Texas Power Debacle was a Bonanza for Pipeline Owners

January 20, 2022

Indicating perhaps that as long as incentives are this perverse, Texas power problems may be resist definitive solutions.

Bloomberg:

Kinder Morgan Inc. posted a record annual profit after revenue was inflated by the deadly winter storm that paralyzed Texas almost a year ago, sending natural gas prices soaring. 

The second-largest U.S. pipeline operator by market value reported adjusted earnings of $3 billion for last year, up from $2 billion in 2020, the company said in a statement Wednesday. Its fourth-quarter profit of $609 million beat the $569.7 million average of analyst estimates compiled by Bloomberg.

Kinder Morgan, which moves about 40% of U.S. natural gas through more than 70,000 miles of pipelines, was one of the biggest winnersfrom the freeze offs that disrupted gas deliveries in Texas during a deep freeze last winter, pushing prices for the fuel available in storage to unprecedented levels. In contrast, power producers and utilities across the state incurred billions of dollars in losses amid ballooning costs.

Shares of Kinder Morgan have risen 9.9% this year, underperforming the S&P 500 Energy Index’s 16% gain. 

Kinder Morgan’s net income may reach $1.09 per share this year, up from 78 cents in 2021, following the $1.2 billion acquisition of Stagecoach Gas Services LLC and the completion of projects, the company said last month. The company plans to spend $1.3 billion in projects and as much as $750 million in opportunities including share buybacks.  

Washington Post:

After last year’s deadly storm left millions of Texans freezing in the dark for days, the Electric Reliability Council of Texas, or ERCOT, made improvements to its power grid. Now, the council said, 321 out of 324 electric generation units and transmission facilities have fully passed inspection to meet new regulations.

“The Texas electric grid is more prepared for winter operations than ever before,” interim ERCOT chief executive Brad Jones said in a statement.

But Michael Webber, an energy resources professor at the University of Texas at Austin, cautioned that although the electrical grid is better equipped for winter storms, the natural gas side of Texas’s energy system was not upgraded and could freeze in extreme conditions — which could strain the whole system. Companies that operate the natural gas systems that froze last February, cutting off supply to power plants, do not face the same regulations as those that provide power to homes and businesses.

“It’s like fixing your car, but the tank is empty,” Webber said.

Already below-normal temperatures caused some natural gas production equipment to freeze two weeks ago in the Permian Basin region of West Texas, where Bloomberg reported gas production plunged to its lowest levels since last year’s historic freeze.

On Wednesday, pipeline operator Kinder Morgan warned customers that“potential exists for supply shortfalls due to freeze‐offs” ahead of this upcoming cold onslaught.

However, this freeze, when temperatures may plunge to the teens in some areas near the southern border, will not be a repeat of last year’s winter weather, unusual for its extensive damage and duration.

“I’m not really too panicky,” Webber said. “But I will be curious to see how the gas systems perform. That’s the weak link in the system, and all eyes should be on that.”

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