CenterPoint Customers Will Pay the Price of Natural Gas Company Profits
Texans must pay $ 3.6 billion in natural gas costs incurred by utilities during a week of freezing in February – a burden consumers will bear for a decade or more.
During that same winter week, several pipeline companies and natural gas traders made billions of dollars transporting and selling natural gas at exorbitant prices when supplies were insufficient.
Dallas pipeline companies Energy Transfer and Houston’s Kinder Morgan made $ 2.4 billion and $ 1.1 billion, respectively, while UK oil major BP made more than $ 1 billion from its operations. natural gas trading during the deadly and historic storm, according to files and the company analyst. estimates. Houston’s pipeline company Enterprise Products Partners said it made $ 250 million from transporting and selling high-priced natural gas to utilities, industrial customers and power producers during the storm.
Ultimately, Texans will fund the profits of these companies, said Jim Krane, an energy researcher at the Baker Institute for Public Policy at Rice University.
“It’s pretty clear that this is a transfer of wealth from the public to investors and traders who could capitalize on the high prices,” Krane said. “What’s frustrating is that even though people were shaking in their homes, their (natural gas) bills are going up anyway. They’re still going to have to pay for it. It really is a slap in the face.
More than 1.8 million CenterPoint Energy customers in the Houston area are responsible for the $ 1.14 billion natural gas bill incurred by the Houston utility when it had to quickly buy natural gas from consumers. sky-high prices after demand soared and supplies plunged during the storm.
Natural gas wells and pipelines, many of which were not weatherproof to withstand prolonged freezing temperatures, froze and lost pressure during the storm. Weather-related issues and power outages at remote oil wells caused natural gas production to drop nearly in half as the Texans tried to stay warm during the days of below freezing temperatures.
As a result, spot prices for natural gas at the Houston Ship Channel hit $ 385 per million British thermal units, down from less than $ 3 per million British thermal units a few weeks before the storm. In other markets, prices soared above $ 1,000 per million British thermal units, breaking records.
Utilities such as CenterPoint pass the cost of natural gas on to customers without any markup and instead make money on their natural gas operations through state-regulated distribution charges.
CenterPoint filed a request with regulators on Friday to fund the billions of dollars in gas cost increases. Documents submitted to the Railroad Commission indicated how much the financing would cost Houstonians in the years to come, reflected in their monthly bill.
The average natural gas bill in the Houston area – about $ 30 – could increase by $ 2 to $ 5 per month starting next year if CenterPoint is allowed to use state-issued bonds to fund what ‘he owes for this high-priced gas. This means Houstonians could pay up to $ 60 more per year for their natural gas over the next decade.
If CenterPoint’s claim is denied, it would levy a fee of $ 15 to $ 40 per month over the next year, pushing the average gas bill to nearly $ 80 in the summer and over $ 100 in the winter. That means Houstonians could pay up to $ 480 more for their natural gas over the next year.
The cost would hit everyone in CenterPoint’s territory, even if they couldn’t turn on their natural gas heating systems due to power outages, Krane said.
“You buy either a six pack or a gym membership from your local bill collector,” Krane said. ” It is not negligible. For some people, this will be quite difficult news if you hang in there. “
While there are consumer protections prohibiting price increases for essentials such as bottled water and gasoline during hurricanes and other emergencies, there are no such protections for natural gas customers. .
It’s by design, Krane said. Higher prices in the spot market encourage Texas natural gas companies to produce more fuel when demand is high and supply is low.
“In this case, it’s a state-sanctioned price hike,” Krane said. “The pricing structure is set that way. “
Pipeline companies that made billions during the storm said they were doing their job of providing essential fuel at a market price set as expected. Kinder Morgan and Energy Transfer have invested in projects to keep their pipelines flowing during inclement weather and have profited generously.
There are no penalties for natural gas suppliers and non-functioning pipeline companies in an emergency – only gigantic profits for those who can, Krane said.
“Unfortunately, the state’s reluctance to heed the common sense propositions of previous grid failures has predictably set us up for yet another of these utility bailouts,” Krane said. “The public is paying for the state’s reluctance to regulate properly. “
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