David R. Baker, Chronicle Staff Writer

Gasoline isn't the only fuel whose price is rising.
Pacific Gas and Electric Co. wants to raise electricity rates by 6.5 percent to cover the soaring cost of natural gas, which fuels most of California's electric power plants. The utility filed a request for the increase with state regulators on Tuesday. If approved by the California Public Utilities Commission, the increase would come in two steps.

Electricity rates for all customers would rise by an average of 4.5 percent in October and an additional 2 percent in January. PG&E has different rates for different types of customers, and some would see a larger increase than others. The monthly electric bill for a typical home would rise a total of $1.30, to reach $73.43.

The commission is expected to vote on PG&E's request by Aug. 21.

While it gets less public attention than oil, diesel and gasoline, natural gas has seen its own wild swings in price. The fuel now costs 63 percent more than it did a year ago, more than PG&E predicted.

"What we're telling the (utilities commission) is that our costs for providing electricity are significantly higher than we expected them to be," said David Eisenhauer, a spokesman for San Francisco's PG&E.

To make matters worse, this year's thin snowpack in the Sierra means that California won't get as much power as usual from its hydroelectric dams.

"That drop in hydro means we have to go out and buy more power from natural gas," Eisenhauer said.
Natural gas has grown in popularity as a fuel for new power plants because it burns cleaner than coal, and that popularity has pushed up the price. Natural gas also has been caught up in this year's bull market for energy-related commodities. Just as investors have poured money into oil, betting that its price will rise, so have they invested in natural gas.

The fuel now costs more than at any time since hurricanes Katrina and Rita shut down offshore natural gas wells in 2005. Natural gas sold on the New York Mercantile Exchange closed Tuesday at $12.44 per million British thermal units. A year ago, it cost $7.61.

"Year over year, it's been a pretty shocking increase," said Bill Brewer, vice president of Summit Energy, a company that buys natural gas in bulk for businesses that use it.

"Typically, you're not talking about these kinds of prices unless there's a hurricane coming through the gulf."
Consumer advocates who scrutinize PG&E's rate requests acknowledge that natural gas prices are soaring. But they note that the utility already has requested other rate increases. In May, for example, PG&E asked state regulators to raise rates by $2.3 billion, spread over six years, to pay for improvements to the company's electrical grid. A decision on that request is pending.

"Unfortunately, this is only one among many rate hikes," said Mindy Spatt, spokeswoman for The Utility Reform Network. "It remains to be seen whether this is avoidable or not, but certainly, some of the others are."

E-mail David R. Baker at dbaker@sfchronicle.com.

This article appeared on page C - 1 of the San Francisco Chronicle