What goes into an SDG&E bill and why are rates higher?
The market price for natural gas – a globally traded commodity – has continued to surge worldwide through the first half of 2022, due to demand outpacing supply and the Russia-Ukraine war’s impact on the energy market.
SDG&E’s cost for buying natural gas on behalf of our customers has increased by 260% year to year, going from 40 cents per therm in June 2021 to $1.04 per therm in June 2022 (not including the cost of delivery and mandated surcharges).
CNBC story: Natural gas surges above $9, hits the highest since 2008 as inventories stay low
Energy bills can be complicated. We totally get it. And we're committed to helping you make better sense of your bill and your energy rates. Whether you receive electric only, or both electric and gas service from SDG&E, the total cost of supplying energy to your home is made up of several things:
- Generation is the cost of buying the energy from the power plant where electricity is produced, as in where it’s generated. SDG&E and Community Choice Aggregators purchase energy on behalf of their customers. The price SDG&E pays for that energy is the exact same price our customers are charged. There is no markup of any kind and SDG&E makes no profit.
- Natural Gas Charges include the cost of the gas that you use for heating and gas appliances such as water heaters and stoves, along with the costs of getting the gas to you.
- Delivery is the costs of operating energy systems along with construction, modernization and overall upkeep of pipes, wires, substations and other equipment needed to deliver electricity and natural gas to the communities we serve. Delivery also includes costs for things like customer service, service technicians, meters and other equipment needed to operate the utility.
- Public Purpose Programs are state-mandated programs funded through energy bills like financial assistance for income qualified customers and energy efficiency programs. SDG&E does not earn any profit on these programs. Currently, SDG&E collects more than $350 million a year from utility bills to support Public Purpose Programs. If these program costs were to be removed from customers’ bills, local families would see about $90 in bill savings per year.
- Taxes and Fees include items such as taxes from the state of California and from the city that you live in. Examples include the State Surcharge Tax, State Regulatory Fee, Franchise Fees and other similar taxes and fees. SDG&E does not earn any profit from these charges.
Factors affecting your monthly bills
There are a lot of different factors that affect energy bills. Here are some of the reasons your bill might vary from month to month.
Extreme temperatures, both hot and cold, can change the amount of gas and electricity we all use. In the winter months, we use more gas or electricity to heat our homes and businesses. In summer, energy usage increases as AC units are cranked up to beat the heat. Extreme changes in temperature can also impact energy supply and demand, which can lead to higher bills. As demand goes up and supplies go down, the price of energy itself goes up.
The more we use individually, the higher our bills. Increased use of appliances during colder weather affects your bill. Some appliances, like electric heaters, use a lot of energy. Water heaters also work longer and harder to heat up colder water. Having guests, cooking at home more, using more lights and leaving appliances on can all affect your bill.
Natural gas is a commodity that is traded worldwide, and it’s used to generate the electricity we use in addition to heating some homes and powering appliances like stoves, water heaters and such. Just like gas prices at the pump, the price can vary month-to-month based on limited supply, maintenance activities, weather and customer demand.
The price that SDG&E pays for gas and electric generation is the same price our customers pay. If SDG&E pays a dollar, our customers pay a dollar.
We use a suite of tools to ensure that our customers get the best possible prices. Long-term contracts and use of storage fields that allow us to stock up on natural gas during lower cost periods are two ways we work to mitigate prices.
Climate resiliency investments
Given the growing threats posed by climate change, California and local governments have established ambitious goals to slash greenhouse gas emissions via 100% carbon-free electricity, zero-emissions clean transportation and net zero buildings.
To meet California’s goals and keep electricity flowing reliably, power companies across the state must make ongoing investments to modernize and climate-proof their infrastructure. About 40% of what customers pay in their SDG&E bills is for climate-related expenses including:
- Undergrounding power line to reduce wildfire risk
- Building electric vehicle charging stations to enable the transition to zero-emissions vehicles
- Installing microgrids to keep critical resources powered during extreme weather conditions