The head of the Federal Energy Regulatory Commission that oversees the interstate transmission of natural gas, electricity and oil on Thursday would not say whether it will launch a formal investigation into soaring natural gas prices in California but did say the agency has assigned staff to examine whether any market manipulation took place.
"Let me be clear, FERC takes serious the gas price spikes that happened in California and in the West," acting chairman Willie L. Phillips said during a briefing with energy reporters at the agency's headquarters in Washington D.C.
"Our office of enforcement, the division on analytics and surveillance, they are undertaking enhanced surveillance right now regarding market participants (to) determine whether they contributed to or benefited from the high gas price spikes in California," Phillips said. "If our office of enforcement discovers any potential violations of our anti-manipulation rule, we will — and I'm going to add this — aggressively pursue violations of that rule."
In the natural gas industry, market participants are commonly understood to include — but not limited to — producers, marketers and traders, utilities, owners of capacity rights, storage providers, pipeline companies and other associated infrastructure.
California utility customers experienced unprecedented hikes in natural gas bills in January.
San Diego Gas & Electric last month warned that typical customers with natural gas hookups in their homes should brace for January statements rising 114 percent compared to January of 2022.
Earlier this month, SDG&E posted a big drop in the commodity price of natural gas and predicted typical customers would see their February bills cut by about half. But prices in the San Diego area will still be about twice as expensive as they were in February 2022.
Gov. Gavin Newsom on Feb. 6 sent a letter to Phillips, requesting FERC "focus its investigatory resources on assessing whether market manipulation, anti-competitive behavior, or other anomalous activities are driving" the run-up in natural gas prices across the West.
Utilities have blamed the sudden increase on a combination of circumstances, including abnormally cold weather in California that has caused customers to crank up their gas-fired heating units. But, Newsom said in his letter, "those known factors cannot explain the extent and longevity of the price spike."
Sen. Dianne Feinstein, D-California, and Rep. Mike Levin, D-San Juan Capistrano, also sent letters to FERC, requesting an investigation.
When asked by a Union-Tribune reporter if FERC has decided to launch a formal investigation, Phillips said the agency does not comment on such matters. "But we are taking a careful look," he said. "That's the status. Thank you."
The Public Advocates Office, the independent arm of the California Public Utilities Commission that is assigned to look out for consumers, has also called for FERC scrutiny.
"We need a better understanding of whether any profiteering or market manipulation has occurred," Matt Baker, the Public Advocates Office's executive director said on Feb. 6.
The day before the FERC briefing, Robert Yawger, managing director and energy futures strategist based in New Jersey at the investment firm Mizuho Securities, said he thinks a formal examination may come but doesn't believe there's been any gaming of the system.
"I think they should have the investigation because you never do know and I think they (FERC) have no choice because of the public outcry," Yawger said. "But I doubt that they're going to find a smoking gun out there. I really don't even know how somebody could manipulate that situation. The weather is the weather and it's just going to attract buyers like moths to a fire."
Mike Florio, who served as a commissioner at the California Public Utilities Commission from 2011 to 2016, said a thorough review by FERC is needed to find out "was this just an accumulation of little things that added up to a big thing or was somebody manipulating the market? Without digging into all the data and getting the facts on the record, it's hard to know that in the abstract."
SDG&E officials say they have no issues with a FERC investigation.
"We support a review of the natural gas supply and storage constraints, and cold weather conditions that drove up commodity prices in the western United States recently and that left many SDG&E customers facing unprecedented winter heating bills," utility spokesman Anthony Wagner said.
Of SDG&E's customer base of 3.7 million, about 905,000 have gas meters.
