Gas utility bills are rising, but natural gas prices are down. Here's why
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Gas utility bills are nearing record highs, even as natural gas prices are relatively low. Customers are now paying mostly for pipelines, taxes and other costs, instead of mostly for actual gas. NPR's Jeff Brady explains why.
JEFF BRADY, BYLINE: In suburban Philadelphia, construction crews are tearing up streets and replacing old gas pipelines. The local utility is spending $1.8 billion for this work.
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BRADY: The cost falls to ratepayers, including homeowner Michelle Lordi (ph).
MICHELLE LORDI: We had thousand-dollar bills this past winter.
BRADY: That included electricity, but it was mostly gas for heating. Bills that high made her wonder what changed.
LORDI: It looks like they are tearing every single bit of infrastructure up here. So, first of all, I know that's very expensive. There's crews and crews of people.
BRADY: And miles and miles of new pipe. Around the country, gas utilities have increased construction spending, up 50% in 2023 to nearly $50 billion. The federal government encouraged this after a pipeline explosion 15 years ago in San Bruno, California. It killed eight people and destroyed dozens of homes in the San Francisco suburb. The goal of this spending is to replace old iron and steel pipes with new plastic ones to improve safety.
ABE SCARR: That has driven up rates substantially.
BRADY: Abe Scarr directs the Energy and Utilities Program at the Public Interest Research Group.
SCARR: Doubling here in Chicago, the delivery rates, tripling in BGE, Baltimore Gas and Electric territory in Maryland.
BRADY: Gas utilities typically sell natural gas at cost. Their profits and the higher bills consumers are facing come from building things like pipelines. That has fundamentally changed what gas customers are paying for. Forty years ago, two-thirds of a typical U.S. gas bill went to the gas itself. Now, only about a third of a typical bill pays for the gas. Richard Meyer with the American Gas Association, which represents gas utilities, says while gas prices are relatively cheap, construction costs are up.
RICHARD MEYER: Inflation certainly plays a role there, you know, the cost of materials, the cost of labor and so forth.
BRADY: The Trump administration wants the U.S. to export more gas around the world, risking tighter supplies at home and even higher prices. But Meyer says gas drillers are responding.
MEYER: We're seeing an upward trend in production, and that is response and in anticipation of this growing demand.
BRADY: Scientists say to avoid the worst effects of climate change, gas and other fossil fuels should stay in the ground. Natural gas is mostly methane, a greenhouse gas far more damaging to the atmosphere than carbon dioxide. Utilities have reduced methane leaks, but eliminating them is difficult. Activists like Scarr question if there's even a place for gas utilities now.
SCARR: The science says we need to stop burning things, and part of that is burn gas in our homes to heat our homes.
BRADY: Scarr says instead of first spending money on replacing gas pipelines, regulators should require utilities to repair or even shut down parts of gas utilities. A few states are moving in that direction, including Illinois, Maryland and Massachusetts. Earlier this year, Massachusetts regulators overhauled a pipeline replacement program. Gas utilities there must now consider whether it's cheaper to shut down leaky pipelines and install electric heat pumps in homes. With the change, Massachusetts regulators say gas customers could see reductions on the infrastructure part of their bills.
Jeff Brady, NPR News.
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