LB Energy says the one month price spike stemmed from a "perfect storm" of factors in December's local commodity cost of gas and the January commodity cost of gas has already declined by roughly 40% which will be reflected in next billing.

LB Energy's monthly cost of gas is a direct pass-through, not a mark-up, of the volatile commodity price of gas; the utility doesn't make money from the commodity price. The commodity cost varies month to month as the commodity price of gas rises or falls; LB Energy displays the changes monthly on its website at this link..

LB Energy's November 2018 cost of gas was 0.5858 per therm for residential core users. It jumped in December, 2018 to $1.3465 per therm. The good news is the January 2019 cost of gas has abated to 0.7895 per therm. So what happened?

LB Energy Business Manager Tony Foster says December's price spike resulted from a "perfect storm" of events. LB Energy receives its gas through the Southern California Gas Co. system...and So Cal Gas has encountered a number of issues. Long Beach Energy typically purchases gas in the summer (when it's cheaper), stores it in So. Cal Gas facilities and taps it in the winter when the commodity price is typically higher...but So Cal Gas's storage capacity has been significantly curtailed by issues surrounding the So. Cal Gas operated Aliso Canyon gas storage facility (the one that leaked large amounts of methane in 2015.) At the same time, a major pipeline burst in Canada that supplied gas to northern California (PG&E), which caused PG&E to purchase gas in the So. Cal gas market, which increased demand locally when storage capacity was reduced, producing a local commodity price spike in December.

Sponsor

Sponsor

Since individual LB utility bills are prepared on differing cycles covering different periods, the December commodity price spike will be blended into whatever monthly period your utility bill covers which may be different from your neighbor's, but everyone will ultimately pay the December commodity cost increase. Depending on one's billing cycle and individual usage, it may be a sizable sum. As indicated above, the December per therm cost of the gas commodity increased by nearly 130% (more than double.)

Mr. Foster said LB Energy chose not to send out notices about it because the one-month spike showed signs of beginning to abate and normalize. He noted that most of December was also (fortunately) warmer than usual, moderating the impact of the spike somewhat, but acknowledges that LB Energy expects calls from residents about it. Mr. Foster said utility call center staff has been briefed on the issue and although the bill must be paid, the utility can discuss payment arrangements or spread the cost over a period of time.

But caveat: while most of December was warmer than usual, LB began a cold-snap in late December, continuing now.

Sponsor

In 2001, a spike in the price of natural gas caused LB utility gas bills to spike. Residents sued the City. The City of LB and other cities sued some natural gas suppliers alleging price manipulation. The residents' lawsuit didn't succeed. The City's lawsuit succeeded in producing a settlement with payment of sums to City Hall. And LB city management hired a new Gas Dept. manager, Chris Garner, who instituted longer-term purchasing policies that lowered the price of gas to LB utility consumers.

[LBREPORT.com comment: The City will presumably receive some quantum of increased utility tax as a windfall from the one month of increased utility bills from the December 2018 has price spike. We presume a City Council majority could vote to direct LB city management (which operates the LB-owned gas utility) to refund or credit all or part of the utility tax windfall to LB utility consumers. LB's utility tax is 5% Any predictions?]

Sponsor

Sponsor

Support really independent news in Long Beach. No one in LBREPORT.com's ownership, reporting or editorial decision-making has ties to incumbent Long Beach officials, development interests, advocacy groups or other special interests; or is seeking or receiving benefits of City development-related decisions; or holds a City Hall appointive position; or has contributed sums to political campaigns for Long Beach incumbents or challengers. LBREPORT.com isn't part of an out of town corporate cluster and no one its ownership, editorial or publishing decisionmaking has been part of the governing board of any City government body or other entity on whose policies we report. LBREPORT.com is reader and advertiser supported. You can help keep really independent news in LB similar to the way people support NPR and PBS stations. We're not non-profit so it's not tax deductible but $49.95 (less than an annual dollar a week) helps keep us online.