Democratic Sen. Tina Smith of Minnesota is calling for federal investigations into possible price gouging of natural gas in the Midwest and other regions, following severe winter storms that plunged Texas and other states into a deep freeze that caused power outages in millions of homes and businesses.
Smith says natural gas spot prices spiked as high as 100 times typical levels, forcing utilities and other natural gas users to incur exorbitant costs, many of which were passed on to customers.
In a letter sent Saturday to federal regulators, Smith said the price spikes will not just harm consumers, but could “threaten the financial stability of some utilities that do not have sufficient cash reserves to cover their short-term costs in this extraordinary event." The letter was sent to the Energy Department, Federal Energy Regulatory Commission and the Commodities Futures Trading Commission. A copy of the letter was obtained by the Associated Press.
The Minnesota Public Utilities Commission has called its own special meeting on Tuesday to discuss the spike in natural gas prices. The commission has invited utility companies to take part in the meeting to discuss how the severe winter weather may affect Minnesota customers in the weeks ahead.
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The extreme weather spurred residents from Mississippi to Minnesota to crank up electric heaters and pushed demand for electricity beyond the worst-case scenarios planned for by grid operators. At the same time, many gas-fired power plants in Texas and other states were knocked offline because of icy conditions, and some plants appeared to suffer fuel shortages as natural gas demand spiked nationwide.
More than 70 deaths across the U.S. have been blamed on the storms.
In Winfield, Kansas, the city manager reported that a unit of natural gas that sold for about $3 earlier this month sold for more than $400 on Thursday. City Manager Taggart Wall told KWCH-TV in Wichita that Winfield, which budgets about $1.5 million a year for natural gas, expects to pay about $10 million for the past week alone. Residential customers could see bills as high as $2,500 this month, he said.
In Morton, Illinois, officials reported that gas normally sold for about $3 per unit cost nearly $225 this week as demand soared because of the deep freeze.
While officials don’t know all the details of what happened, nor precisely how it will affect utility rates, “we do know this situation could be a significant financial burden for utilities and their customers," especially as families in Minnesota and across the country struggle in the coronavirus pandemic and economic downturn, Smith said.
A spokeswoman for the Federal Energy Regulatory Commission, known as FERC, said the agency will review Smith's letter and "respond in due course.''
A spokesman for the American Gas Association, which represents more than 200 local energy companies, said Feb. 14 and 15 set a record for the largest natural gas demand in U.S. history over a two-day period.
While natural gas utilities faced “unprecedented challenges" and “spot prices climbed in some regions due to spikes in demand, families and businesses that use natural gas were protected from higher prices by the careful planning of their utilities," said Jake Rubin, a spokesman for the gas association. Most natural gas utilities use long-term contracts that seek to guarantee enough supply to meet demand and to lock-in affordable prices, he said.
Still, exorbitant price spikes were recorded in the spot market. Natural gas hit a record $600 per million British thermal units in Oklahoma, while Missouri Gov. Mike Parson said he’s asked the state attorney general to investigate complaints of price gouging of natural gas in that state.
Smith, in her letter to regulators, urged them to investigate conditions in the natural gas market over the last week, including any price gouging by natural gas producers and suppliers.
“A public report should detail what occurred, make recommendations to prevent such problems in the future and determine if laws have been broken," she said. Smith also urged officials to invoke emergency authorities, including under the Natural Gas Policy Act and the Defense Production Act, to ensure natural gas is sold at fair prices during the current crisis.
The Biden administration and Congress should consider financial support to utilities and customers “that may be facing a cash crunch or rate increases as a result of the spike in natural gas prices," Smith said.
The White House announced on Saturday that the president had declared a major disaster in Texas, and he has asked federal agencies to identify additional resources to address the suffering.