Natural Gas Pass

The cost of natural gas for New Mexico consumers might have a few people turning down the thermostat despite chilly temperatures this month.

Commodity prices for New Mexico Gas Company customers have increased by more than 77% over last January, according to executives, but NMGC used its “hedging” program to plan ahead, preventing an increase that would have been even higher.

Including static fees and per-therm costs, the average residential bill from last year that peaked in January at $135 will run about $211 this month, the company tells SFR.

Notwithstanding that most of New Mexico’s natural gas comes from the San Juan and Permian basins within the state’s borders, the national and international market drives the supply-and-demand cycle currently keeping prices high. War in Ukraine, bitter cold weather in the Northeastern US in December and capacity constraints on pipelines are just some of the reasons for today’s prices, says Tom Bullard, vice president of engineering and gas management.

New Mexico Gas Company opted last year, however, to enter a financial hedge for 2023 to essentially lock in the price for the minimum amount of gas it expects to use, called the base load. The result: Instead of effectively paying $3.30 per therm, customers will be charged $1.1337 per therm this month. (Last year, the January price for NMGC customers was $0.6382 per therm.)

“It’s been in practice for a long time that we’ve done this. It’s an annual program and some years we don’t use it,” Bullard tells SFR. “It’s kind of like an insurance policy. But in the years, like this year, when gas prices are volatile, and they go way up, that does pay off. This year, it has paid off very well.”

Ninety percent of the company’s 540,000 customers statewide are residential, explains Gerald Weseen, vice president of regulatory strategy and external affairs, “and most of their gas use is in the winter months, because people use gas for space heating, or hot water heating and for cooking. So the vast majority of the gas that our residential customers use would be in that November to March time and that’s why the hedging program covering December, January and February is focusing on those three months.”

Even with the hedge in place, the spike over 2022 in New Mexico is significant, and it comes on top of a 4.3% increase that began this month as the result of increases to the company’s cost of service. Yet, it’s not nearly as high as what customers in California can expect this month.

Depending on the day and the region, prices can vary wildly.

Southern California Gas Co. told customers last week that its price for January is up more than 300% from last year. According to the Los Angeles Times, SoCalGas issued a blunt statement: “There’s no easy way to put this,” the company said. “January bills are likely to be shockingly high.”

Within days of that announcement, a major producer that serves as the national benchmark for the market reported a 17-month low spot price on the commodity. Over the last year, however, the Henry Hub spot price averaged its highest level since 2008.

A proposed natural-gas storage facility under consideration by the Public Regulation Commission could help to further insulate New Mexicans from demand-based price increases because NMGC would give up leased storage capacity in west Texas for the Rio Rancho plant in 2026. But a separate, future proposal would determine how construction costs should be passed on to ratepayers.

Customers who have trouble paying the increased bills this month may access the Low-Income Home Energy Assistance Program through the state Human Services Department (YesNM Portal) and also apply for additional help through the NMHeat grants administered by the Salvation Army.

Marilyn Wright, state LIHEAP manager, said she’s expecting to hear from customers who are surprised by the increases, but noted the state made two additional disbursements last year to families who had received benefits earlier.

“All customers received $335 in additional benefits within the period from June to September, so we’re in the hopes customers that have higher gas bills…will actually have some sort of padding on their account so that they’re not going to get the hit the full brunt of this December bill,” she said.

The program primarily serves those who earn 150% of the federal poverty designation or less, with extra priority for children, disabled people and other vulnerable populations.

“A lot of families, especially the elderly, the disabled, and families as a whole, you know, have to live paycheck to paycheck and they’ve got to make choices every month,” Wright said. “Is it going to be a utility bill or is it going to be groceries or medication perhaps? Providing a LIHEAP benefit actually enables the household to feed their families or provide the medicine or the clothing that is necessary for them to just be.”