CenterPoint customers will pay price for pipeline company profits during Texas freeze

Written By Paul Takahashi at The Houston Chronicle.

Texans are on the hook for $3.6 billion in natural gas costs incurred by utilities during one freezing week in February — a burden consumers will bear for a decade or longer.

During that same winter week, several natural gas pipeline companies and traders made billions of dollars as they transported and sold natural gas at sky-high prices when supplies were short.

Pipeline companies Energy Transfer of Dallas and Kinder Morgan of Houston made $2.4 billion and $1.1 billion, respectively, while British oil major BP made more than $1 billion from its natural-gas trading business during the deadly, historic storm, according to company filings and analyst estimates. Houston pipeline company Enterprise Products Partners said it made $250 million for transporting and selling natural gas at high prices to utilities, industrial customers and power generators during the storm.

Ultimately, Texans will fund these companies’ profits, said Jim Krane, an energy fellow at Rice University’s Baker Institute for Public Policy.

“It’s pretty clear this is a wealth transfer from the public to investors and traders who could capitalize on the high prices,” Krane said. “The frustrating thing is, even though people were shivering in their homes, their (natural gas) bills are going up anyway. They’re still going to have to pay for this. It’s really 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 at sky-high prices after demand soared and supplies plunged during the storm.

Natural gas wells and pipelines, many of which weren’t weatherized to handle prolonged freezing temperatures, froze and lost pressure during the storm. Weather-related problems and power outages at distant oil wells, caused natural gas production to plunge by almost half just as Texans were trying to stay warm during days of below-freezing temperatures.

As a result, so-called natural gas spot prices at the Houston Ship Channel hit $385 per million British thermal units, up from less than $3 per million British thermal units a couple of weeks before the storm. In other markets, the prices soared above $1,000 per million British thermal units, shattering records.

Utilities such as CenterPoint pass along the cost of natural gas to customers without any markup and instead make money on its natural gas business through state-regulated distribution fees.

CenterPoint on Friday filed a request with regulators to finance the billions of dollars in excess gas costs. The paperwork submitted to the Railroad Commission outlined how much the financing would cost Houstonians in the coming years, reflected in their monthly bill.

The average natural gas bill in the Houston area — about $30 — could go up by $2 to $5 a month starting next year if CenterPoint is allowed to use state-issued bonds to finance what it owes for that high-priced gas. That means Houstonians could pay as much as $60 more a year for their natural gas over the next decade.

If CenterPoint’s request is rejected, it would levy a fee of $15 to $40 a month over the next year, pushing the average gas bill to almost $80 during summer and to more than $100 in winter. That means Houstonians could pay as much as $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 because of rolling blackouts, Krane said.

“You either buy your local bill collector a six-pack or a gym membership,” Krane said. “It’s not insubstantial. For some people, it’s going to be pretty tough news if you’re just hanging on.”

Although there are consumer protections prohibiting price gouging of essentials such as bottled water and gasoline during hurricanes and other emergencies, there are no such protections for natural gas customers.

That’s by design, Krane said. The higher prices on the spot market encourage natural gas companies in Texas to produce more fuel when demand is high and supply is low.

“In this case, it’s state-sanctioned price gouging,” Krane said. “The pricing structure is set up this way.”

The pipeline companies that made billions during the storm have said they were doing their jobs: providing critical fuel at a price set by the market as designed. Kinder Morgan and Energy Transfer invested in projects to keep their pipelines flowing during the harsh weather and profited handsomely as a result.

There are no penalties for natural gas providers and pipeline companies that fail to perform during emergencies — only gigantic profits for those that can, Krane said.

“Unfortunately, the state’s unwillingness to consider common sense proposals from previous grid failures has predictably set us up for another one of these public bailouts of utilities,” Krane said. “The public is shelling out to pay for the state’s unwillingness to regulate properly.”

paul.takahashi@chron.com

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