California retail natural gas market overview

read | Share:

I presented at the Energy Solutions Center’s conference in Toronto regarding California’s natural gas market. I want to share some of the major points from that presentation.

Brief History: In 1988, the California’s gas industry restructuring began for noncore* customers. In 1991, additional rate design changes were implemented giving core** customers the ability to elect commodity services from gas suppliers through a core aggregation transportation program.

About California’s Natural Gas Market: There are four major utilities in The Golden State: Southern California Gas, Pacific Gas & Electric, San Diego Electric & Gas and Southwest Gas. California is a fully opened state with regards to natural gas, meaning all customers have access to competitive gas suppliers. The state boasts one of the largest gas markets in the U.S.

Regulated utilities deliver about 80% of the gas consumed in the state. The utilities don’t own any natural gas facilities – all natural gas sold by utilities must be purchased from suppliers/marketers. Annually, $11.2 billion is spent on natural gas delivered by California utilities.

How Gas is Purchased in California:

  1. In a producing basis and transported to California border on interstate pipelines
  2. At the California border or utility receipt points
  3. At the “citygate” or any point at which the backbone transmission system connects to the local transmission and distribution system. The Citygate is not one specific, physical location. It is a virtual trading point on CGT's system.

How Utilities Beat the Market Price:

  1. Utilities are permitted to hedge
  2. Portfolio of Contracts
  3. Managing the use of the rights and assets assigned to retail core including storage inventory, injection and withdrawal rights
  4. Making physical and financial trades on behalf of core customers to reduce gas costs
  5. Utilize interstate capacity rights to provide portfolio diversification and lower gas costs
  6. Use tools typically available to trading organizations

As a general rule, utilities take a more conservative approach to energy procurement and more often than not, rely on market fundamentals to set the default rate. If budget certainty is of concern to your overall business operations, then utility supply may not be your best option in a volatile natural gas market.

*Noncore customers include all cogeneration, regardless of load size, and those commercial customers with annual loads above 250,000 therms.

 

**Core customers include all residential, regardless of load size, commercial customers with annual loads below 250,000 therms, and those commercial customers with annual loads above 250,000 therms who elect to receive the higher reliability associated with core service.

Set your ZIP code and utility

Enter a valid ZIP code
Unfortunately, we don't currently service this area. Please try another ZIP code.

Loading please wait...

Don't see your utility?

We currently only provide service to the listed utilities. For question, please contact 1-888-925-9115.

Loading...

34.236.190.216