RivCo Utilities Prepared For Potential Energy Price Shocks From Mideast War

RIVERSIDE, CA — Power providers throughout the Inland Empire said Friday they don't anticipate major increases in electricity prices despite destruction of natural gas facilities amid fighting in the Middle East, where losses could drive up demand for natural gas supplies in the U.S., impacting electrical-generation costs.

"There's no indication of any near-term impacts from the overseas gas disruptions," SoCal Edison spokesman David Eisenhauer told City News Service Friday. "From an electricity supply and pricing standpoint, we don't see impacts."

In Riverside, the municipally owned Riverside Public Utilities also was not forecasting any dramatic changes, noting that natural gas inputs to the power grid are "fairly moderate and limited."

"Riverside's internal natural gas generation ... is typically used to meet just about 5% of the city's total load-serving needs," RPU told CNS. "And the expected amount of natural gas we anticipate using this summer has already been pre-purchased at competitive prices."

Earlier this week, joint U.S.-Israel military attacks on Iran resulted in significant damage to the country's South Pars natural gas field, one of the largest in the world and generally described as a "lifeline" to meet the Islamic republic's needs.

The nation's forces responded in kind, hurling missiles and drones at Qatar, which hosts the largest American military installation in the Middle East, inflicting major damage to liquified natural gas repositories. According to published reports, the LNG facilities could require three or more years to repair.

The tit-for-tat strikes come following Iran's announced closure of the Strait of Hormuz to oil and LNG ship tanker traffic navigating the Persian Gulf, with the exception of a few select countries, and then only after payments in Chinese Yuan for passage, according to reports based on statements by the Islamic Revolutionary Guard Corps.

Spot market contracts on natural gas priced per million British thermal units spiked to nearly $3.30 BTUs on Thursday but receded 2% in U.S.- based commodities trading Friday, according to TradingEconomics.com and OilPrice.com. The softening was similar to minor downward adjustments in per- barrel spot prices for West Texas Intermediate Crude. Despite touching $100 a week ago, late futures trading Friday saw WTIC oil prices holding at $98 per barrel, which is still causing prices at the gasoline pump to steadily rise everywhere.

Domestic oil prices have been mildly restrained by the White House's decision to release 172 million barrels of oil from the Strategic Petroleum Reserve. In overseas oil futures trading, per-barrel prices on some crude products have already jumped to nearly $150.

While diesel or other fuel isn't vital to run power plants, natural gas often is, according to the U.S. Energy Information Administration.

"Natural gas is the single-largest source of energy used to generate electricity in the United States, making up 43% of electricity generation," the EIA said.

The Imperial Irrigation District, which supplies electricity to a large swath of the eastern Coachella Valley, told CNS there's an "action plan" in place to contend with any price surges stemming from greater pressure on U.S. natural gas producers to sell more product overseas due to Middle East supply breakdowns.

"Of 1,340 megawatts, 40% of this power generation would come from natural gas," IID said. "To protect against market volatility, we have a risk management policy and procurement plan ... that supports a strategic natural gas and energy hedging program, giving us flexibility to changing conditions."

The utility said that as of now, "we have secured up to 90% of our forecasted natural gas requirements for this summer."

IID said its power purchasing team keeps a close eye on market fluctuations and can "make resource decisions daily, hourly and even minute by minute ... to protect customers from volatility."

SoCal Edison's power portfolio is sufficiently diverse to "help shield customers" from market shocks, according to Eisenhauer.

"Unlike gasoline, which can re-price quickly, electricity rates don't move in real time," he said.

SCE is the largest energy provider in Riverside County.

Eisenhauer said less than 10% of SCE's power plants operate exclusively on natural gas, and he emphasized that pricing adjustments are subject to hearings at the state level.

According to RPU, because of advance contracts on natural gas purchases, "even if natural gas prices start to rise significantly, Riverside will be protected by fixed cost forward gas purchases."

The utility further noted that most of its acquisitions originate from Delta, Utah, "where natural gas is much less expensive."

"RPU staff do not anticipate experiencing any material deviations to our budgeted energy costs this year, regardless of how domestic natural gas prices might change," the agency stated.

The U.S.-Israel operations, dubbed "Operation Epic Fury," started with the assassination of Iran's supreme leader and most of his family, as well as the bombing of a girls school, where more than 150 children died, according to Amnesty International and multiple other sources. The Trump administration did not obtain a formal declaration of war from Congress, and no exit strategy has been announced by the White House.

Iran's IRGC and military have made it clear the U.S. needs to vacate the entire region to restore peace.

Inflation predictions vary, but energy price impacts from the war will likely weigh on most sectors of the economy, according to the Federal Reserve Bank and other sources.