Recommendation to receive and file a report from the Long Beach Energy Resources Department on the recent spike in natural gas customer bills.
Let me move up. I think we're going to do a timesharing on this. Where is what number is the what is it? Just the the issue on the on the Charlie Bills. Can we move that up and do that next? Communication from Councilwoman Price, Vice Mayor Andrews, Councilman Austin recommendation to receive and file a report from the Long Beach Energy Resource Department on the recent spike in natural gas customer bills. Thank you. Thank you, Councilman Price. All right. Actually, I'm trying to just read the item. Okay. Councilman Price, thank you. And thank you to my colleagues for signing on to this item. We have our office has received a lot of correspondence from residents regarding the recent. Increase in the bill that the residents received. And and the and I know there's going to be a presentation tonight, so I'm going to turn it over to staff for a presentation on this. But I'm hoping during the course of the presentation, we can talk about whether any notice was given to residents, why notice wasn't given to residents, and because one of the things that we're hearing from a lot of the residents is had they received notice, they could have maybe modified their usage in the winter months so that their bill wouldn't have been as high. So if we can get just kind of a background on this and what we're doing to mitigate at this point, that would be great. Bob Dylan, director of Energy Resources. Well, actually, Councilman Eggleston wants to comment before we go to the staff report on the second. Yes. Before the staff report, I would just ask madam, my colleague, Susan Price. I mean, look, from the looks of at them, nobody's paying attention at this point. And I think this is a this is an issue that that that the public really, really wants to know about. I mean, maybe somebody is paying attention at home on television, but I'd like to delay this or. Well, it's the time it was on the supplemental issue, on the supplemental agenda, because it's actually a very timely discussion. The rates are going to smooth out. This was just this is just a report on the recent spike. And it's rare for third district residents, frankly, to come to council meetings, but they are incredibly engaged. We have correspondence from residents that we've received all day today as well as comments. Okay. Yeah, so I'd prefer to go forward, but if we want to do another study session or something on it. But my understanding from everything that I've read is that we expect the situation to be mitigated in the future months. And this was which I just we just want an explanation of what happened. Got it. Thanks. Thank you for saying that to. Me, too. We've all been getting the emails. I'm. Yeah. Okay. Mr. Downer. Yes? Good evening, Honorable Mayor. Members of the Council as a staff was directed to prepare a presentation this evening to explain the high increases in residential gas bills and business businesses as well. This is normally a very complex and convoluted discussion, but for tonight we've kind of simplified it so we can kind of get the message across and briefly explain what what occurred to understand, first of all, the commodity portion of the gas. Where does it come from for the state of California? So this depiction here shows pipe flows and gas movements. And it's noted at the top that California continues to depend on out of state imports for 90% of its natural gas supply . In Long Beach Pacific. We only produce 4% of the gas within the boundary as Long Beach that we consume. So we're heavily reliant on the markets outside of California. We call it east of California. And you can see the predominance of the gas tends to flow to the northeast into the Texas area. There are very few mechanisms to get gas out to the state of California. More specifically, we do not have a pipeline from Long Beach that runs to the border of California to receive this. Gas energy resources is 100% reliant upon the distribution and transmission system of the Southern California gas company to bring that gas to the L.A. metro area. And then we have four receipt points in the city of Long Beach, where we take possession of gas that we purchase and deliver to the residents and businesses within Long Beach. So there you can see there's about eight receipt points there. They're depicted along the border of California where SoCal Gas brings that gas in. And also on there, if you note in the red, there are four gas storage facilities that SoCal utilizes. Typically, you fill those up in the summertime when gas prices are lower and when demand is up in the winter and prices are higher, they supplement their system from these storage fields and also boost the supply of gas when the demand exceeds the capacity of the pipeline. You know, it's about 250 miles to the border of California. Takes a long time to get gas from there into the city. It's a lot easier than it is to get it there. So those storage fields serve a very, very useful purpose. What is the make up of gas in Long Beach or who consumes it? About 44% is consumed by residential use. 18% small businesses, large commercial industrial are about 23%, and our CNG usage constitutes about 15% of the gas that's consumed in the city of Long Beach. Good news for residential users is that since 1990, consumption of natural gas has basically dropped in half. And that's due to several reasons. There's building efficiency standards, appliance efficiency standards. So the average residential customer on a yearly basis in Long Beach uses a little over three thirds of natural gas. Back in 1990, they consumed about 600 firms of gas, and to approximate the therm is roughly 100 cubic feet of natural gas. It's a volumetric measurement. It comes as no surprise when you look at the utilization of gas by residents in Long Beach predominantly. Of the 313 terms that they consume. If you look far to the right of that graph, the last two months are pretty high. That's that's November. December. And if you go back 12 months, January, February, that's what we refer to as the winter heating season. And our residents consume about 50% of the gas that they consume on a yearly basis in those four months. So 50% of the gas in the average residential use is consumed in one third of the year. So that curve is pretty typical of residential use. Commercial industrial tend to be pretty flat. They use it for whatever processes they balance tends to be flat. Residential tends to follow this pattern. So how is the cost determine for SoCal or sorry for Long Beach residents? There's two two components of your gas bill that you're seeing at your house. There's the cost of delivering that to you. That's the transportation rates. But the biggest item in the item we're here discussing this evening is the cost, the actual commodity cost of the gas. So we only produce 4%. We have to purchase the gas that's here. We do that on a monthly basis from the natural gas market, that is gas produced from local producers and marketers . And we procure that gas at the best available rates. It should be noted that by law, utilities may not mark up the price of the natural gas commodity. So if we pay $5 for gas from the markets with the hubs, that is exactly the price of gas that shows up on residents gas bills. So there's a process whereby suppliers and marketers get together the last five days every month they develop and post what's called the so-called city gate first of the month price that comes out in the first of every month. Energy Resources, Inc. Those prices into developing our cost of gas. Our cost of gas is always lower than that price of gas that constitutes about 75% of the gas in the winter months that we sell. We purchase some spot market gas as well as we have a produce gas. So it's always slightly below that posted price. And this price is published the first of every month, an energy resources website. They've been doing this at least for the last nine years that I can trace back to. But every month and the first of the month that is posted on our website. The other component I mentioned was the delivery of gas to our customers. That has not increased since to October of 2016. So our transportation rate, the cost to maintain and move that gas through our system at those four receipt points to the residents and business addresses has not changed in that time frame. So here's where you go to find that price of gas. You go to either utility services or the energy resources website. You click under the information tab and it's how is the cost of gas determined? And this is what's posted every month. You can see the February price last Friday at 3 p.m. when prices posted, we published our price of gas. Again, that is per therm. That's what customers see on their bills. The cost of gas is is done by firms. You can kind of see and you'll see it in the curve earlier or later that the December price is extraordinarily high compared to the to the other months. So it's been said a pitcher can makes up a thousand words. This product makes up 10,000 words. But briefly, what this shows is that same so-called system that I described presented earlier. And what what's happening right now, the green arrows are the receipt points. This is where Southern California gas receives the gas from out of state suppliers and moves it through its system into the L.A. Based or L.A. metro area. And that's where Long Beach resides. There are numerous reasons you'll see red X's and partial red x's. There are a number of constraints and maintenance items that SoCal Gas is undertaking. Those items have reduced the capacity that's coming into the L.A. basin at this present time. And the. Limitations. I think most folks here are familiar with the Aliso Canyon storage incident that occurred in 2015. They had a leak at one of their largest gas storage fields. After that, there was investigations and restrictions placed on the uses of those. So those have greatly hampered SoCal gases ability to meet the winter demand in the L.A. Basin. If you look, the real story is in the lower left hand corner in those red letters. In last year, for instance, they could take in 3.2 Bcf of gas at those green arrows and deliver that to the the greater metro area . And they had 1.6 Bcf of storage withdrawal capability on a good winter day and not in excess of what a day. They take out 3.5 to 3.7 Bcf to meet a daily demand. So they had some cushion in September of 17. But if you look at today, that is 3.7. So as a commodity, markets grow when there's more demand than there is, supply prices go up. And that's the situation we're facing today. Just as a kind of a point of reference that they could deliver at that risk point was 3.2 and now it's 2.6. That's about a point six Bcf. That's billion cubic feet differential. That's 17 times the usage of the city of Long Beach. So that is a significant reduction that they have brought into their system. Or no longer have there. So we were up against and they are up against some significant hurdles to meet the demand of the L.A. base that. So what did this look like on a monthly basis? The first year you can look back and see in winter of last year, in November, we were at $3.61 a deck a therm or it showed on Thursday may be to you. And in December, it peaked at $6.38. So it was a modest peak. That's a historical graph that goes back to 2015, but certainly some of the implications of the storage limitations were shown then. Then this summer we had a very big heat wave in August and in fact on July 23rd, that price on a daily basis that you see reached now went up to $32. It will be off that chart for a daily spot price. So the electric consumer is the Uggs that produce our power. We're paying some astronomical prices for their gas to generate electricity. So here we are in November. Our gas is at $5.82 a therm. The forward looking curve showed it going up modestly to about the 6 to $8 range. No more than that. What actually occurred is when they posted the price on December 1st, that price went up to $13.85. So that is a significant increase that was not foreseen. And that's with the market supply, some of it going east back to the East Coast. There was a limited amount of gas and with the constraints on the so-called gas system to get that to Long Beach, this was the price that not only Long Beach but anybody purchasing gas at their local, the city of Vernon, any municipal and others that are transporting their gas are paying that same price. So it was a significant hit. So we looked at what would that mean to the average Long Beach resident? The average Long Beach resident customer consumes 44/3 of gas. That was in the month of December in 2017. So we plugged in and asked guesstimate what what is the impact with the higher price? It was about a $34 impact to those residents. Certainly, if you are a high or significant higher than the average residential user, your bill would predict to be larger than those seen by the average customers. So we saw this. It was a it was an increase, but certainly it wasn't an alarming increase. Nothing like what was observed back in 2001 when this number went up into the hundreds of dollars. Shortly thereafter, we put a fact sheet on the front page of our website that discussed the impacts of this winter pricing anomaly. We utilized social media. We have a Facebook page. With the press telegram that put this out. Now, mind you, the press telegram article went out January 4th, but many people had not seen their December gas bills. During that time, we briefed our call center representatives with the appropriate information. Certainly we anticipated those calling in where financial burdens and we brief them on how to respond and address those concerns. As I said, this is not just a city of Long Beach issue. This issue impacted the electric companies significantly. Other cities and municipalities were impacted that are buying their gas. And on January 11th, the California Energy Commission, a California Public Utilities Commission, held a workshop where they brought in Southern California gas companies to discuss this. And it was important to note that clearly these volatile and unprecedented things are under discussion. They want to understand what is going on with the so called system for this to occur. So it is being looked at at a higher level, at a state level. We just happen to be a customer of Southern California gas that was impacted. So there is some good news. January prices posted and came in a drop 40%. And then last Friday, they dropped another 40% down to almost normal levels. But we did go through the one time December peak because of similar conditions nationwide and those constraints on the so-called system. So we have offered assistance for any customers or residents that this has impacted. There are numerous options that we have. I'd like to know briefly, though, we've got a tally. Everyone says they've had a number, but it's about 1% or we estimate of 154. But any I can assure you, every customer was impacted. And that's the concern of us, is that. Yes, just because they don't call doesn't mean they didn't see. Hi. Hi, Bill. We have enrolled several customers into a payment arrangement, plans where they spread that one time monthly cost over whatever number of months they want. But one of the lessons learned is that we really are encouraging customers if this is going to be the norm going forward, until such time as no cap can remedy these restrictions on their system to participate in what we call our level pay plan and basically take 12 months worth of your gas bill and it's levelized and you pay a flat fee for 12 months. At the end of those 12 months, you'll true that up. And if if we over collected, you'll receive a credit. If there's a small balance, do they pay that small balance? This is a way to alleviate those winter. Well, we show that with 40% or 50% that was used in those four months, you spread it out over 12 consecutive months. Certainly there are some lessons learned here. And so in preparing for the 2019 season, we are going to continue to form our customers in advance whenever we can of any price spikes utilizing bill messaging, website and social media. One thing we also determined is that we can utilize LBE link that's there is a notification checkbox there that you check from Energy Resources. We will utilize that to put messaging out to our residents on that. And certainly a communications campaign for the 2019 winter season is well earned here. Everybody hears the messages from SoCal Gas on the radio on a TV. Better job when you hear that. For Socalgas customers, we essentially are a so-called gas. So what they're telling their customers to do, we need to in turn have our customers do, such as setting your thermostat lower, conserve where you can and and to sign up for the level pay plan. So on a customer's bills, there are tools to look at advances. We just need to do a better job of educating our residents on how to utilize that. And that far left where you see that first arrow, that is the historical usage of that customer for the last 12 months. So at any time you can go back, if we were in December this year, they could go back and look at their December usage if it was saved. I don't know what that number is under 44th terms or 33 thumbs. You would basically go over to the second arrow up in the upper right and just put in the new cost of gas that's posted on our website. You could look and estimate what your December bill would look like then knowing that the cost of gas. But this is something that I think a very small percentage of our residents know of and that we've communicated and how to make it effectively work for them. So clearly, we need to do a better job of messaging this information and in how to utilize that bill. Additionally, most of the meters at Long Beach, if not all our army, we take a read every 4 hours for a mile per second of data, so we actively know the consumption of our residents on a daily basis. We're exploring with our vendor who supplied us the software here of a means to take that data. And if we have information from our customers, I want to know when I'm at 50% of what my last year's bill was, can you alert me? And yes, we can certainly do that. We believe we could have the technology to do that. How we were going to put it on our Web page remains to be seen. But we we believe the technology is there and that we can alert our customers to this. And it's certainly a step that we're going to take to do that. So that concludes my presentation and I'm available for any questions. Thank you. Thank you. Mr. Dow Johnson for Supernova. Actually, can I just ask. Absolutely. Thank you very much for that presentation. Excellent. And it answered a lot of questions for me. So if I'm if I'm understanding the presentation correctly, once we learned of the spike in in rates or in what we thought the customers would see if they weren't going to the energy resources website and checking the rates, we did put out some social media information. We did update the web page. So we did try to get some information out to the best of our ability at that time. Yes, that's correct. However, it would not have even been soon enough for customers to avoid what would occurred here, because you need to start this in September and educating them how to do it. Any messaging we would have gotten out through any EPA, even if I don't know how many people read local press or listen to our go to our social media page would probably not have been sufficient enough time unless they actually observed it. How we and we're going to utilize our Office of Innovation to help us. How do we message customers more timely? What's the best means to reach them? We do. Not everybody has access to a computer that has an email address. We have to figure out what is the best means in a more timely fashion to get this information. We can start earlier and hopefully that will be enough. But how do we get this message across? Yes, we can utilize the L.B. link or link L.B. and things of that nature, but it is a difficult task to try to reach out to 154,000 customers in one month and convey to them that your gas price went up this month. Now, mind you, that that figure that was shown there was for customers whose bill cycle started on the first day of the month and in and on the last day we have 22 billing cycles of our customers. Some started November 15th and went through December 15th. So half of their bill would have been the November prices and the other half would have been December and then the next month they would have had the second half. So it is a convoluted task to try to tie it all together, but that doesn't mean we can't do a better job of starting a program earlier. And if this volatility even has the remote chance of occurring next year, i we're going to do everything we can to start earlier. I. I love the advanced planning and planning for the 2019 winter season. In my personal opinion as a consumer, I think the best way to get the message out to all residents is to do an insert in the bill on the front of the bill. So a lot of times the inserts are behind the bill, but I think if there is a way to do it so that the insert is at the front of the bill, they have to look at the insert before they look at their bill because even the print that's on the bill, I'll be honest with you, I receive that bill every month. I've never read the special message that you have in the bottom. I just saw right now that you have something on there about tree recycling. Never knew that was on there. And so either we need to do a better job of telling people to look for the special message on their bill and that fine print or maybe put like a one page, you know, very simple, you know, program about this level pay program and why you recommend it. I think that would be really great. That's just my $0.02. And I think if you were willing we I know a lot of our offices do newsletters. If you were willing to write it, write a short article about this and how residents can participate in this level level pay program. I think all of us would probably those of us who wanted to would include it in our newsletters. And that would be a really great way to do outreach. I think doing it in the print media is very helpful, but I think for the East Side, at least if you don't do the grunion, you're going to miss, you know, a lot of people because many people will just read the grunion since it's so readily accessible for everyone and it's free, a lot of restaurants and businesses. So I think just thinking about how to get the word out best, it was a big hit. Unfortunately, my bill was not $34, which much higher because I live with two boys who do not understand the concept of turning out lights and not turning the heater on and all those things. And they are continuing to cost me a lot of money. And that was true for December. So I think a lot of residents found themselves in the same situation as me. But it is helpful to know that even if we would have gotten information out in December, there's nothing that they could have done to reduce their bills because the rate was already in place and they wouldn't have been able to adjust their own usage for that month and time to have a difference. So thank you very much for doing this presentation for us. It's very timely and I'm grateful for your expertize because I learned a lot tonight. Thank you. Thank you, Councilmember Supernova. Thank you. Appreciate the presentation. And I have no doubt moving forward that this is. Going to be resolved. And you're going to Tracy involved in coming up. With a communication system. I just wanted to give you guys some credit for what you did do. Our office was aware of this issue, but we hadn't heard from a constituent. Our newsletter goes out every Friday at 1:30 p.m.. After we distributed the newsletter on Friday the 25th, we got our an email. One email. That's all we ever received on this issue. A week after that, we got a phone call and another email, but it was just reacting to the person. Who had originally emailed us because he posted it on social media. So. That Friday, I left a phone message on Bob Dole's office phone and said, hey, we need to talk about this next week. Thinking he would get it on Monday. He called me on Sunday and basically gave me this whole presentation. That we just saw here. Tonight. We already had a committee meeting scheduled for that Wednesday, and he got Tony Foster to show up at our committee meeting. And this is just days notice and went through this whole presentation at our committee meeting. Then last Friday, we went and published with. Your letter from your. Website and whatnot. That just showed me how nimble. Your management. Team is. So moving forward, I have no doubt that we can. Get the information out there. So thank. You. And not all of us get paper bills in the mail, but I think the council. Offices can really assist with this because. We all push the information out there. So whatever you hand off to us will. Make sure it gets in our constituents hands. Thanks again. Thank you, Vice Mayor. Yes, thank you, Mayor. First of all, I want to thank Councilwoman Susan Price for bringing this forward. And also, I would like to thank Bob Dole and his team for being very responsive to my office and my residents when they ask about these price increase. So thank you for your informative memo that was released on Friday. Thank you very much to. Councilman Alston. So I'm glad we went through with this item tonight. I want to thank thanks, Susie, four for four for bringing it forward. And thank you, Mr. Dowd, for the very, very informative presentation. We've already have some ideas on and groups that we'd like to to engage in the district, but particularly our seniors who I think will get a lot out of out of this presentation because they've had a lot of questions. So thank you very much. And let me just add also so something we may want to consider because this was a lot of people are we have been shocked about this and kind of been, you know, stopped me on the street and people have been posting things on social media and so forth. I still think there's value in telling people what happened even after the fact. And I know that, you know, things are going to go back to normal, but a lot of people are just wondering what happened. And so I would encourage us to send something in the bill now that says you experience an increase. You know, during these months, here's why you experienced it. And and here is how, you know, so that they know that it wasn't because people don't know. They just think that we up their bill. I mean, you know, everyone I talked to just thinks that the city just basically decided to increase their their utility bill. And so regardless of that great presentation, that is that's what people think. So I think that doing a mailer and putting it on social media and doing all those other things, saying, here's what happened, here's why it happened. And well, we don't expect this to be a regular occurrence. It can happen in the future. And here's a way to prevent. I just think that would be helpful if that's something we should at least look at doing, because most people are, like Al said, are not watching right now. But it's the best way of getting to people is through that bill and then through our newsletters I think would be also helpful. Is are the recall public comment on this already. I think I did right. Yeah. And seeing no public comment on this roll call the. Councilmember Pearce. Councilwoman Price. Councilmember Supernova. Right. Vice Mayor Andrews. Councilman Austin. Councilmember Richardson. Motion carries.