california energy commission natural gas assessment: short and long term briefing to the legislature...

CALIFORNIA ENERGY COMMISSION

NATURAL GAS ASSESSMENT: SHORT AND LONG TERM

Briefing to the Legislature

Assembly Utilities and Commerce Committee

January 15, 2004

James D. Boyd, Commissioner

California Energy Commission

April 20, 2023 2


TOPICS COVERED TODAY

• Recent natural gas market price increases• Impact on ratepayers• Status of California’s infrastructure• Upcoming issues

April 20, 2023 3


NG MARKET PRICES

• Market prices are highly volatile• Daily Spot market prices at Henry Hub are the

most volatile and most widely quoted in the media• Daily Spot market prices are also quoted at the

California border• Monthly market prices are less volatile• Futures prices are even less volatile

April 20, 2023 4


NG MARKET PRICES

• California’s market prices are tied to national market events

• California border prices have been significantly lower than national prices, due to:– Moderate demand

– Excess infrastructure capacity that allows gas-on-gas competition

– Ample storage inventories

– Risk management by California gas IOUs


2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

22.00

24.00

26.00

01/02/0302/02/0303/02/0304/02/0305/02/0306/02/0307/02/0308/02/0309/02/0310/02/0311/02/0312/02/0301/02/04

$/MMBtu

Southern California Northern California New York City Henry Hub

Regional Natural Gas Spot Market PricesSource: Natural Gas Intelligence

3.00

5.00

7.00

9.00

11.00

13.00

15.00

09/30/03 10/30/03 11/30/03 12/30/03

$/MMBtu

April 20, 2023 6


Regional Natural Gas Spot Market PricesSource: Natural Gas Intelligence

-

10.00

20.00

30.00

40.00

50.00

60.00

12/30/9903/30/0006/30/0009/30/0012/30/0003/30/0106/30/0109/30/0112/30/0103/30/0206/30/0209/30/0212/30/0203/30/0306/30/0309/30/0312/30/03

$/MMBtu

Southern California Northern California New York City Henry Hub

April 20, 2023 7


NG MARKET PRICE INVESTIGATIONS

• CEC, CPUC, and FERC have investigated past market price spikes

• Feb/March 2003: Henry Hub Spot hit $18; we found no evidence of manipulation

• We have agreed to cooperate fully on investigating future “unusual” market events

• California sees current prices resulting from cold temperatures, high national demand, and tight national supplies– Prices could be higher if national storage were lower

April 20, 2023 8


IMPACT TO CALIFORNIA RATEPAYERS

• Henry Hub Daily Spot market prices are not a good indicator of what California Core gas ratepayers will pay– PG&E ratepayer costs up about 30%

• Henry Hub Monthly market prices are more closely correlated

• California gas IOUs have purchased NG at less than the monthly market prices

• Ratepayers pay the IOU’s blended cost, called the Weighted Average Cost of Gas (WACOG)

April 20, 2023 9


IMPACT TO CALIFORNIA RATEPAYERS

• California gas IOUs purchase fuel for Core (residential) ratepayers, and some non-core

• Noncore (large commercial and industrial) purchase gas for themselves using many mechanisms

• Electric generators (EG) purchase fuel for themselves

• Spiking Henry Hub Daily Spot prices can potentially affect some Noncore and EG– Potential impact on the cost of electricity and other

goods/services

April 20, 2023 10


California Natural Gas Annual Average Consumption - 2002

Core31%

Noncore32%

Power Generation

37%

April 20, 2023 11


SoCalGas Monthly Weighted Average Cost of Gas and Henry Hub Monthly and Daily Contract Prices

-

4.00

8.00

12.00

16.00

20.00

1/1/02 3/1/02 5/1/02 7/1/02 9/1/0211/1/02

1/1/03 3/1/03 5/1/03 7/1/03 9/1/0311/1/03

$/MMBtu

Henry Hub Daily SoCalGas WACOG Henry Hub Monthly

April 20, 2023 12


INFRASTRUCTURE STATUS

• California has added storage capacity• California has filled its storage facilities• California has added pipeline capacity• California is currently in good shape to weather

the national NG “storm”

April 20, 2023 13


Current California Storage InventoriesBeginning of the Month, Energy Commission Estimate

-

50

100

150

200

250

300

Nov-2001Jan-2002Mar-2002May-2002Jul-2002Sep-2002Nov-2002Jan-2003Mar-2003May-2003Jul-2003Sep-2003Nov-2003Jan-2004

Bcf

January 1, 2003: 189 Bcf

Total Storage Capacity: 256 Bcf



Level to meet the start of the heating season core requirements - 153 Bcf.

April 20, 2023 14


Interstate Pipeline ExpansionsOwner

Pipeline/ Project Name General Location Nature of Project

Capacity (MMcf/d) *

Completion Date

Kern River Gas Transmission Co. Kern River Pipeline UT, CA Temporary compression upgrade 135 July 2001PG&E National Energy Group

Gas Transmission Northwest WA Expansion 42 November 2001

Kern River Gas Transmission Co. Kern River Pipeline WY, CA Permanent compression upgrade** 11 May 2002

Transwestern Pipeline Co.Transwestern Pipeline AZ Red Rock compression upgrade 120 June 2002

Questar Pipeline Company

Southern Trails Pipeline NM, AZ, CA Conversion of oil pipeline 80 June 2002

PG&E-NEG/Sempra International North Baja Pipeline AZ, CA, Mexico New pipeline 500 September 2002Kern River Gas Transmission Co. High Desert Lateral San Bernardino County, CA New pipeline 282 September 2002PG&E National Energy Group

Gas Transmission Northwest WA Expansion 169 November 2002

El Paso Natural Gas Company

All-American Pipeline TX, NM, AZ, CA Conversion of oil pipeline 230 November 2002

Sierra Pacific Resources Tuscarora Pipeline OR, CA, NV Expansion 65 January 2003Kern River Gas Transmission Co. Kern River Pipeline WY, UT, NV, CA Expansion 906 May 2003Total interstate pipeline capacity additions since 2001 1,414 MMcf/d** Expansion represents a net addition to the original temporary upgrade, which was made permanent

Interstate Pipeline Projects (FERC Jurisdiction)

Interstate pipeline expansions increased California delivery capacity by over 20 percent since 2001.

April 20, 2023 15


UPCOMING ISSUES• Future price trends—UP• Longer term need for additional infrastructure

capacity• Need to embrace LNG coming to the West Coast• CEC and CPUC working together well on gas

issues– EAP– IEPR/energy policy– Regulatory agenda

April 20, 2023 16


.

•Questions?

April 20, 2023 17


BACKGROUND INFORMATION

• CEC Long Term NG Assessment• IEPR• Natural Gas Working Group• NG Infrastructure Workshop (Dec 9-10)

April 20, 2023 18


Comparison of U.S. Lower 48 Wellhead Prices with Energy Commission Forecast

california energy commission natural gas assessment: short and long term briefing to the legislature...

Documents