Here’s why gas bills have gone up

In a recent letter, R. Tyner of Santa Fe asked why consumer natural gas costs have increased so dramatically since 2020 (“Skyrocketing costs,” Letters to the Editor, Jan. 24). We understand the concern and we want to provide some insight.

The chart below shows the major components of a residential customer bill for natural gas service in January of each of the last four years. Our customers use on average about 118 therms of natural gas in January so the chart reflects the costs associated with that level of natural gas consumption. Many factors impact each customer’s consumption including the age and size of the home. While the chart is not indicative of every customer, it does provide important insight into what is driving the increases in gas bills over the past four years.

The cost of gas portion of the illustrative bills was more than four times higher in January 2023 than in January 2020. Market forces are driving higher prices for the natural gas that our customers use to heat their homes and water and cook their meals. In particular, the market price has been influenced by overseas demand for U.S.-produced natural gas — including liquefied natural gas — as well as the almost 1-year-old conflict between Russia and Ukraine. We also have seen increased demand for natural gas here in the U.S., including for electricity generation.

I’d like to mention that, by regulation, New Mexico Gas Co. doesn’t make a profit on natural gas we purchase on behalf of our customers — our customers pay what we pay for gas. Our team works hard to purchase natural gas at the lowest price. We also have a hedging program, under which we contract during the spring and summer for a cap on the next winter’s prices for some of our gas supply. It’s like an insurance policy. Some years we don’t use the hedges, but in years where prices are very high — like this year — we pay a lower price when compared with market prices. For January 2023, as an example, the locked-in rate we negotiated in 2022 was about three times lower than market prices. That meant our customers avoided paying much of the higher market prices for January. The hedging program saved our customers about $90 million in overall gas costs for January bills.

One question we are asked is why natural gas isn’t cheaper when it’s produced here in our state. New Mexico Gas Co. sources about two-thirds of its natural gas from the San Juan Basin in northwestern New Mexico. Most of the rest of our supply is sourced in the Permian Basin. Although prices in New Mexico are generally lower than elsewhere in the country, the demand elsewhere means higher prices here. Much of the gas produced in the Permian Basin is sent to the Gulf Coast for liquefied natural gas exports — which means the price for Permian gas that stays at home reflects that “world” price. It is also true that natural gas is typically more expensive during the winter months, when our customers use the most gas for heat.

Even with the increase in natural gas prices over the past four years, natural gas remains a cost-effective source for heating your home compared with most other energy sources. However, we do understand that some customers may be struggling with higher bills.

We have assistance programs and payment plans available. We have a bill assistance program administered by the Salvation Army and some customers qualify for assistance under the federally funded Low Income Home Energy Assistance Program. We offer a budget billing program, where your gas usage is averaged over 12 months so you pay the same amount each month, all year long, reducing the size of bills during the winter heating season. And we offer energy efficiency programs where rebates are available to offset home insulation or the purchase of high-efficiency natural gas appliances. You can also obtain low-flow showerheads to use less water, which reduces the amount of natural gas you use.

For questions, visit nmgco.com, call 1-888-664-2726 or visit a walk-in payment center — in Santa Fe at 1700C St. Michael’s Drive; in Española at 340 Paseo de Oñate; and in Taos at 1110 Gusdorf Road.

I appreciate the opportunity to respond to the letter from one of our customers.

Tim Korte is communications manager for New Mexico Gas Co.