Days before below-freezing temperatures and icy rain were expected to begin bearing down on East Texas, Kountze City Administrator Tim Drake had already heard from his natural gas supplier.
If the city’s tiny municipal gas utility uses more gas than its typical daily allotment starting on Thursday, Drake said, it will be charged “an exponentially higher rate” for natural gas on the spot market.
The city is only a couple of years into a 15-year plan to pay off its natural gas bill from 2021, when gas sellers told Drake the cost of 1,000 cubic feet of gas had jumped from $3 to $200.
“Let’s hope that doesn’t happen again next week,” Drake said Wednesday.
Natural gas prices have already surged this week as the potential effects of Winter Storm Fern — whose name was bestowed by The Weather Channel — started to come into focus. In a post Thursday, the Department of Energy’s statistical agency said the benchmark Henry Hub spot price Wednesday was roughly 59 percent higher than the previous Wednesday.
An enormous front of Arctic air will slam into the central U.S. this weekend and merge with a second, moisture-laden storm system coming through California. The combined storm will move slowly eastward impacting more than 150 million people from Texas to the East Coast, forecasters warn.
Northern Great Plains states are facing temperatures down to minus 50 degrees Fahrenheit. Heavy snowfall extends through the Midwest into New England. Farther south, the storm is poised to bring ice storms and sleet from Texas to Virginia, according to the National Weather Service and other forecasters.
The storm is a “trifecta” danger, said Jim Robb, chief executive of the North American Electric Reliability Corp., the interstate grid operations standards organization.
In other words, extreme cold, high winds and blankets of ice, sleet and snow threaten to bring down local power lines and freeze power plants and natural gas production.
And millions of residents are still paying off the massive natural gas price spikes that occurred in during Winter Storm Uri in 2021 in Texas and other states.
Henry hub gas futures traded Thursday around $5 per million British thermal units as numerous utility companies said they would open emergency operations centers to deal with potential power and natural gas outages.
How high gas prices will climb hinges on how much natural gas production freezes and how much demand rises, said Michael Webber, a professor at the LBJ School of Public Affairs and the mechanical engineering department at the University of Texas, Austin.
Winter storms caused the largest interruptions to U.S. natural gas production over a four-year period ending in 2024, according to the U.S. Energy Information Administration.
Mathieu Utting, a natural gas and LNG markets analyst with Rystad Energy, wrote in an email to POLITICO’s E&E News that gas production has already dropped by 4 billion cubic feet a day compared to early last week, “because of wellhead freeze offs or shut-ins in anticipation of extreme winter weather.”
“For the demand side, it depends how cold it is and for how long,” Webber said. “It’s a double whammy, because customers use gas to hear their homes and electricity from gas power plants.”
Utting said the storm is expected to add around 1 billion cubic feet a day of gas demand over the next week.
President Donald Trump campaigned on making energy prices more affordable, but the White House dismissed concerns about rising natural gas prices in a statement on Thursday.
“Instead of fixating on normal market fluctuations that are being driven by a looming winter storm, the media should focus on how American natural gas output is projected to hit a record high this year,” said Taylor Rogers, a White House spokesperson.
But consumer advocates said the coming winter storm could echo concerns from 2021, when natural gas sellers made massive profits selling gas at high prices as demand surged.
“I am extremely concerned that companies will exploit this cold snap to engage in profiteering, and I think not only is that immoral, but it should be illegal,” said Tyson Slocum, director of the energy program at Public Citizen.
An existing energy affordability “crisis” is being driven by higher natural gas prices caused by record liquefied natural gas exports from the U.S., Slocum said Thursday. The natural gas industry has disputed such characterizations and said prices go up when gas supply is constrained.
“We should be regulating and curtailing exports during extreme weather events, during times when we see domestic price spikes or if we see domestic shortages,” Slocum said.
Energy Secretary Chris Wright said in a press release Thursday he directed regional grid operators to maintain communications with his agency and to be prepared to bring backup power generation online during Fern.
In a related letter to grid operators Thursday, Wright wrote that he has directed DOE to prepare to issue orders that would ensure that “tens of gigawatts of available backup generation, which would otherwise stand idle, is available during emergency conditions.”
It was unclear Thursday evening whether he expected that backup generation to be available by the time Fern arrives this weekend.
Lessons learned
Dozens of lawsuits are still working their way through courts over sky-high natural gas prices that dominated the market during Winter Storm Uri in 2021.
Spot prices at the Henry Hub jumped from $3.76 per MMBtu on Feb. 10, 2021, to $23.86 on Feb. 17, according toEIA.
Some natural gas customers, however, saw much larger increases.
The Oklahoma Corporation Commission reported that prices spiked from around $3 per thousand cubic feet of gas to more than $1,200, ultimately leaving ratepayers on the hook to pay off nearly $5 billion in bonds issued to cover that increase in price, with interest. One thousand cubic feet of gas is roughly equivalent to 1 MMBtu.
Texas natural gas ratepayers now are paying off $3.4 billion in bonds to help natural gas utility companies stay afloat as prices also spiked in that state. That does not include the $2.1 billion in securitization bonds that the state’s grid operator is charging ratepayers to help pay generators for certain “extraordinary costs” incurred during Uri.
Meanwhile, BloombergNEF has estimated that natural gas sellers in Texas alone made about $11 billion during the five days tied to the 2021 winter storm.
While natural gas sales that occur through pipelines that cross state lines are regulated by FERC, those that occur in pipeline systems that stay contained within one state are opaque, Webber said.
Webber pointed to states like Texas, where natural gas companies can both own pipelines and the gas within the pipelines. Regulators there don’t require gas companies to report the prices at which they acquire and sell their natural gas.
“You can own title and transfer so you can control the flow of the gas,” Webber said. “The concern, and the people who feel like they were price gouged, say that the people who are selling and moving gas charge whatever they want — that it’s not a real competitive marketplace because it’s not a common carrier.”
State attorneys general in Oklahoma and Kansas filed lawsuits in Uri’s aftermath, accusing natural gas companies of price gouging.
Oklahoma Attorney General Gentner Drummond (R) said in a statement that his office would monitor natural gas supplies and market pricing during Winter Storm Fern.
“It is critical that Oklahomans are not exploited, especially during extreme weather events,” Drummond said. “While energy markets can experience volatility during periods of severe cold, those conditions do not excuse predatory behavior or violations of contractual obligations.”
Kansas Attorney General Kris Kobach (R) announced last February he would abandon his price gouging lawsuit tied to overcharging during Uri. FERC, meanwhile, launched an investigation into potentially unlawful actions relating to Uri, but last November, it closed the investigation and opted not to pursue enforcement actions.
Now, government and energy industry officials are looking ahead to Winter Storm Fern.
Laura Swett, chair of the Federal Energy Regulatory Commission, said Thursday that her agency is keeping a close eye on the storm, particularly in terms of electric reliability.
“From every utility that I have spoken to or grid operator, we are benefiting from our lessons learned from past extreme weather events,” Swett told reporters at FERC’s monthly meeting. “Everyone combs over those to see what we can do better next time, so I think we are as best prepared as we possibly could be.”
Learning from past events was a sentiment echoed by the Natural Gas Supply Association, whose members include producers and marketers, or sellers, of natural gas.
The groups’ members have “invested significantly in winterization and system coordination following past extreme weather events,” said Dena Wiggins, the association’s CEO, in a statement Thursday. “The pending storm has the industry laser focused on doing all we can to serve the needs of consumers.”
Storm preparations
Energy industry officials know they can expect drops in gas output as below-freezing conditions spread across the country.
Natural gas production in Texas declined by almost 45 percent during Uri, according to EIA, leading the state’s oil and gas regulator to adopt its first rules requiring natural gas operators to weatherize their equipment.
The Appalachian Basin saw natural gas production sink by more than 6 billion cubic feet a day during Winter Storm Elliott in 2022, when temperatures fell below 0 degrees Fahrenheit in parts of the Northeast.
In an advisory this week, the Railroad Commission of Texas — which oversees the state’s oil and natural gas industry — urged operators under its purview to take steps such as monitoring weather reports, listening to orders from local emergency officials and securing “all personnel, equipment and facilities to prevent injury or damage.”
Officials with the American Petroleum Institute, one of the nation’s largest oil and gas trade groups, said Thursday that the natural gas industry “remains focused on sustaining safe, dependable operations while protecting worker safety throughout this cold weather event.”
Meanwhile, concerns are growing for the grid as Fern approaches.
The storm will test the winter storm defenses installed by power plant and gas infrastructure owners and operators since Uri in 2021 and Elliott in 2022.
Grid coordinators have called on power plant operators to be at maximum readiness by delaying maintenance outages, according to NERC’s Robb.
NERC said in a winter readiness report in November that New England, the Carolinas, parts of the Tennessee Valley region and most of Texas were at an “elevated risk” of power emergencies in extreme storms.
Power plant winterization standards developed by NERC and ordered by the Federal Energy Regulatory Commission have been added and strengthened over the past three years. Although final actions won’t be complete in every case for two to four more years, Robb said protections are definitely stronger.
“The surface equipment in the electric sector should be well prepared for this event,” Robb said. “The issue is that those requirements don’t extend into the fuel supply because we don’t have authority to do that. So we’re banking on the gas industry doing the things that they’ve committed to do voluntarily to keep gas flowing during very cold periods.”
State regulators and the Electric Reliability Council of Texas, the state’s main power grid operator, made sweeping changes after Uri, when much of the state was plunged into darkness for days and more than 200 people died.
The rules require power plants to winterize their facilities, for example.
ERCOT officials said this week that they expect there will be enough generation “to meet demand this winter.”
“We are continuing to monitor the weather conditions throughout this week and keep Texans informed through our communications channels,” the grid operator said in a statement. “ERCOT will continue to deploy all available resources to manage the grid reliably and coordinate closely with the Public Utility Commission, generation providers, and transmission utilities.”
