Texas Ratepayers will Pay for Blackout, Enrich Gas Barons

November 11, 2021

I’ve been following the emerging story of rising gas bills that consumers across the country will be paying this winter.
The larger picture is that, as gas exports, via Liquified Natural Gas tankers, have risen over the last 5 years, consumers in the US are now competing with Europe, and particularly, Asia, for gas that in the past had no pipeline to the larger world.
I’ll be fleshing this out in coming weeks, but look for the usual suspects to blame higher prices on the (non-existent) Green New Deal.

Of course, everything is bigger in Texas, so ratepayers there have the added burden of paying for the windfall profits gas sellers made when pipelines and wellheads froze in the February, 2021 blackout.

KUT

Oil and gas regulators at the Railroad Commission of Texas cleared the way on Wednesday for $3.4 billion to be paid to natural gas companies by raising bills for ratepayers. 

The $3.4 billion is part of the debt that gas utilities unexpectedly owed suppliers after gas prices skyrocketed during February’s winter storm and blackout. The cost may be included on Texans’ gas bills for up to the next 30 years.

The move, approved unanimously by the three Railroad Commission members, was the most recent step in a process state legislatures approved last spring known as “securitization.” It essentially turned blackout-related debt owed to natural gas companies and others into low-interest bonds guaranteed by the state.

Those bonds are then paid back over decades by charging higher bills to consumers. The Railroad Commission vote today approved the issuance of those bonds by another state group, the Texas Public Finance Authority.

During the winter storm, tight gas supply and high demand translated into historic high prices as utilities struggled to bring gas to residential customers and electric companies scrambled to secure fuel for their power plants. 

At times, gas traded 150 times higher than it had before the crisis.

Those prices made massive profits for gas companies, estimated at $11 billion earlier this year by Bloomberg News. They also led to accusations of price gouging, which would have been illegal if it had been been applied to other products like gasoline.

“It would be like you’re going to fill up your gas tank during the storm … and instead of paying $50-ish to fill up your tank, the register there reads: ‘Give me $6,000 to $7,000,’” Paula Gold-Williams, former head of San Antonio’s publicly owned utility, told KUT in July. 

Texas’ regulated gas distribution utilities, which don’t make money from higher fuel costs, typically pass those costs on to consumers. For those utilities and their ratepayers, securitization was pitched as a way to spread out the pain of paying the massive price tag of the blackout.

While the Railroad Commission approved the securitization of $3.4 billion, it remains unclear exactly how much individual ratepayers will see their monthly bills increase and when.

Texas Gas Service, which services the Austin area and is the state’s third largest gas distributor, says it doesn’t know yet what the impact on customers’ bills will be.

“The Railroad Commission has 90 days to issue a financing order which instructs the Texas Public Finance Authority to issue bonds,” Texas Gas Service said in an email. “After that, the Texas Public Finance Authority has 180 days to issue the bonds. As this process unfolds, the length of time for recovery and the rate charged to customers will be determined.”

In a legislative hearing after the storm, Texas Gas Service told lawmakers that it paid 22 times more than usual for gas during the freeze and blackout.

One estimate published by the Austin Monitor in August said Texas Gas Service bills may increase by $5 a month for the next 10 years.

After Wednesday’s vote, critics accused state lawmakers and the Railroad Commission of putting gas company profits over customer needs.

The legislature could have agreed to spend some amount of state money … to just help utility customers that are struggling with their utility bills,” said Virginia Palacios, executive director of Commission Shift, a group pushing for reform of the Railroad Commission. “They completely passed on that.”

The companies that profited the most from this [winter storm] were Energy Transfer and Enterprise Products Partners. Railroad Commissioner Christi Craddick holds beneficial interests in both of those companies,” Palacios said, citing a series of reportsher group recently released on conflicts of interest at the commission. 

Gov. Greg Abbott has also come under fire for receiving a $1 million campaign contribution from Kelcy Warren, CEO of Energy Transfer Partners.

Others have pointed out that the Railroad Commission is currently proposing new regulations that would allow natural gas companies to opt out of winterization rules, potentially causing prices to spike again when the next cold front cuts the state’s gas supply.

“No ratepayer assistance. No required weatherization of gas supply to ensure no repeat. If it happens again, we’ll pay again,” tweeted Doug Lewin, head of the consulting firm Stoic Energy. “The invisible hand never picks up the check.”

Bloomberg:

The official autopsy of the great Texas winter blackout of February 2021 quickly established a clear timeline of events: Electric utilities cut off power to customers and distributors as well as natural gas producers, which in turn triggered a negative feedback loop that sunk the state deeper and deeper into frigid darkness.

It’s now becoming clear that while millions of Texans endured days of power cuts, the state’s gas producers contributed to fuel shortages, allowing pipelines and traders to profit handsomely off them.

nterviews with energy executives and an analysis of public records by Bloomberg News show that natural gas producers in the Permian shale basin began to drastically reduce output days before power companies cut them off. As the flow of gas cratered, everyone scrambled to secure enough supply, sparking one of the wildest price surges in history. Power producers were forced to pay top dollar in the spot market for whatever gas they could find. Soon customers will be saddled with the bill.

And it’s a big one: The total comes to about $11.1 billion for a storm that lasted for just five days, according to estimates by BloombergNEF analysts Jade Patterson and Nakul Nair. The cost of gas for power generation alone was about $8.1 billion, or 75 times normal levels. A further $3 billion was spent by utilities providing gas for cooking, heating and fireplaces. The BNEF estimate is based on spot prices at major hubs assessed by S&P Global Platts rather than private contracts, so is likely an upper limit of the total cost.

Millions of Texans are now faced with the prospect of paying higher gas prices for years as utilities seek to spread the cost over a decade or more. Texas lawmakers have set aside $10 billion to help natural gas utilities cover their natural gas costs from the storm through low-interest, state-backed bonds.

One Response to “Texas Ratepayers will Pay for Blackout, Enrich Gas Barons”

  1. rhymeswithgoalie Says:

    One estimate published by the Austin Monitor in August said Texas Gas Service bills may increase by $5 a month for the next 10 years.

    My last gas appliance to replace is my kitchen range with a gas stovetop, and I’m just waiting for my induction-top replacement to become available (supply chain), and after that is installed I will have my gas feed cut off and get rid of my TGS account.

    I am so looking forward to getting rid of that last gas appliance (which I very rarely use these days anyway)


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