Why 2 gas giants aren’t changing after Southwest winter storms

By Shelby Webb | 04/20/2023 07:20 AM EDT

Policy debates in Texas and Oklahoma show the challenge facing governments across the country as they prepare for extreme weather while working with energy companies that deliver natural gas.

Karla Perez and Esperanza Gonzalez warm up by a barbecue grill during a power outage in Houston in February 2021.

Karla Perez and Esperanza Gonzalez warm up by a barbecue grill during a power outage in Houston in February 2021. Go Nakamura/Getty Images

Legislators and regulators vowed two years ago to hold energy companies accountable after Winter Storm Uri caused power outages across the central United States.

But in Texas and Oklahoma — the largest natural gas-producing states — investigations into actions during the storm have sputtered.

That has left the two gas giants potentially unprepared for future storms, raising concerns that there could be a repeat of the 2021 crisis, which led to more than 240 deaths in Texas alone.


Without more federal action, states have been left to investigate and police actions taken by natural gas companies during the 2021 disaster. A number of gas sellers reported record profits after Uri, while many customers will be paying off billions of dollars of debt for years as utility companies pass along costs from the freeze in monthly bills.

The lack of action by the two states shows the challenge governments across the country face as they prepare for extreme weather events while still working with energy companies that deliver natural gas.

“The industry is very well insulated politically in Texas, and there’s lots of reasons for that: the number of jobs it creates, the revenue it generates and politicians they’re associated with give them a lot of pull in the Legislature,” said Brandon Rottinghaus, a professor of political science at the University of Houston.

The chief financial officer of natural gas producer Comstock Resources Inc. said in February 2021 that the storm was “like hitting the jackpot” and that it was able to sell its product at “super-premium prices.” A BloombergNEF analysis found gas sellers in Texas made $11 billion in the five days during the storm.

Oklahoma’s attorney general said he’s still investigating whether to act. In Texas, several bills that would make in-state natural gas transactions more transparent and give the state more authority to investigate and prosecute price gouging or market manipulation have been referred to legislative committees. Lawmakers, people affected by the high prices and political scientists say it’s unlikely that gas companies in the two states will face stiff new oversight despite industry failures as temperatures plunged below freezing.

State courts have taken some steps. A Texas appellate court ruled in March that the state’s Public Utility Commission erred in raising the price of electricity to the then-maximum price of $9,000 a megawatt-hour during the storm. It remains to be seen how much money customers may be able to claw back.

But Texas’ governor “has declared the problem has been solved,” Rottinghaus said. “Passing a bill relating to natural gas markets now or natural gas prices during the freeze backtracks on that.”

For Roderick Hutto, city administrator for Kountze, Texas, the matter is anything but settled.

His city, about 25 miles north of Beaumont near the Louisiana border, was told by its natural gas supplier during the freeze that it would use more natural gas than expected and have to buy gas on the spot market. The price had jumped from $2.77 per million British thermal units to as high as $175 within the hours after Texas Gov. Greg Abbott (R) declared a natural disaster on Feb. 12, 2021.

In all, the city’s natural gas bill for February came out to $500,000, well above the $12,000 average bill it receives for 289 customers, which include a nursing home and jail.

Only about $99,000 of the bill was for natural gas; the rest was for various penalties and fees city officials and their hired attorneys are still trying to understand.

When Hutto called Republican state Attorney General Ken Paxton’s office to ask for help and an investigation in the weeks after the freeze, he said the attorney general’s office responded a couple of weeks later with a different offer: a low-interest loan to help Hutto and the citizens of Kountze pay off the full amount over the course of decades.

Paxton’s office did not respond to a request for comment. The Oklahoma Gas Association and the Texas Oil and Gas Association declined to comment on bills filed in that state.

“The bottom line is you have a whole bunch of powerful people hand in cookie jar. Everybody takes off real fast to try to help but run into a brick wall over the marketing value of natural gas,” Hutto said. “We’ve had [elected officials’ representatives] come in and say they’ll help take care of it, but then they back off like they’re going to get their brake lines cut or find a horse head in their bed.”

Following Kansas?

While Federal Energy Regulatory Commission officials say two matters relating to Winter Storm Uri have been referred to the agency’s Division of Investigations within its Office of Enforcement, the agency is limited in what it can investigate.

FERC can only look into matters in which natural gas flows from one state to another, not when natural gas flows from wellhead to households that reside in the same state. That authority lies with state offices.

Some states have taken action or are considering taking steps.

Kansas’ attorney general filed a lawsuit in late February against a natural gas company, alleging price gouging. In a Chicago Sun-Times opinion piece, Illinois Gov. J.B. Pritzker (D) called for auditing the state’s gas distribution infrastructure, implementing performance-based regulations for gas utilities and other actions relating to the February 2021 winter storm.

Gavin Newsom, the Democratic governor of California, asked FERC to investigate natural gas companies after prices spiked this winter, and the Colorado General Assembly set up a special joint committee to investigate utility rates (Energywire, Feb. 21).

At the Oklahoma Corporation Commission — which regulates fuel, oil, gas, public utilities and transportation — calls to take action on charges relating to Winter Storm Uri have reached their loudest volumes since 2021.

In that state, ratepayers are on the hook to pay off more than $2.25 billion over 25 years for bonds issued to cover the increased costs of natural gas paid by the state’s natural gas utility during Uri. That will cost the average residential customer $7.82 a month in additional charges, according to the Oklahoma Corporation Commission.

Bob Anthony, the commission’s longest-serving commissioner, said those bonds include some $41 million in “bond issuance costs” that seem unaccounted for, and the entire deal represents “the worst fleecing of Oklahoma public utility ratepayers in the last three decades.”

He has called on the three-member Republican commission to investigate the matter. But the other two commissioners instead have pressed Oklahoma Attorney General Gentner Drummond, a Republican who took office in January, to look into the matter. Anthony has done the same but also sent a six-page letter to the Oklahoma Legislature and governor seeking more action.

Leslie Berger, press secretary to Drummond, told E&E News in a statement that the attorney general has been reviewing whether circumstances similar to what happened in Kansas’ natural gas markets during Uri happened in Oklahoma.

“If that turns out to be the case, he will take appropriate action,” she wrote.

Michael Crespin, a political science professor at the University of Oklahoma, said Drummond has been active in investigations since he was sworn into office and may be setting himself up for a gubernatorial run.

“To investigate an increase in prices in a very pro-consumer thing to do,” Crespin said. “But there’s a difference between looking into and investigating and trying to bring some sort of suit.”

The Oklahoma Legislature, meanwhile, has long been friendly to the oil and gas industry, thanks to the high number of well-paying jobs the industry provides in the state and how closely it’s tied to the state’s economic fortunes, Crespin said.

There have not been many bills filed this legislative session looking into recouping costs for Uri or making within-state natural gas transactions more transparent. Instead, the Oklahoma House passed a bill along party lines that would allow natural gas producers to increase prices by more than 10 percent during states of emergency. It adds natural gas to an existing state law that already allows petroleum prices to be increased during disasters as well.

State Rep. Mark McBride, a Republican representing a suburb of Oklahoma City who authored the bill, did not respond to requests for comment.

In an interview with Tulsa’s Fox 23 News, he said of the high prices during Uri: “I don’t blame any of this on oil and gas companies that produce natural gas. I think our utilities were ill-prepared, and they don’t like me saying that, but that’s just my opinion.”

“My guess is the industry was like, ‘Oh we’re not included here and want to make sure we’d be safe next time around,’” Crespin said.

Oklahoma Natural Gas, the state’s largest natural gas utility provider, said in a statement that it maps out an annual gas supply plan that includes how the company intends to obtain natural gas, how much it keeps in storage and other practices to help mitigate potential volatility in prices.

The company ultimately used some of its stored natural gas to offset high spot market costs, which it estimated saved customers $1.4 billion during the 2021 winter storm.

“Our winter storm preparation allowed our customers to endure the dangerously cold temperatures and experience minimal outages due to our gas supply plan and the operational preparations we made on our system to keep the gas flowing,” the company said in a statement. “Oklahoma Natural Gas does not set the market price or profit from increases in the cost of gas. The price we pay for natural gas is the price our customers pay.”

For many power providers, natural gas companies began sending curtailment notices and telling power generators that they would need to buy their fuel on the spot market five to seven days before the winter storm actually hit, said Michele Richmond, executive director of Texas Competitive Power Advocates, a trade group that represents companies that have fossil fuel-powered electricity generators.

“There were issues with the natural gas supply chain. And so at least in Texas, it’s part of the reason they passed legislation requiring weatherization for natural gas that goes to power generation, as well as all electric infrastructure,” she said.

Texas legislation

At least five bills have been filed in Texas that aim to provide more transparency into natural gas transactions made within the state and to try to scrape money back for high Uri natural gas prices.

S.B. 2129 would create an independent market monitor for the gas industry, while H.B. 2128 would make clear the attorney general’s authority to take enforcement action against companies that charge “excessive” prices for natural gas during disasters. H.B. 4708 would create a gas desk within the Electric Reliability Council of Texas (ERCOT), H.B. 5029 would require natural gas companies to pay a surcharge in 2024 equal to the profit they made selling gas above a certain price during Uri, and S.B. 1872 would have confidentiality provisions in natural gas contracts become unenforceable when the contract expires.

Of particular interest to Hutto, the city administrator of Kountze faced with a half-million-dollar gas bill from Uri, is the measure that would underline the attorney general’s authority to go after natural gas companies that charge allegedly excessive prices during natural disasters. The bill was filed by Rep. Ernest Bailes, a Republican who represents Kountze and the area around it.

Paxton, the Texas attorney general, in March 2021 issued a civil investigative demand asking for records from the Intercontinental Exchange, a natural gas exchange that saw massive price increases during Uri. But no action has yet come of that request. His office did not respond to a request for comment on the status of the investigation.

State Rep. John Bryant (D) filed the bill that would create a natural gas desk within the region managed by ERCOT, the state’s nonprofit grid manager. That desk would receive voluntary information from natural gas companies about whether there would be interruptions in fuel supply to natural gas electricity producers, interruptions that resulted in some of the power shortfalls experienced during Uri.

That information would stay within ERCOT and remain private, but when the idea was floated by several state officials including the head of the Department of Emergency Services, the chair of the Public Utility Commission of Texas and ERCOT’s former and current CEOs, several high-profile lawmakers with deep ties to the industry shot down the idea quickly.

Rep. Tom Craddick, a Midland-based Republican who served as a formidable speaker of the House from 2003 to 2009, worried that any information given to ERCOT about the natural gas market could become public and would result in more regulation on the industry.

“ERCOT did a terrible job before,” Craddick said, referring to the grid operator’s performance during the February 2021 storm. “Why would we give them any more responsibility at this point?”

Former interim ERCOT CEO Brad Jones testified in favor of the gas desk, and new CEO Pablo Vegas has also voiced support for the measure.

“It only makes sense,” Jones testified in September to a Texas Senate committee. “Over half our generation uses natural gas for electric generation. Since gas is a significant contributor, we should be able to gather that information.”

PUC Chair Peter Lake has expressed support for the gas desk, although his support has been more muted amid legislative debate.

“It would be premature for us to comment on legislation before final passage and it becomes law, as it can change throughout the legislative process,” the PUC said in a statement to E&E News.

But Bryant said 20,000 megawatts of natural gas-fueled generation was cut during Uri, and had ERCOT known that could happen, it could have managed resources and avoided coming within four minutes of a total grid collapse that could have resulted in a statewide blackout lasting weeks.

Bryant said that even though the gas desk bill and the four others calling for more transparency in natural gas markets have each been referred to committees, they face an uphill battle in getting passed out of either chamber of the Texas Legislature.

“That’s old school dominance of the lawmaking process by the oil and gas industry, and it’s outdated,” he said. “We currently have a completely unregulated and unmonitored gas market operating [within the state]; it’s only regulated and monitored outside the state when you cross the state lines. [Natural gas companies] are basically unrestrained in what they can do, and our own independent agency guaranteed to make sure lights don’t go out have no idea the status of the gas supply.”

Rottinghaus, the political science professor at the University of Houston, agreed it would be difficult for any of the five bills to reach Abbott’s desk. Three of the bills have been sitting in committees for weeks. Two — the bill that would make it more clear that the attorney general could investigate potential natural gas price gouging and one that would allow confidentiality clauses in natural gas contracts to expire — had hearings but are still pending in committee.

Even if the bills eventually work their way to the governor’s mansion, Rottinghaus said he is not sure whether the governor would sign them.

Abbott’s office didn’t respond to a request for comment on potential legislation.

Hutto said he’s still holding out hope. He and Kountze’s attorneys offered to pay the full $99,000 for the gas charges incurred to the city’s natural gas provider but said they cannot afford the roughly $400,000 in “arbitrary” fees and penalties the company charged against them.

He said he can’t pass those charges onto ratepayers, many of whom live on fixed incomes, because they’ll likely cut their gas lines rather than pay sky-high bills they can’t afford.

And he worries what the city will do if another winter storm sweeps through and prices soar again, especially if no action is taken this year by Attorney General Paxton or the Texas Legislature.

“We’ll be in the same boat,” he said. “Who will protect us from this happening again?”