Texas Attorney General Ken Paxton (R) is widening his investigation of price spikes during a deadly winter storm last month to include a signature piece of the state's energy industry: natural gas.
"These massive price increases impacted businesses and consumers alike and will have long term effects on Texas," Paxton said in a statement yesterday. "Hardworking Texans who pulled together to get their communities through this disaster deserve transparency and justice."
Paxton's office expanded the probe by sending a civil investigative demand to Intercontinental Exchange Inc., whose offerings include futures contracts on local gas markets. The attorney general is interested in learning about gas trades as well as communications about rising gas prices. His review will look at gas trades by companies with business in Texas.
"This could be a fruitful investigation," said Ed Hirs, an energy fellow at the University of Houston, adding, "There's no telling what he's going to find."
Intercontinental Exchange declined to comment on Paxton's request related to gas prices. But it previously sought to address the February cold snap and power prices in written testimony to state lawmakers, saying, "Texas consumers enjoy transparent, efficient markets resulting in arguably the lowest cost of energy in North America."
Less than a month has passed since low temperatures and icy conditions led to a shortage of electricity, power outages for millions of Texans and dozens of deaths. Resources tied to natural gas, wind, coal, nuclear and solar all saw issues, but gas had the most capacity offline during the winter event. In 2020, gas-fueled units provided 46% of the energy on the Electric Reliability Council of Texas grid — by far the most of any resource.
Paxton's examination of gas arrives as a number of issues hover over Texas' power sector, including questions about the financial health of power companies, $16 billion of excessive charges identified by a market monitor and proposed legislation to help avoid a future crisis. It also comes as the attorney general is facing investigations on several unrelated issues, as the Associated Press and others have detailed.
Also yesterday, the Public Utility Commission of Texas announced that Commissioner Shelly Botkin had resigned effective immediately. That left only Arthur D'Andrea, who recently became chair, on the three-person panel, which is the state's primary electricity regulator. DeAnn Walker, the former PUC chair, resigned last week.
With natural gas, there isn't a cap in place on prices. But some experts have asked about the potential for parties to game the gas market during an emergency like the one Texas recently experienced.
In a letter to federal officials last month on higher prices in Texas and parts of the central U.S., Sen. Tina Smith (D-Minn.) said natural gas spot prices spiked in some cases "to nearly 100 times typical levels." Other reports have said spikes were more than a hundredfold.
The Federal Energy Regulatory Commission said last month that its Office of Enforcement would be reviewing wholesale gas and electric market activity during February's extreme cold to see if market manipulation or other violations occurred.
On Feb. 19, Paxton said his office was sending civil investigative demands to 11 electricity companies and ERCOT, the state's main grid operator.
Many of the questions about Texas' wholesale power prices relate to a surge to a $9,000-per-megawatt-hour cap in the ERCOT region during last month's cold snap.
Some ancillary service prices went even higher during the crisis. Texans who saw extremely high bills may have had plans tied closely to swings in wholesale prices, while many residents had fixed-rate plans that offered more protection.
Questions have persisted about which companies, including in the gas sector, may have seen windfalls related to the Texas power crisis.
President and Chief Financial Officer Roland Burns of Comstock Resources Inc., a Texas-based natural gas producer, created a stir last month when he told analysts that recent prices were "like hitting the jackpot." The company's largest owner is Jerry Jones, the longtime owner of the Dallas Cowboys.
In a statement yesterday, Comstock said Burns apologized to state lawmakers last month for using "jackpot" as a description.
"While being taken out of context, that description was inappropriate and insensitive to the millions of Texans that did not have electricity or power, including many of our own employees who suffered through the same since we are based in the Dallas area," Comstock said.
The company also said it's "a price taker and not a price maker, on the Intercontinental Exchange (ICE) in the spot market for natural gas." Much of the company's gas also is sold at a price determined ahead of time.
'We were scrambling'
The move by Paxton coincides with a debate among Texas officials about what state policies should change and who should be blamed after the grid crisis.
Natural gas regulation in the state typically falls to the Railroad Commission of Texas. Christi Craddick, the RRC's Republican chair, defended the work of gas operators in a recent hearing before Texas lawmakers and cited issues with obtaining power for gas infrastructure.
In a statement yesterday, Craddick said she continues to support "full transparency" for Texans in the aftermath of the storm.
"The Railroad Commission does not control the price of gas and, in a recent press release, we stated our commitment to preventing high bills for consumers," she said. "As AG Paxton's investigation develops, we are ready to provide any assistance we can in order to ensure the utmost level of transparency and consumer protection."
R.J. DeSilva, a spokesperson for the RRC, said the commission also is analyzing the winter storm with lawmakers and industry. The parties will work to assess steps to further solidify infrastructure and communications to help bolster emergency responses, DeSilva said.
Commissioner Wayne Christian (R) of the RRC said in a statement that his office has been in regular contact with Paxton's office. And he said there's been an exploration of ways to make sure local distribution companies have access to long-term financing that's needed "to stay solvent and avoid large utility bills for consumers."
"[N]atural gas saved the day," Christian said about the industry's recent performance.
But issues with gas remain a focus for many people reviewing the power crisis. High gas prices and a lack of sufficient supply hurt some power producers that rely on the fuel for some of their power plants.
"We were scrambling to get gas," CEO Curt Morgan of Vistra Corp., which has generation and retail operations in Texas, said during a recent call with analysts. "Gas prices shot through the roof."
Legislation and power prices
Texas lawmakers, meanwhile, are stepping up efforts to reform the state's electricity system after the historic power outages.
Texas House Speaker Dade Phelan (R) laid out seven bills yesterday in a list of priority electricity reforms that have been or will be filed. Still, funding for some of the ideas or requirements may need to be figured out.
"I am proud the Texas House is leading the charge in protecting consumers, fortifying our grid, and creating clear lines of communication and authority during extreme weather events," Phelan said in a statement. "We must take accountability, close critical gaps in our system, and prevent these breakdowns from ever happening again."
The list included:
- H.B. 10 to reform leadership of ERCOT.
- H.B. 11 to require weatherization of electric transmission and generation facilities.
- H.B. 12 to create a statewide disaster alert system.
- H.B. 13 to improve coordination during disasters.
- H.B. 14 to require rules for weatherizing natural gas infrastructure.
- H.B. 16 to ban certain variable rate products for residential electric customers.
- H.B. 17 to prevent local bans on connecting residential or commercial buildings to infrastructure based on the source of energy.
Luke Metzger, executive director of Environment Texas, said in a statement yesterday that the speaker's package included some important elements. Metzger pointed to studying a possible statewide emergency alert system and potentially weatherizing gas facilities.
"Failures in gas infrastructure, including at oil and gas wells and with gathering lines, led to supply shortages at natural gas power plants," Metzger said.
But he took issue with H.B. 17, arguing that electrifying buildings would lower overall use of gas in Texas. He also called for a look at ways to bolster energy efficiency.
Meanwhile, Texas Lt. Gov. Dan Patrick (R) issued a release yesterday calling for the repricing of wholesale power prices in the ERCOT region in light of the $16 billion of overcharges identified by an independent market monitor, Potomac Economics.
"Correcting this $16 billion error will require an adjustment, but it is the right thing to do," Patrick said in a statement. "It will ultimately benefit consumers and is one important step we can take now to begin to fix what went wrong in the storm."
The Public Utility Commission chose not to move forward Friday with a massive repricing of the wholesale power market during a meeting (E&E News PM, March 5).
"On the surface, it looks like, 'Oh no, it's just money that generators got. And if you reverse it, it will go to the consumers,'" PUC Chair D'Andrea said during a Friday meeting. "But that is very simplistic, and it's not how it works."
Other market changes, including potential ancillary services pricing revisions, could be examined further. ERCOT declined to comment yesterday about Patrick's statement, and the PUC didn't provide a comment in time for publication.
Reporter Mike Lee contributed.
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