Texas Pipeline Barons Walk Back Fuel Cutoff Threat

January 21, 2022

The Texas freeze and widespread energy system failures

As I mentioned the other day, in continued fallout from last winter’s deadly and catastrophic Texas power grid debacle, a pipeline operator had, in the face of an oncoming winter freeze, threatened to cut off gas supplies to generators supplying power to 400,000 Texans.

The company in question, Energy Transfer, is a big contributor to Governor Greg Abbot, who was, I imagine, on the phone to his buds yesterday as the media blew up on this.

Energy Transfer has walked back their threat for now. They still claim the generators owe them money, but will continue to sell gas for now, at spot market prices, meaning, quite a bit higher than the normal rate. (gas pros weigh in here)

Texas Tribune:

After threatening to cut off fuel to roughly a third of the power plants owned by Texas’ biggest power generator, a major pipeline company said Thursday it will continue selling natural gas to the plants through the end of March. But the companies have still not resolved their underlying financial dispute stemming from last February’s deadly winter storm.

Energy Transfer LP subsidiaries walked back their threat after Luminant, a Vistra Corp. subsidiary, on Wednesday asked state regulators to prevent the pipeline company from cutting off fuel to five Vistra power plants, which produce enough electricity to power 400,000 Texas homes, businesses and critical infrastructure such as schools and hospitals.

The pipeline companies had told Vistra that gas would stop flowing to the power plants on Monday unless Vistra paid Energy Transfer $21.6 million that they claim Vistra owes them, according to Vistra’s complaint to the Railroad Commission of Texas, which regulates the state’s oil and gas industry.

The “threat to terminate service in the middle of winter is illegal and grossly irresponsible and should be prohibited by this Commission,” Vistra said in the complaint. It called the move by Energy Transfer, run by billionaire Kelcy Warren, “a form of commercial extortion.”

Energy Transfer responded Thursday in a short filing with the Railroad Commission, saying it would continue selling natural gas to Vistra on the spot market — a one-time open market transaction for immediate delivery of gas purchased “on the spot.”

That would nullify the Monday deadline imposed by Energy Transfer. Vistra has been paying those spot market prices to Energy Transfer since Dec. 1, when its long-term contract for gas expired, and Energy Transfer said it would not negotiate another contract until Vistra paid the $21.6 million.

For Vistra, paying spot prices means buying gas from Energy Transfer at between $15 and $25 per million British Thermal Units (BTUs), compared to the average national price of $3.91 per million BTUs in 2021, according to the Energy Information Administration.

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