Why is natural gas costing customers more?
If you are one of the approximately 540,000 New Mexicans who rely on New Mexico Gas Co. to heat your home, you have likely seen your bills increase in recent months, and may be left scratching your head as to why they have, in some cases, doubled.
Posts on local Facebook groups are full of disgruntled gas customers. “Mine went from $106 to $254. Ridiculous,” read one comment. “Last month my bill was $145 and this month it’s almost $600,” read another.
Tim Korte, the public information officer for New Mexico Gas Co., acknowledged the high prices and said there were two reasons for the increase: First, he said demand has significantly increased, particularly internationally, and thanks to the recent installation of a pipeline to Houston, much of the gas from the southeastern part of New Mexico is now being sold elsewhere. Second, he said the cold snap that froze Texas in February 2021 caused a hiccup in the supply chain due to unprecedented unified demand and the inability to drill.
While some might assume the gas supplier controls the prices, Korte explained NM Gas Co. does not make a profit on the gas they sell, and they legally must sell it for market price (their income comes primarily from transportation and service fees). “There is no markup. It’s not allowed. So we are always incentivized to buy gas at the lowest possible price, and our customers pay what we pay, no more, no less,” he said.
This means gas customers are subject to the same market fluctuations as NM Gas Co., which does not drill for the gas itself, but buys it from either the Permian Basin in the southeastern part of the state or from the San Juan Basin in the northwestern corner of the state.
When the pipeline to Houston was completed in mid-2021, Korte said demand went up. The gas is funneled from the Permian basin to Houston where it is converted into liquid natural gas and shipped to Europe and Asia.
“Gas prices used to be relatively low, because they didn’t have the means to transport it out,” said Korte. “When this infrastructure came online, it was accessible to those markets and that’s why the prices went up.” Now, they are competing with international buyers for the gas that comes from New Mexico.
When asked if there were ways to keep the gas inside the state, Korte said he wasn’t aware of any legislation, but said they do their best to diversify their sources and are always looking for the lowest prices for their customers.
The second reason Korte said customers have seen higher bills lately is because of the record breaking storm that overtook Texas last February, creating an incredibly high demand for gas. “We ended up spending about $100 million over the course of one week in February last year [to secure gas for NM Gas Co. customers] ... We spent the same amount of money that we would normally spend in one year in one month,” he said.
Korte explained the increase was so dramatic that putting that price to their customers in one bill would be unreasonable.
“Instead we went to the Public Regulation Commission and asked for them to defer [the $100 million payment] and collect it over a 30 month period. So beginning in July 2021, we began recovering the costs,” he said. This means every customer has seen a higher amount on their bills in part due to the recovery of the February storm. The deferred payments will continue until December 2023.
With another winter storm hitting Taos Tuesday night and Wednesday (Feb. 2), Korte reminded customers that there are several steps customers can take to help lower their gas bill. Of course, one way includes turning your heat on only when you need to, but other measures include cleaning and replacing furnace filters more frequently, making sure vents are not blocked by furniture or drapes, opening drapes on south facing windows on sunny days, and “weatherizing” your home — sealing air leaks and adding insulation.
Korte said he sympathizes with the customers. “We recognize that the higher prices can be tough, especially with COVID, there are still a lot of people who are feeling the impacts from that,” he said. “I would encourage customers who need assistance to check out the website or give us a call. We’re happy to work with anybody to match them with the right program if they’re qualified.”
‘We recognize that the higher prices can be tough, especially with COVID, there are still a lot of people who are feeling the impacts from that.’
TIM KORTE
New Mexico Gas Co.