Natural gas pass | | Santa Fe reporter

The cost of natural gas to New Mexico consumers could have some people turning down the thermostat despite cool temperatures this month.

According to executives, commodity prices for New Mexico Gas Company customers are up more than 77% from last January, but NMGC used its “hedging” program to plan ahead and prevent an even higher rise.

Including static fees and per-spa costs, last year’s average household bill, which peaked at $135 in January, will be 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 state lines, the domestic and international market is driving the supply and demand cycle that is currently keeping prices high. War in Ukraine, bitterly cold weather in the US Northeast in December and pipeline capacity constraints are just some of the reasons for today’s prices, says Tom Bullard, vice president of engineering and gas management.

However, the New Mexico Gas Company last year opted for a 2023 financial hedge, essentially to lock in the price of the expected minimum amount of gas, known as the base load. The result: instead of effectively paying $3.30 per therm, customers are being charged $1.1337 per therm this month. (Last year the January price for NMGC customers was $0.6382 per spa.)

“We have been doing this in practice for a long time. It’s an annual program and we don’t use it for a few years,” Bullard told SFR. “It’s like an insurance policy. But in years like this, when gas prices are volatile and rising sharply, it pays off. This year it has paid off very well.”

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

Even with insurance in place, New Mexico’s increase over the course of 2022 is significant, and it comes on top of a 4.3% increase that began this month as a result of the company’s increasing service costs. However, it’s not nearly as high as what customers in California can expect this month.

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

Southern California Gas Co. told customers last week that its January price was up more than 300% year over year. According to Los Angeles Times, SoCalGas issued a blunt statement: “There is 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, which serves as the national benchmark for the market, reported a 17-month low for the commodity. However, over the past year, Henry Hub’s average spot price has reached its highest level since 2008.

A proposed natural gas storage facility under scrutiny by the Public Regulation Commission could help further protect the New Mexicos from demand-based price hikes, as NMGC would relinquish leased storage capacity in West Texas for the Rio Rancho facility in 2026. A future proposal would determine how construction costs should be passed on to taxpayers.

Customers struggling to pay the increased bills this month can access the Low-Income Home Energy Assistance Program through the State Human Services Department (YesNM portal) and also additional help through NMHeat grants administered by The Salvation Army apply for.

Marilyn Wright, state LIHEAP manager, said she expects to hear from customers who are surprised by the increases, but noted the state made two additional payments last year to families who used to receive benefits.

“All customers received $335 in additional benefits from June through September. So our hope is that customers with higher gas bills actually have some sort of cushion in their accounts so they don’t get hit the full brunt of that December bill,” she said.

The program primarily serves those earning 150% of the federal poverty label or less, with special priority for children, the disabled and other vulnerable populations.

“Many families, especially the elderly, the disabled, and families as a whole, have to live paycheck to paycheck, and they have to make decisions every month,” Wright said. “Will it be a utility bill or maybe groceries or medicines? Providing a LIHEAP benefit actually allows the household to feed their families or provide the medicines or clothing they need to just be.”