Natural Gas Price Increases in Los Angeles

Pursuant to a congressional request, GAO explained the various aspects of natural gas price increases, supplies, and regulations in the Los Angeles, California, area.

GAO found that, for the year ending April 30, 1983, natural gas prices in Los Angeles were 61 percent higher than they were 2 years earlier. The dominant reason for the increase was the decline in the amount of old, low-cost gas. To replace depleted reserves, gas suppliers typically replaced old-gas reserves with new or high-cost gas reserves. The suppliers maintained that, since the states in which the bulk of Los Angeles' gas originated required production on a ratable basis, it was not possible to produce disproportionately more low-cost old gas. GAO noted that other reasons for the increase in gas costs were the increase in Canadian imports, price increases permitted by federal regulation, a decline in domestic gas consumption which made purchasing patterns and company operations less efficient, and increased operating expenses.