodity
cost at the primary markets suddenly jumping. Next slide
please.
And just a little bit to show we all experience it,
especially those of us that live on the West Coast.
We were expecting mild temperatures as the first forecast
shows in the image above. And then the second image
kicked in and showed that well, everything got a lot
colder than we were expecting down here. And that appears
that the same image was copied twice. So I'm just gonna
say, I apologize for the error on this slide. Um, forecast
temperatures were showing cold weather on the East
Coast. And then it ended up being this atmospheric river
that brought cold weather to the West Coast. Next slide
please.
So we're a little bit remiss to publish our own generation
cost data for obvious, confidential, proprietary reasons.
But this is publicly available prices posted by the
CAISO. This is a cellmar LMP prices through December
of 2022 and January of 2023. Just to show that a $5
increase alone in natural gas prices more than doubled
the cost of energy in the region. So that is the relationship
that we'd like to highlight. It is not linear. That
as natural gas prices increase, it's almost exponential
how energy prices then continue to increase. And of
course as we saw, December was the worst month, but
January was still a lot higher than we would have anticipated.
Let's go to the next slide please.
Can we jump to the next slide, please. Thank you. So
also publicly available information as posted on the
EIA website. This just as a benchmark showing other
markets in the Nation. And namely how the Northwest
and CAISO skyrocketed past the relatively stable markets
elsewhere in the other ISOs. So next slide please.
All right, so the last one was simply about questions.
All this to show that suggestions as to what should
we do to actually fix the problem? Well, as my counterpart
at Edison noticed. The electric generators in California
specifically are already in a race to try to reduce
the reliance on natural gas and other fossil fuels.
So that is simply happening. Which is why I don't think
there's a lot that we could do from a regulatory standpoint
to try to cap prices on the market. It's just that
not only are the electric generators on for a ride.
But so are the pipelines and the LDCs, PG&E and SoCalGas.
We're all in this together, simply trying to serve
our core based customers. And it shows that there's
just interesting things going on in the market. Why
is it that the day after Senator Bradford sent a letter
to the CPUC calling for an investigation. Prices were
slashed in half from the $20 mark to the $10 mark.
And as news was then brought on about Governor Newsom's
letter being made public. Now, we stabilized at $5
as of yesterday. It's just a little convenient to show
that the market is responding, responding to news and
putting premiums on the commodity because of it. So
that's my two cents. And that concludes my presentation.
Thank you very much Marlon. Um, and sorry for the confusion
about missing your, your closing slide there.
But you, you handled that great. Um, our next panelist
is Fred Heutte. Um, and continuing with this sort of
outside um, outside the CAISO perspective. He's a senior
Policy Analyst with the Northwest Energy Coalition.
He has four decades of involvement with Western Clean
Energy Development. And he's going to share with us
his perspectives on the what's been happening with
the Northwest Electric and Gas Markets. So take it away,
um Fred. Thank you for joining us today. Thank you. Uh, good afternoon.
Because we just changed over here. Fred Heutte in Portland
with Northwest Energy Coalition. Thanks very much to
the Commission for inviting me to speak on our Northwest
perspective. The coalition has over 100 organizational
members. We also have individual members. Our members
include environmental groups, community groups, labor
uh, some local agencies and some utilities. We have
Portland General Electric, Northwest Natural, our
gas company here in Portland and Seattle City Light.
Our mission is to promote reliable, clean and affordable
and equitable energy system for the Northwest. Uh,
and if you can go to the next slide, I can start
the discussion. I'm not going to go into this in detail.
But just to know, we saw many of the same features
on the landscape over the last 3 months. We had
lower than average temperatures on the West side here.
Even lower, much lower average is actually on the East
side. Um and then uh, gas prices of course that surged.
That's showing the Sumas prices there. Uh, Northwest demand
was up. Northwest Hydro production because we had a
not great hydro here last year was down. Uh, and gas
generation therefore was up. Because those two are operating
more or less uh balance, you know, counter to each
other. And uh, notably because we had high demand in
the Northwest. The amount of available energy exports
some hydro, some gas from the Northwest to California
declined dramatically in all 3 of the last months.
You can go to the next slide.
Just to give a little bit more of a close up on
the Northwest gas system. We have 3 major pricing
points. You can see here assume as Kingsgate and AECO.
AECO is kind of in the core area of Alberta. Kingsgate
also comes down from Alberta, and Sumas comes from
British Columbia. And you can see the basic map there.
We have two main storage fields, ones in the Oregon
shown over there above Portland. Ones on the Oregon
side that's called mist. It's about 16 BCF and one
on the Washington side uh, it's called Jackson Prairie
is about 46 BCF. You can go to the next slide. So
again, everybody has to show a pricing chart. This
is ours, notable features of the last couple of months.
Our price separation for the West, especially West
of the Rockies. And even within the various zones of
the West. For example, here's the Northwest, the low
price, there is AECO up in Alberta, which was completely
independent of all this. The high price there assumes
that price surge started in mid-November and went
up after Thanksgiving. Uh, and then the Kingsgate
the GTN Pipeline coming down through Idaho from
Alberta, that surged in early December. Uh, may have
had something to do with force majeure. But we think
that pricing effects were actually happening already
even by that point. But you can see the kind of separation
from East to West in this, in this chart. Next slide
please.
Uh, this is a chart from Portland General Electric, showing
the tight correlation between gas prices and mid-C
uh, unorganized market power, market trading hub. You
can see very tight correlation there. Next slide please.
So a number of factors that we've already seen and
discussed here. Certainly the convergence of multiple
factors that caused the scarcity pricing uh, to go
dramatically upward, especially on the gas side. But
also on the electric side. This is going to result
in probably the most consequential price event for
customers since the power crisis two decades ago. Hundreds
of millions to billions of dollars of an unanticipated
costs. It's very difficult yet to say where that's
going to go. Because we don't yet know how successful
the hedging strategies were. But this is not an unprecedented
event. We've had previous scarcity pricing episodes
for example uh, 4 years ago in February-March of
2019. Uh, we published a report on that, which is referenced
at the end of our slides. We have an elevated risk of
this going forward. The Winter and Summer conditions
are quite different, but we feel that there's significant
elevated risk now in both seasons, that require action.
And we really do have to take action now to deal with
some structural issues both in the markets and in the
resource mix on the power side. Next slide please.
Uh, most of the time power markets are price-takers,
and that's going to continue. So, we have to be aware
of the issues there. Electric prices are regional gas
prices are national, continental and increasingly prone
to market forces. Global market forces because of the
rapid increase in LNG exports. When the Freeport LNG
Terminal had their, uh explosion outage last Summer.
The price of Henry Hub, which was fairly high at the
time, $8 or $9 went down by $2. Just because that
in that inventory was now uh feeding back to the domestic
market. When Freeport goes back online probably in about
a month or so. I expect the Henry Hub price to go
back up maybe a dollar. So we're definitely more prone
now to these international uh price uh, context. Um,
electricity power pricing as discussed before by the
ISO. Is highly dependent on gas prices. That's
a key issue here. And as mentioned by Edison, there
are longstanding misalignments between the gas nomination
cycle and the electric commitment. And dispatch cycle
that really create problems, ongoing structural problems.
That are now something we ought to take another look
at. Next slide please.
So I won't read through all these, but I do want to
make a couple of comments. The California ISO issued
a new report yesterday, which I've gone through already.
And found, I really hope everybody takes a look at
this is very important findings there. It's called
the Gas Conditions in CAISO Markets Report. Uh, the
first conclusion that I reached from looking at that
was. The kind of self-sustaining nature of the gas price
bottle, especially from Thanksgiving to past the holiday
season. At the end of December, we have a thin market
less than 150 trades a day. PG&E uh,
it's easy for a handful of trades to move that market.
There's tight correlation of spot prices and forward
and, uh forward strip. As noted by Mark Pack to the
bid week phenomenon is a factor here. Everybody on
the sell side knows that the buy side is going to be
in the market at the end, you know, last week of the
month for the following month. And so the interaction
between the very tight correlation of current prices
and prompt month prices, the next month prices. Is a
really serious problem now. Because if we're in one
of these price surges. What are the utilities and power
plants going to do? Are they going to buy an over inflated
prompt month or are they gonna expose themselves to
more direct spot price risk? This is a really serious
problem now. Uh, the second big conclusion I've reached
uh that the ISO report reached. That I'm, you
know, has a lot of detail in the report. The massive
impact on power markets, $4 billion plus dollar impact
on the notional value of the CAISO market uh in November
through January. Uh you know, a lesser amount in the
Northwest, but a significant, very significant amount.
How much of that will be washed out by hedging? We don't
know yet, but it's very significant. The and, the figure
16 on the report on page 26 shows that the dangerous
signs were in place months before, especially in August
and September were very, very high market prices occurred.
These effects are similar if somewhat unless magnitude
in the Northwest. So finally concluded, just want to
give a couple of thoughts here about potential response.
And I'm not going to go through all these different
issues. First of all, this is a regional problem. It's
a Pacific and Western states, regional problem. We have
multi billion dollar impacts. It could happen again.
We agree with Southern Cal Edison and the root causes
not markets though they have problems. But rather over
dependence on gas. Uh, we have a double bind of scarcity
pricing in both the gas and power markets. But because
power is a gas price-taker, it puts us in a very
tight spot during these market price breaks. Very high
priority for us in the Northwest Energy Coalition is
to provide customer information during these kinds
of events. To avoid the kind of total price shock we're
seeing. Its very important for the Commission to continue
doing prudence review. We need to look at reform of
hedging and fuel cost adjustment policies. We need
forward looking policy to address the structural issues.
Certainly demand side load management should be dramatically
accelerated on both the gas and electric side. And I
want to commend California PUC, and the utilities for
really pioneering on gas demand response. But we need
a lot more attention to that. We need to look at supply
alternatives and reserves. Um potentially and extend
extending the dependence on gas for reserves on the
power side is really not going to be the answer. We
can certainly look at more batteries, maybe some use
of hydro storage that's available. Um and, and very
important longer term point. Enlisting load and resource
diversity across the widest Western footprint
possible. Which is why we and many others are supporting
the development and the uh, on the activation of the
energy demand, the extended day ahead market. That the
CAISO is putting together. Finally we really support
coordination of the Pacific Coast and Western regulators
and state agencies through existing organizations like
prepc, as well as separate efforts we'll encourage the
Commissions and agencies here in the Northwest. To join
together with you. Thank you very much.
Thanks Fred um and uh, and thanks for all those insights.
And I see you've um you've got a paper up here, um
from a prior incident. I did take a look at that. It
was very insightful as well. Um, next up um I think
we can go to the next slide. Uh, we have Becky Robinson
from the California ISO. As I mentioned, um earlier
our first speaker Amelia is from the independent entity
within the ISO so called the Department of Market
Monitoring. Becky Robinson is from the ISO itself.
She's a Principal Economist, where she focuses on market
policy and performance. Um, prior to joining ISO.
She held roles at and FERC and she was an advisor
to Commissioner Cheryl Lafleur. Becky, um if I can
ask you to take the mic and then I'll come back and
do some Q&A. Thanks. All right, thank you. Good
afternoon everyone. We appreciate the opportunity to
be part of this discussion today. I wanted to start
with what will be background for some of you. Um, before
we get into some of our observations, um over the events
of the last couple of months. But wanted to, to level
set first on some of the fundamentals of the ISO
market structure. So uh, the California ISO
market supports three notable objectives. It dispatches
generation at least cost. It reliably balances demand
and supply moment to moment throughout the day. And
it has made great strides in facilitating the transition
to a decarbonized grid. In the market optimization
process used, uh in the California ISO market is to
clear the market every five minutes. Uh uses locational
marginal pricing. And this marginal cost pricing is
critical again for three purposes at least. It number
one, it disciplines suppliers to offer at their marginal
cost. And two, provide transparent signals for resources
to provide power when and where needed. Both within
the California ISO balancing area and in the neighboring
balancing areas throughout the West, through the Western
energy imbalance market. And then third, it provides
signals for long term contracting. And this, you know,
it's both with respect to resource adequacy, which
is a very important piece puzzle. As well as for hedging
transactions, which other panelists have discussed
a bit. But that's where, you know, buyers and sellers
may voluntarily transact for electricity prices agreed
to ahead of time. Um, those are informed by the ISO
market signals. And, and consistent with the, you
know, competitive wholesale electricity markets.
So the California ISO markets and the resources that participate
in them. Reflect the cost to produce electricity. So
gas prices are an input to the electric markets and
can flow into the resulting electricity prices. As
Amelia's charts showed.
Um, if and when gas resources are on the margin, which
they often are. Which is all, which is to say these
gas prices aren't input. So, you know, the prior panels
today discussed, you know, potential reforms to gas
pricing, gas operations. Things you can do in the gas
market itself. And so if such reforms put, put downward
pressure on natural gas prices, then uh, that will
just sort of flow into, through suppliers offers into
the electric markets. Um, flow into the business of
the CAISO market and put downward pressure on the
electricity prices as a result. Um, so to put another
way kind of, the most direct way of addressing the
concerns raised here today. Um, is if you can do something
in the gas market itself. Um and then, you know, if
that if that can be successful, then you don't necessarily
need to do anything incremental on top of that. To get
to address any concerns about high electricity market
prices. Because it just flows through, um lower gas prices
would just flow through into the electricity market
for resource offers.
And so now some observations on the events of the last
couple of months. That we've seen with high gas prices.
Um, other panelists have done a great job of um, of
identifying many of the drivers for, for what is putting
upward.
Um and I won't go through all of those, but to mention
one that hasn't perhaps got uh as much air time. Um,
that I just wanted to mention is um, generation retirement
throughout the Western region. Um, just meaning that
there are a few other supply sources to switch to and
gas costs rise. Um, ordinarily, you would sort of expect
across the electricity market to see well, you know,
different resources or economic or more or less economic
at different points in time. And if you become less
economic, than the market will dispatch other resources.
Um, and not, you know, tell resources not to buy that
expensive gas, right? Because we can run something
else instead. And um as we've seen, for instance,
um some cold, you know, continuing coal retirements
throughout the rest of the West. Um, there's just sort
of a little less uh, switching available for the market
to do. Um and, and I mentioned this because I think
this underscores the interrelatedness of the gas market
and the electricity market. And I think in terms of
some of the potential um, uh, I don't want to say perform.
But, but potential things to consider going forward.
Um, thinking about coordinating, coordinated planning
between and across the gas and electricity space. Um,
could be very important um, as given that interrelatedness
and that interdependence.
And then uh on, on the issue of reliability. Um, we
did want to note that while, you know, gas prices have
been unprecedented in magnitude and duration. That we've
seen over the last couple of months. Um thus far, the
higher gas prices have not affected the actual reliable
operation of the electric system. We haven't heard
um, through the outreach we've done. We have not heard
that there have been actual threats to gas um, curtailment
for, um for resources or anything like that. So it's
not been a question of whether you can get the gas,
it's just been a question of at what price. Um, but
we will continue to monitor the ISO markets. To address
an unusual market results. And as others have mentioned
already, yesterday we published a report on the recent
impacts in the gas and electric markets. Um uh so
with that, we look forward to the discussion on this
panel. And um, ISO is ready to work with California
entities and entities throughout the West. On the path
forward. Um, and thank you very much, again.
Thank you. Thank you Becky. Um I am, uh as your
moderator. I'm gonna go ahead and ask one question,
and then I'm gonna turn it over to um, President Reynolds.
To see if she wants to ask a question. And, and
then we'll go to the rest of the dais. Um, so my
question, um is uh and, and you know. Maybe my panelists
can raise their hands and see who's most eager to answer.
Otherwise, I'll pick on one of you. Um uh, my question
is about, um, what we do to sort of mitigate price
spikes. So the US has a strategic petroleum reserve.
We recently used it in an effort to address gasoline
price spikes, which flow through to consumers. Um,
when this, the CPUC adopted the core, non-core uh policy
in the 80s. It did so because electric generators
had the ability to fuel switch from natural gas to
oil in times of high prices. Um since that time, almost
all electric generators that run on natural gas.
Have removed their oil tanks, they can no longer fuel
switch. Um, and yet they remain non-core. So do you
think California should consider something like a strategic
reserve for natural gas. For electric generation bill,
you know, definitely, you know, explained how hedging
comes at a cost. Um but uh, what would the benefit
be and what would the obstacles to that approach be?
Um, and I'll let you raise your hand bravely any of
my panelists. Who want to talk about electric generator
hedging requirements.
All right, Bill and Fred. And then say I'll let the
two of you go and then I'll turn it to uh, President
Alice Reynolds. Thank you.
Sure. I mean, I think essentially that, that's what
the storage facilities that currently exists provide
for us. Um, that they are that uh, sort of reserve
that helps prevent the price volatility around. Um
those price spikes that, that may occur. And that's kind
of my point around and being an important feature of
the gas infrastructure. Um and again I, the gas utilities
were describing it correctly. As a combination of reliability
from, from gas standpoint. So for, for um, you know,
core customers as well as providing that price protection.
So in a way it kind of exists. One thing that I
didn't get to one of my bullet points was. Um, Southern
California, they, that uh access to storage or being
able to use it from a electric generator standpoint,
does not exist anymore. That may be something worth
looking at to see if that could be made available. To
provide more tools to prevent spike, price volatility.
On the electric side for, for that class of customer.
So this is Fred. Uh, I think we should be looking at lots
of things. You know, not all of them may be feasible.
Uh, the point about, you know, having a physical gas
reserve would be similar I guess to a strategic petroleum
reserve. But there are lots and lots of policy issues
with how to do that. There's a responsible, when do
you use it? Uh, James Bushnell wrote some interesting
comments on this whole topic. Around the time of the
Energy Reserve Bill discussion last Summer. And he also
testified in that bill. You know, it's something we
might want to look at on the gas side. Could we find
a way for the states and I think this would be a
Western uh, multistate effort ideally. You know, reserve
some space that could be used. Well I don't know,
but we should look at that. On the power side, I think
we have more options. Um, batteries provide kind of
intraday storage and I commend you to the new chart
on the CAISO website. Showing now the hybrid performance
which for yesterday for example, clearly showed the
ability to move energy from the day to the evening
ramp. And also into the morning ramp by using the same
hybrid facilities. In both, in California and in the
Northwest California has a fair bit of hydro storage.
Especially in low hydro conditions that could be used
in that way. And in the Northwest of course, we have
a gigantic resource. There are lots and lots and lots
of constraints to doing this with hydro. But, you know,
how many billions of dollars do we have to hand off
to the markets? Before we decide to change the way we're
doing supply side. The supply side of course, then we can
get into this. Is only one, only one half the equation.
We have lots of things we should be doing on the demand
side as well.
Okay um, President Reynolds. We have until about 12:35.
I did see Becky put her hand up. Do you have
a quick addition? And then I think Elliott is gonna,
has got his hand up. But I'm, I'm gonna like Becky
go real quick and then turn it to President Reynolds.
Unless you didn't mean to. No, no thanks. Just, just
quickly. I think it's a great question. Um, certainly
gas storage seems like it is a, is a prominent driver,
right? Even as wearing sort of this perfect storm of
lots of different drivers. It feels like gas storage
is, is a big. Um, is a thing that feels like it
wants to be tackled in this um, in trying to figure
out how to move forward from here. You know, I would
just advise, I think it's important to kind of think
through. Um
how, who to put that, what entities put that on and
how that syncs up with market dynamics? So for gas
generators, for instance, if um, uh, from some of
the outreach we've done. We understand that they, you
know, do sell power forward. Um and, and that those
hedging transactions that, that is settled. You know,
not at the, not at the, you know, they had in real
time prices um, that are shown on those charts. But
those are settled at prices agreed to ahead of time.
And so um, my thoughts from the outreach we've done is
that when that happens. Um, you know, you place
the uh, the risk of the price of the, on the gas
generator for instance. Um, and so you take that risk
off of customers, these customers. And, and so um,
I think if you are asking should gas generators be
required to put gas in storage. You know, separate
apart from those hedging transactions. You know, I
might expect that they would price the risk that the
forward gas purchase may become uneconomic. You know,
by the time it comes around to actually produce the
electricity. And so that, there might be a premium that
shows up somewhere in terms of, you know, covering
that risk on their side. Um, basically it seems like
there are ways to think through. I'm not offering sort
of specifically to structure it, but I think it's important
to think through different entities, the different
incentives and, and where those lie. Thanks.
President Reynolds. Thanks Molly. I'm not gonna take
too much time. I want to give my fellow members of
the dais, time to ask questions. But I had a quick
question for Bill. Um and um, it's about the difference
between the Southern system and the Northern system.
And so we saw prices at um, PG&E Citygate to be
similar um, to prices in the Southern system. But
there was a significant difference in I think the procurement
prices and certainly the prices that um, core gas customers
saw. So this might be more, you know, more of a direct
question for SoCalGas. But given your visibility into
the situation and your experience, do you have thoughts
on why we might have seen that difference? Yeah. The
way I understand it and I'm getting a little out in
front of my skis. Is that um, you know, we have on
the power side. We have our era account, forecasting
balancing account. That it was, it had something to
do also with the timing of the gas balancing accounts.
For the two service territories on the gas side. But
that's about the extent of my knowledge on that. Where
the prices were the same. But when you're forecasting
your rates and you need to rebalance it. You may see
that they're not completely lined up. In terms of when
SoCalGas is doing it. When PG&E is doing it. You may
just see when those rate increases are coming at different
times. But that's, that's about as far as I can tell
from, from an actual rate impact on customers at the
end of the day.
Okay. Um anyway, does the LADWP have any
thoughts on that? Or maybe it's something to save for
later? I want to see if anyone else had any thoughts.
Likely something that's safe for later. As we continue
to bring more renewables onto the system. It's just
the way that we're set up, it's a little bit of a
different paradigm. Particularly uh, participating
in the Kaiser EIM Market also. Um, it's difficult
to forecast what our natural gas spring is going to
be from one day to the next. So there's a bit of
a compounding problem here. When it comes to figuring
out what our gasper is going to be. And then subsequently
responding to the market.
Okay, great Molly. I'll turn it back to you.
Thanks. I'll just go in the order I saw them. Um,
uh, I'd like to turn to the CEO of CAISO, Elliot Mainzer. Do you have
a question? Thanks Molly, yeah. Um really, really outstanding conversation
here. And there's been a lot of talk today about the
dependencies between the gas market and the power market.
And gasping a key input into electricity prices. Build something
of something you said, others may also have a perspective.
But I know for a long time, I've heard discussions about
the need. Maybe some potential to better align uh,
the power market scheduling windows and gas nomination
processes just for visibility, transparency. Is there
anything that, you know, you see that would be, you
know, fairly actionable in that realm. That would maybe
better harmonize both inside, inside of California.
Maybe also across the broader West, which has also
been experiencing these phenomenon. Yeah, I can tackle
it, Elliot. Yeah. Um we, we did introduce this concept
a number of years ago. Where um, you know, we're making
our gas nominations essentially after we get our
IFM Awards. So I'll go back up, not get so wonky.
I'm looking at Elliot, that's what I did. But essentially
when we say how much gas we're gonna use. We don't
that amount in until we find out how much power our
generators have to give. Because they are directly correlated.
Um, I want to be clear here though. I think that inefficiency
is not what's causing the price spikes through this two
month period. Um, it just makes it a little more difficult
for us to balance. And I think ultimately it does increase
costs, um, at the end of the day. But certainly not
what we've seen throughout the couple of months. So
when we look at it um, Elliott. That I think the challenge
is, there's so many market dynamics. You're basically
moving to even just say just the CAISO. Moving the CAISO market
um, runs and calculations. And then moving the gas
market simultaneously on when they have to nominate,
that it became a bridge too far. Because the amount
of market changes have that, that had to occurred, and
then impact across the West. Forget, you know, I'm
not even bringing in those secondary facts. So, you know,
it is, I think it's something to work out. To see
if there's a value there, that that could be worked
out. But I don't, I am well aware of the sort of
practical implications that would occur on, um, changing
those market dynamics. Thank you.
Okay. Um, I'm seeing no one else chiming in. I'm gonna
go to Commissioner Gunda next, and then Commissioner Douglas.
And if the other members of the dais, um just saw Commissioner
Shiroma. Um, if you can raise your hand. I'll call you,
call on you. Thanks. Yeah, thanks Molly. Um, Bill
I think maybe this is a question to you. And first of
all, thank you. It was super helpful panel, um also
specifically. And really, I think some, some things
that was really helpful for me. Uh, 30,000 ft level
I just wanted to um, kind of build on what Elliot
was just asking. Are we talking about a true scarcity
here in the market? Or kind of a, you know, structural proxy of
scarcity given the misalignment of timing or both,
right? Um it seemed, it seemed that we're talking
about both elements um, and wanted to understand.
Um, you know, what is really happening in terms of
you know, the scarcity. And how those prices are, are
being misaligned in time. That, that kind of
goes through the entire process. Anybody can comment
on that. Let's go to Amelia first. Um, and then I saw
Fred's hand up.
I repeat something that was just said. I don't think
this is an issue that has to do with the alignment
between the gas and the electric market. Part of the
reason that you can see that is the extended period
of high prices. What we did see changing in the gas
market. Was the expectation of the use of gas and storage
to mitigate price spikes. If you go back to some of
the notes that were made in the first panel. And put
them together with things said in the 2nd and 3rd panel.
You'll see that's a pretty consistent uh, finding
throughout this, this En Banc. Thanks.
My opinion is that the price spikes, especially the
weather driven ones that we get both Summer and Winter.
You can kind of understand why that's happening. It
does, there is a real scarcity aspect to it. But the
long tail, especially after those price spikes that
we saw over the last month. When weather conditions
are clearly abated and we're back to, you know, maybe
a little cooler or maybe a little warmer overall. But
those, those very high gas market prices persisted.
Indicates something is happening structurally in the
gas markets. That enables that to occur and we really
got to look at that. It's not a matter of gaming necessarily,
it may just be market structure.
Okay. Um, Commissioner Douglas, you're up. All right.
Thank you. Um, and I don't know if this is too speculative
to answer or not. But do you foresee the potential
for the gas issues and the actions parties have taken.
To mitigate their exposure by say to these high costs
by say, running more hydro or something like that.
Is this something that could affect summer reliability
or, or do you think? Um, or how could it potentially
affect summer reliability? If at all.
I can tackle this one at least, at least from the California
perspective. Um, yeah. Even going back to the last
question about scarcity. We did not experience liquidity
issues in the, in the gas market. Now, let me compare
this to the polar vortex from a couple of years ago.
We were having trouble getting gas um, there was true
scarcity and getting the actual physical molecules.
Now in the Summertime I think for the most part, what
we've seen is that. Um, one will have more reasons
are available. Solar's um, solar's uh, able to produce
a lot more electricity, life storage, additional storage
resources. Certainly anytime we're short gas, it could
be bringing a reliability issue. But even over the
last couple of heatwaves, we've had these last three
years. While gas was at an elevated level, you know
in the $16 range. Um, we were never in a position where
we had difficulty in getting gas to the gas units is
more about having the gas units to actually burn it.
Um, so that has not been an issue. Even some of the
most uh straining um, circumstances. Um, I think the
Commission has also done well to allow some loosening
of Aliso Canyon withdrawals, during those periods. To
make sure that we do maintain electric liability. But
obviously, it's not an endless pool at the end of the
day. But I think for Summertime um, you know, my main
concern has probably been more around the amount of
capacity on the system. Being able to meet the system
at the end of the day.
Okay, looks like Fred wanted to jump in and then I'll
go to Commissioner Shiroma. Thanks very quickly just
to say. I think if we unpack this a little bit more.
I think we'll, you know, we will, we know we will
find structural differences in demand between Winter
and Summer and also by region. Northwest Winter gas
demand is very different. Because we have so much more
heating here. Uh, Summer demand is more aligned between
the regions. But the, but the resource side also is different
between Winter and Summer. I think that when we start
looking at that more structurally. We'll find some
important clues about the right ways to come up with
responses.
Okay. And then I saw Marlon's hand. Sorry, Commissioner Shiroma. Marlon, you want to jump in on
at this point. Sure, I'm just going to echo
what Bill was saying. That during the Summer, I'm going
to speculate if I had to presume. This isn't going to
be the same issue during Summer. Because during the
Summer at least in Southern California. The issue has
never been the volume of supply load to meet load. It's simply been
the instantaneous or the hourly load. That the pressure
in the pipeline may be diminishing. Because all of a
sudden you have electric generators sucking everything
out of there, really quickly as we ramp up. And the
fact that it is the injection season, generally supply
is not that big of an issue in the Summer, as it
is during the Winter.
And then Commissioner, thank you for that. And Commissioner
Shiroma. Thank you. Uh, you know, if I was paralyzed
almost. I really think that a lot of what we're experiencing
today is the result of deregulation from 20 years ago.
And the uncoupling of power generation from our investor
owned utilities. But having said that, I have a granular
question. And that is, you know, on our CPUC
website. We indicate that 65% of our gas use is
a non-core customers. That would be power generation,
and industrial uh, manufacturing what have you. Use
is 35% for core, which is residential. And I think
you know, I always look for indicators. And I would
say that, that tells us you know, during the Summer
we've got air conditioning needs more and more air
conditioning needs. And so um, um, it so far as, but
we have to very much pay attention to the year round
impact. On what's happening with the gas prices. Uh,
in that same set of indicators metrics. It talks about
in California, and by the way, I do think this is additional
problems that we've got to figure out traditionally.
We've got a Western conference coming up in May. There's
19% of customers who receive gas directly. My question
is, does anybody know. Uh, did they experience
the same impact? I mean these 19% received directly from interstate
pipelines or directly from California producers. Does
anybody know if they experience the same price rushers?
As the core and non-core overall.
Do they have a (inaudible). I'm sorry Commissioner, which
which customers are you referring to? I, I think I missed
it in the audio. Well, they're evidently are 19% of
100%, received gas directly from pipelines and from
California producer. They go through a third-party
or their, you know. Um not um, going through our
investor owned utilities or what have you. Do you
know, if they experience the same price spikes? And the
answer is, we don't know that, that's okay.
Yeah, I think it would depend on whether they, if they're
buying that spot market. Then, you know, actually the
question would become, did they hedge their position
um, uh to accomplish what they're, what they're trying
to accomplish. And I think, you know, whether they
have or not. Will probably depend on what exactly
the industry and whether it makes sense for them. I
think typically if your physical operator of some sort
of mechanical or generation type unit. Um, some level
of hedging, it's just prudent from a risk management
standpoint. But, you know, if they're unhedged then.
Yeah absolutely, they're feeling the price spikes.
(inaudible) O go ahead. Sorry, Commissioner. Did
you have a further question? No, further questions.
Thank you. Thank you very much for this excellent
morning and afternoon. Uh, may have a few
closing remarks. Thank you. Thank you for that. And
Amelia, you looked like you were gonna jump in shaking
your head. No, you're good. Okay. So um, I think I'm
going to at this point. Um, turn it back over my, my
colleague um, Christina Aborigine. Um, uh and um thank you
very much to my panelists. And thank you to the dais for
these excellent questions and your attention.
Thank you Molly. Um, that concludes all three panel
discussions for today. I want to thank all of our panelists
and moderators for the excellent, insightful discussions.
Uh, Francisco can you pull up the deck please? Thank
you. So it is now time for public comment. As a reminder,
if you would like to make verbal comments today, please
dial 800-857-1917. The access code is 1767567#. Um, you
may also email your comments to us at gaspolicy@
cpuc.ca.gov
Um, to make comments today over the phone. Please go
ahead and unmute your phone, press *1. Record
your first and last name slowly and clearly, when prompted.
You will then be placed into a queue in the order that
you have identified yourself. If you wish to cancel,
please press *2.
And please note, we are only able to accept public comment
at this time. Please do not pose any questions to the
dais or panelists. Um again, you may also email us
your questions.
Operator, will you please announce the first speaker?
The public comment line is now open. Our first speaker
is Lionel Morris.
Hello. All right. Uh, sorry Lionel apologies. I just wanted
to note that, at this point you have two minutes for
your comments. You will hear a chime when your time
is up. Thank you.
Hello.
Yes, can you hear me? Yes, can you hear me?
Yes, please go ahead with your comment. Okay, thank
you. Thank you. Hi, my name is Lionel Morris. I am a City Six
resident of the San Fernando Valley. I'm also a board
member with the Sun Valley Area Neighborhood Council,
but I am speaking in my own capacity. I am very disappointed
with the gas prices from SoCalGas. Um, the cost
per firm has skyrocketed, um significantly. And many
of us are low-income working class families, myself
included. And I'm low-income I cannot afford to pay
more in utility costs such as gas, water or power.
And I strongly believe that the California Public Utilities
Commission and State Legislators. Should look into the
gas price increase from SoCalGas. Because um, we
feel that SoCalGas unfairly is price gouging.
To take advantage of the market situation with, you
know, due to climate change and, and the cold weather.
Uh, impacting the whole country. And we believe that
SoCalGas is just keeps raising its rates per firm.
And it's unfairly hurting working class families, myself
included. And many people have posted this under on
Nextdoor, a social media account and on Twitter expressing
their concerns. And I've taken action by sharing resources
and information to my neighbors in my community. To
to inform them how to make public comments. And, and
I've also read the consumer watchdog, that's looking
into this. And we feel that the California Public Utilities
Commission should investigate SoCalGas and its
parent company Sempra, I think. And why their price
gouging and they should not be price gouging. Because
they keep raising the rates every single time. Um, they
request a rate increase and it's not fair for working
class families. Uh please take, please investigate this.
Thank you. I yield my time.
Thank you. Um I apologize. I actually meant to say
that we will allow one minute comment. Because of the
number of callers we have in the queue. So apologies
for that Operator, will you please announce the next
speaker? Our next speaker is Noemi Luna.
Hello?
Hello? Yes, we can hear you. Okay, wonderful. Thank
you. I'm so sorry about that. Well thank you very much
for hosting this information or discussion session.
There's a lot really going on, um from a residential
customer perspective. There's a lot of big words and
jargon and um processes that are really not privy to
the public. And I think that this is a great, a great
forum to hear all of this out. Um, but it is a
big concern. Um, when we as, as a residential customer
that we went from $50-$80 a month to um, double. And
then it seems like it went to um four times that cost.
Um I as a residential customer, my house is about 3000
square feet. I was paying $50 on a monthly basis and
then it skyrocketed $118. And now this month, it went
up to almost $400. Um which I,
I could say that as, as a resident it's obscene.
Especially when we're trying to catch up with expenses.
Hello?
Yes, thank you for your comment. I just wanted to note
that your time is up. Okay. How can I get back on
the queue?
Um, at this point um we have a full queue. And we
have a limited time. But please feel free to email us
additional comments to gaspolicy@cpuc.ca.gov
Thank you. Perfect, thank you very much.
And our next speaker is Carl DeMaio, your line is open.
Thank you as all of you know, as CPUC Commissioners.
California utility rates are not set by the utilities.
They're set by you as appointees of state politicians.
If you or Governor Gavin Newsom really want to find
the root cause of our high utility costs. Look in the
mirror. You and the Governor are the ones forcing California
ratepayers to pay the costs of your extreme fixation
on climate change. This Friday, the Transparency Foundation
will release a study of utility rate cases approved
by your Commission. The study shows that you're charging
Californians, 67% higher rates for electricity and
30% higher rates for natural gas than the national
average. You've also imposed hidden state taxes through
unnecessary charges. Including public purpose programs,
various climate change regulations. Resulting in a hidden
tax rate on each ratepayers bill of 26% to 30% for electricity,
and 17% to 28% for gas. In PG&E's, 2023
rate case submitted last month. They actually admit
that the rates are driven quote by the impact of the
state's decarbonization strategy. Some of you mentioned
gas storage. Well, that's ironic given the fact that
your policies have discouraged electricity or utility
companies from storing gas. Uh, including PG&E's
decision to abandon gas storage investments in June
of 2021. In closing, you expected these high rates.
The rates will only get higher because of your force
transition. To virtue signaling, energy sources versus
cost, efficient energy sources. Thank you.
Thank you.
Our next speaker is Michael Aguirre.
Good morning. Um, this was not a hearing. There was
no evidence, no sworn testimony. The utility sat on
the same side of the desk as the regulators.
What we need is an OII to allow the customers to
participate in a real investigation. To find out facts
such as does SoCalGas mark up, the prices for natural
gas before it sells that natural gas to SDG&E? Third, and
finally, the fact that the electricity prices are still
so vulnerable to the natural gas prices. Show that the
climate change progress has been way overstated. We
don't know exactly. I do agree with one thing that
one of the Commissioners said. And that is, this goes
back to the deregulation of the markets. We need to
tackle that. Please. Please please think about the
public interest. Thank you.
Our next speaker is John Smith.
Okay. So on um, slide 25. SoCalGas casually showed they
stopped injecting gas from the storage system for four
weeks, smack in the middle of the price spike. Um, they
stopped December 21 and resumed on January 16. Then
after the injections were resumed. Um, the spot market
imploded. Now, we're back to competitive rates. So
a question that needs to be answered right now, we
cannot address panelists directly. But why did SoCalGas
do this for the four weeks in the middle of the
price uh, spike? And then secondly, everybody else
is kind of alluded to this. On the counter party side,
on the spot market where any Sempra subsidiary, subsidiaries
involved. Perhaps one's not, not regulated by the CPUC.
Or even the bilateral contracts indexed the spot market.
So I'll shoot an email to and hope this gets answered
by somebody. Thank you.
Our next speaker is Troy Jackson. Yes, good afternoon
or morning, whichever it is. Uh, just wanted to say
thank you for allowing me to speak on this. Uh, I'll
be turning 67 in a couple of months. I'm on the CARE
program. And I know a lot of seniors are. And I don't
understand how some of these people are saying that
their uh, utilities or gas utilities have went from
$50 a month to $400 a month. And how seniors and people
on limited income uh, can afford to stay warm. And
I, it's like California doesn't really care. Uh, the
Commission that you guys are on, Governor Newsom. Uh,
you know, he's cutting back on, on oil. He's cutting
back on oil production and making all our prices are
costs of gasoline, uh food, electricity and gas, power.
To warm our whole our homes, and I don't understand.
I'm just a simple man. I just, I worked on a farm
all my life. And I can figure this out. And I don't
understand why you guys still want to raise all of
these prices. There's gonna be a lot of people that's
gonna, you know, they're going hungry and they're cold.
And they're gonna be hot in the summer. Thank you.
Thank you. Um Operator, I think we have time for one
more caller. And then unfortunately, we do need to move
on to closing remarks. But again, please feel free to
email your comments to us, gaspolicy@cpuc.
ca.gov
Thank you. Our last speaker is Charles Langley.
Charles, your line is open.
All right, our last speaker is Steve Hicks. Thank you.
Um, my name is Steve Hicks. I'm a lifelong San Diegan. My
mother is 90 years old. She recently installed all
new gas furnaces and she keeps her house nice and cozy.
Her bill was $500 just for the gas portion. This is
insane. The CPUC event, this CPUC event brings the
term gaslighting to a whole new level. With all of the
data and presentations and I'm a data analyst. You
failed to observe that the CPUC sets the rates and
forces the providers to charge what they do. We are
onto you and it's a political solution that's required
to get rid of all of this green new steel.
Thank you. Thank you. Operator, I was just advised that
we actually do have time to go through the rest of
the callers in the queue. Um, if that's not too late.
So please go ahead with the next caller. Sure, our next
speaker is Janet Hall.
Thank you. Good afternoon. Um, as a resident of San
Diego. What I'm experiencing like so many others are.
Outrageously high gas to the point that I entirely
shut my heater off. I keep all my lights off. I don't
even try to put lights on. And I still notice I get
charges where the electric delivery which confuses
me to death is between 67% to 90% of my entire bill.
I've been told that, that has something to do with helping
with the infrastructure cost. I, I truly believe that
CPUC, if you really are the true regulating body
of these utility companies. Needs to do much greater
in depth work, accounting wise. And looking into exactly
what is going on when we get these bills. That we can't
understand. We get all these little, you know, rewards
telling us. Oh you did good, you suffered to the nth degree.
So now we're gonna a chance to cut back. So I think the CPUC
needs to really step up and really do regulating. And
do investigating. Thank you.
Our next speaker is
Patricia Baines.
Hi. Um, my name is Patricia Baines. I'm a SDG&E customer.
And I'm reaching out with the ludicrous national rates
of gas charges. I would like to know how the CPUC or
the CPUC believe these increased rates are affordable.
Are unacceptable for California to absorb, their families
and where families are gonna find the funds. And they're
already tight budgets.
The cost of living in California for middle class,
which makes up more than half the residents of the
state is out of control and unsustainable. Every consumer
categories see all time high inflation rates. All at the
same time and now natural gas is added to the list.
When each category is looked at in silos, the impacts
manageable however. But this all compounded simultaneously.
As the true effect is magnified to an unsustainable
level for families to survive. I broke down when I
saw the increase in the natural gas charge from the
on my last bill. Where gas rate went from, went
up 228% from 1.06 in December to 3.45 in January 2023.
This year, over year increase from January 2022, rate of .84.
This came right after the holidays during a cooler
than normal month. With little to no time prepared,
no alternative, and not even knowing what our final bill.
just released the gas energy rate. I will need you to quickly wrap up, so that everyone has a chance to speak. Okay.
Thank you so much. Um, okay. Well, I'll start with this.
Um, I have small children at home. I'm holding their
little cold hands. It breaks my heart. No one should
have to hear their kids say they're cold. But what
makes it worse is reaching out and being told you don't
need help, as part of the middle class. I've spoken
with so many different groups and organizations SDG&E
is promoted to help with the rising gas prices.
However, I qualify for none of them. To get help, I was
told I need to leave the state. I recently learned
about a program that SDG&E is offering called neighbor
to neighbor. Where, where San Diego residents hand out
money to those who can't afford their bills, from their
own paychecks. This is great, but why can't our state
do anything to help us. Thank you. Thank you. Thank
you. Operator, next caller please. Our next speaker is
Andreas Malik, your line is open.
Thank you. My name is Andreas Malik. I live in San
Elizabeth County and I work as a District Director
for Assemblymember Dawn Addis. Whose district includes
parts of San Luis Obispo, Monterey and Santa Cruz
counties. The number one issue that our constituents
are calling us about is the drastic increase in their
utility bills. Someone at the beginning of this meeting
today refer to it as a sticker shock, but it is much
more than that. For many of our constituents, it's true
hardship. As they simply can't afford to pay a bill
that is three times higher than what they budgeted
for. We've had constituents with bills as high as $800.
A four time increase from the previous one. Even as
they lowered their usage. Our residents are left with
few options on how to navigate the situation and they
are quickly losing trust in the agencies. They allow
this to happen without proper planning and mitigation.
I appreciate everyone's input today and I hope that
you can not only plan for the future. To prevent this
kind of situation from happening again. But to provide
adequate relief that is desperately needed today. Thank
you.
Our next speaker is Marca O'connell.
Hello, is the line open?
Your line is open. Okay. I got an email from an Assembly
person asking me to come today. I've waited hours and
you're giving me one minute. We are the most important
people, not the panel. And you need to give these people
more time than one minute. I'm really confused as a
senior, who wears three layers of clothes to bed. And
doesn't turn on my heat, because I can't afford it. All
I heard you guys whining about was you don't make any
money. But I went online and it says you make $20.64
billion in 2021. And your total assets are $103.33
billion. This is PG&E. Okay. As far as the PUC
goes, I'm sorry guys, you are a joke. I agree with
the guy that said you're sitting up there with the
utilities. Where are the people that you're supposed
to be representing. And the advocate, I've never heard
anybody make such a weak speech. You need to be replaced.
Because you're not doing your jobs and you are in bed
with the utilities. And you are hurting the citizens.
Bad job guys, as usual.
Our next speaker is Marcel.
Good afternoon. My name is Marcel Kopparberg. I am an attorney
with the Utility Reform Network. Um, I really just
wanted to comment on one issue. I appreciate the data
concerning gas prices. That emphasized West wide increase
in gas prices. But the reality is that for January the
gas prices charged by Southern California Gas Company.
Were 2 1/2 times the price for PG&E. I think President Reynolds
asked an excellent question as to why was that? And I
did not really see in the presentation concerning gas
demand, and weather and prices, and transportation lines
and storage. Any discussion of what was the difference
between PG&E and Southern California Gas Company.
That accounted for a 2 1/2 times price difference. And
I certainly hope that PUC will follow up and investigate.
To determine whether there is something in the activities
of these two utilities. That should be addressed by
the Commission. Thank you very much.
Christina, there are no more speakers on the public
comment filling.
Thank you operator. Um okay, well that concludes our
public comment session for today. Again, as a reminder
if you have comments you'd like to submit to us. Please
email them directly to gaspolicy@cpuc.ca.gov
Um with that, I would like to turn it over to
President Reynolds for her closing remarks. Thank you
Christina. Um, I did want to thank everyone for attending
today. Um, and as well as thank all of the members
of the dais for participating. And I wanted to also
extend a special thanks to all the panelists. Um, for
taking the time to prepare and present information
in such a clear way. Um, I really appreciated all of
the discussions and I also appreciated hearing from
the members of the public who called in. Um, to tell
us about their experiences. I think that, you know,
it shows the reason to do meetings like this. Where
we really um, get sunlight. Uh, the reasons for the
drivers behind the gas price spike that we saw. Which
of course is beyond the normal increase um, in gas
bills. That, that folks see as we transition from Summer
to Winter. Um, I also wanted to remind everyone that
they should be seeing the Climate Credit show up on
their bills. Um, we hope it will be in the next bill
cycle. The utilities have all been instructed to provide
the credit as soon as possible. And that's between
$90-$122. Some will see a combined electricity and
gas bill credit um, to get to those amounts. To provide
some relief during this time of the recent price spike.
Um, I also was encouraged to hear from the PHMSA representative.
That the El Paso Line will be back um, in service on
February 15. That's great news um, and really a will
will be a great improvement to the current situation.
When that, where that gasoline has been down for quite
some time. Um, and I also want to note that we'll be
following the next steps. Following the Governor's letter
to the FERC. And whether there's a need to examine the situation
any more closely from an investigatory perspective.
Um, and we have met with FERC Staff and will continue to
uh to do so. Um, with those steps though, I do believe
that we need to have follow up on this question. And
I understand our Staff will be taking the materials
that will be presenting, presented today and assessing
next steps. So, I very much look forward to continuing
to examine the causes that we saw. For the, for the
situation that we saw to look for, um ways to mitigate
similar situations in the future. So with that, thanks
again. Um, and I'll turn to other members of the dais
for closing remarks.
Commissioner Shiroma?
Thank you President Reynolds and for convening this
EN Banc. I felt that the speakers, uh were excellent with
the knowledge. Uh thank you to the folks who phoned
in with very, very impassioned messages to us. I want
to assure the speakers or the folks who called in.
Maybe didn't speak, but I have listened to the conversation
through this morning, this afternoon. Uh, I want to assure
them that the team at the CPUC is
working very hard. They are very experienced. They
they've got a lot of knowledge towards troubleshooting,
towards problem solving. I mentioned before my comments
and I think many of the ills that we are experiencing
today uh is is an artifact of deregulation. Now having
said that, doesn't mean that we um, uh not problem solve.
We must probably solve. I heard loud and clear the
message that uh, the cost of inaction uh is increasing
rapidly. And that cost is put on the customers both
industrial and customers. Residential customers, the
power generation. I think it's unconscionable that
consumers don't have more protections against the win
of news. You know that there's this news can have such
an impact on the cost of gas. I think the further investigations
by uh, the uh the FERC is going to be important. As
well as in activities that we are doing at the CPUC.
(inaudible) the CAISO. I know that it is a complex uh, it
is a landscape of looking at the equilibrium of storage
of hedging, of anticipating weather and drought, of
a safety of the pipeline, the maintenance of the pipeline,
we do a lot here in California. What about the rest
of the, the information? I think there is a has, has
adopted new requirements that are very important. But
we must be on a constant quest to see if there's more
that can be done. To maintain the integrity, because
even as we are looking to be decarbonize. We are heavily
reliant upon this infrastructure and on natural gas.
So I do look forward to working with my colleagues.
To problem solve and towards looking at how do we provide
for greater protections. For the other customers in
California and across the region. Thank you. And back
to President Reynolds. Thank you, Commissioner Reynolds.
Thank you, President Reynolds. I will try to be brief
given that we're a little over time. I'll echo the
thanks of everyone to the panelists, the public and
the Staff who, who supported the En Banc. And our response
to high gas prices. I really want to just focus in
on one of the factors that we talked about. In despite
the prices, that's the demand side. I think um, we've
heard discussion of how increasing demand due to cold
weather contributes to price spikes. I really wanted
to continue hearing from utilities about how they can
empower their customers. With information that up prices
are anticipated. So that customers can respond in advance
of events. Hopefully both to mitigate um, mitigate
price spikes in the market as a whole. But also to
save on their own bills, in advance of those bills coming
to them in January. Thank you.
Commissioner Houck? Just briefly, I just want to thank everyone.
The Staff, the panelists that was on the dais and the public
for their participation in today's events. This is
a critical issue that we are all taking seriously.
Um, this is just the beginning of, of what we're looking
at. And then just to follow up on Commissioner Reynolds
comment. As I've said before, I think we need to also
really double down on looking at demand side um, solutions.
To some of the bill issues with flexibility and demand
response um, issues. And with that, just again, want
to thank everyone for joining us today.
Great, Commissioner Douglas?
Thank you. And just very briefly, I'll just join in
the thanks to Staff, panelists and the public. Who took
the time to call in and participate today. And um, I'm
very much looking forward to next steps here. Thank
you. Great. Now, I'll go to Vice Chair Gunda.
Thank you President Reynolds. I'm having difficulty
turning on my camera. But I just wanted to say thank
you so much for convening this important conversation.
Um from the public comments as well as just the panelists.
I understand how important of an issue this is for
a number of people in California. And, and look forward
to the next steps on continuing to unpack and, and figure
out solutions to manage this price spikes, in
in the future. So thank you. President Reynolds to you and
the Commission Staff. For both, including us and your
leadership on moving this conversation forward. Thank
you.
Great, thank you. Um I'm assuming that Chair Hochschild. I know
he had to go to another appointment. Okay, I don't
see him on. Um, so let's now go to um Elliot Mainzer.
Elliott?
I wanted just to express my appreciation, President
Reynolds for the panelists. I think this is an extremely
important conversation today and also just really hearing
the voices of California as well. And so we look forward
to working with all of you. To continue to our work
together, developing infrastructure, supporting reliability
and also affordability, during this important transition.
So thank you again for including us in the CAISO today. Appreciate
it. Great, thank you for joining. That concludes comments
from the dais. So I'll turn it back to you, Christina.
Thank you President Reynolds and members of the dais.
Um, that concludes our En Banc today. I appreciate everyone
that tuned in.