Brandon Sanchez, senior service technician for the New Mexico Gas Company, installs a meter in a Four Hills home on Wednesday. (Adolphe Pierre-Louis / )
Copyright © 2021
The Grinch has been grappling with home heating bills this holiday season, replenishing the average consumer’s stash with a New Mexico Gas Co. bill that’s about 64% higher this December year-over-year.
But the unusually warm weather in November and much of December has, at least so far, averted the total heating cost shock that many feared in October when natural gas prices hit their highest sustained level since 2014. Unusually warm, sunny days have enabled local consumers to avoid turning up their thermostats, lowering their bills through reduced consumption, and at the same time mitigating the previous inflationary spiral that started last summer, said Josh Tilbury, director of gas management at NM Gas Co ..
“We forecast much higher prices for the winter, but warmer weather in the fall and now demand has dropped significantly,” Tilbury told the Journal. “Prices have gone down, although they are still much higher than they were a year ago.”
Average customer pays 64% more
The utility estimates an average household bill for NM Gas customers in December of $ 139. That’s about 64% more than the average $ 85 bill in December 2020, company spokesman Tim Korte told the Journal.
The average bill for housing in November was $ 100, 70% more than the average bill of $ 59 in November 2020.
However, the January bills could be a little lower depending on the weather, as the price that NM Gas pays for natural gas fell between November and December. The company sources all of its gas from producers in the San Juan Basin in the Four Corners region and the Permian Basin in southeast New Mexico.
Wholesale prices for San Juan natural gas fell about 12% that month to $ 5.08 per 1,000 cubic feet, from $ 5.77 in November. And Permian prices fell 15% from $ 5.58 to $ 4.75 per 1,000 cubic feet.
This in turn lowered the end customer price, which suppliers pay from 78 cents per thermal bath consumption, to 71 cents. And although the wholesale prices for January are not yet available, the supplier estimates that the retail price will drop another 15% to 60 cents per spa next month.
While a welcome relief for many, customers are paying much more for the natural gas they consume this winter compared to last year. This is because wholesale prices from the San Juan and Permian Basins are roughly double what they were last winter, as are the per-spa retail prices paid by customers.
NM Gas calculates the actual gas costs for end users. The profits come from delivery services.
“We don’t make any extra money on gasoline costs,” said Korte. “Customers pay what we pay for the goods.”
Pandemic, heat drive costs
The pandemic, combined with the intense heat waves from last summer, are largely responsible for the high prices this winter.
The heat-stressed output of natural gas power plants throughout the southwest in the summer drove up the electricity costs that are needed to keep the air conditioning systems running at full speed. And with the economy reopening as coronavirus vaccinations gained ground in the spring and early summer, demand for electricity rose across the board.
This pressure reduced the natural gas supply and drove wholesale prices to a seven-year high by early October.
The warm weather and the subsequent drop in demand have eased supply problems and depressed prices just in time for the holidays. But the Christmas cheer could fade in early January when much colder weather is expected across the country.
And how long this winter cold will last is an open question.
“Weather monitors are still predicting a higher likelihood of warmer than normal winter weather,” said Tilbury. “But things can change, and if January and February get really cold, prices could go up.”
That happened last winter, which was unusually warm for much of the season. But a week-long, severe Arctic cold in February stressed natural gas supplies across the country, and NM Gas consumers are still paying for it today, Korte said.
NM Gas Co. was forced to pay sky-high prices this week to let the tight supply flow through its system.
“In that one week we spent $ 110 million on gas to supply our customers,” said Korte. “That is the same amount that we spent on gasoline throughout 2020.”
To cushion the pressure on consumers, the state regulatory commission approved an application by the utility company to spread its cost recovery over 30 months from July 2021 with a small fee on each customer’s monthly bill.
“The impact on the average household bill is between $ 5 and $ 8 per month per customer,” said Korte. “That will last until December 2023, then stop.”
Fortunately, the utility is working to buy more natural gas from the Permian Basin, where wholesale prices are cheaper than in the San Juan Basin. The company built a new 10-mile pipeline earlier this year to carry gas from a processing facility near Carlsbad to existing pipelines connected to the utility system.
“That helped a lot,” said Tilbury. “We now get quite a lot of gas from this plant every day.”