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California Governor Gavin Newsom called this week for an investigation by the Federal Energy Regulatory Commission to determine whether market manipulation or anti-competitive behavior could explain why natural gas prices in the state are higher than elsewhere in the US
Prices spiked in December during the winter storm to as much as $55/MMBtu, prompting California utilities to warn of sky-high bills.
Since then, prices have fallen substantially, but remained above $15/MMBtu last week at some delivery points in California, while Henry Hub gas prices have fallen below $3/MMBtu.
In a letter to FERC Acting Chairman Willie Phillips, Newsom acknowledged the impact of cold weather in early winter, but said the scope and duration of the price increase “cannot be explained.”
Two of the largest utilities in the state, PG&E (New York Stock Exchange: PCG) and Sempra Energy (NYSE:SRE) Southern California Gas said it supports Newsom’s call for an investigation, while arguing that gas prices are not set and that costs are passed on to customers without a surcharge.
State energy regulators began hearings Tuesday to examine the causes and impacts of the high natural gas rates.
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Newsom’s call for a federal investigation into natural gas markets follows his proposal to limit the profits of oil companies operating in California by reducing their gross refining margins.
