Why Texas regulators refuse to investigate role pipelines played in 2021 blackouts
If a gas station on an interstate highway raised prices by 1,500 percent during an evacuation from a hurricane, state and federal authorities would prosecute the owner to the fullest extent of the law.
When natural gas companies did precisely that while people froze to death in 2021, state officials rushed to defend them. The $11 billion in excess profits collected by natural gas companies during that week was one of the largest wealth transfers in Texas history.
Our elected officials are doing their best to ensure that pipeline companies will continue to enjoy windfalls when the next weather crisis strikes. This is the fourth and final part of my series on widespread allegations that the natural gas pipeline system defrauded markets and customers during Winter Storm Uri in 2021.
On the darkest, coldest nights, Texans rely on the natural gas system to generate electricity. But the companies responsible for meeting those needs also make most of their money during those hours, thanks to our free-market system.
FAILURES OF POWER: 'Collective amnesia': Texas politicians knowingly blew 3 chances to fix the failing power grid
The Texas electricity grid has operated on a scarcity model for more than 20 years, and most of the time, Texas has the cheapest electricity in the nation.
When demand rises, though, so do prices for electricity and natural gas, the primary backup fuel for generating electricity. In a pending lawsuit, Houston energy data firm CirclesX alleges pipeline operators routinely manipulate natural gas supplies to drive up prices during weather events.
These companies went too far in February 2021, CirclesX says, inadvertently triggering statewide blackouts that left hundreds of Texans dead.
Pursuing profits
The Federal Energy Regulatory Commission and the North American Electric Reliability Corp. investigated and described the sequence of events: Record cold weather hit Texas, and natural gas failed to reach power plants, which shut down and forced the grid operator ERCOT to initiate rolling blackouts. The blackouts aggravated natural gas shortages, and 4 million people spent at least some of four subfreezing days without power.
Public data, analyzed by industry data firm CirclesX, suggests the profits arose from intentional manipulation of the natural gas supply to drive up profits. CirclesX’s lawsuit seeks the return of those profits on behalf of all Texans, which would go to repay public debt issued in 2021.
PART ONE: Deadly Texas blackouts during 2021 freeze were caused by greed, not the cold, lawsuits allege
The data and CircleX’s analysis are compelling enough that CirclesX not only deserves a day in court, but Texas officials should launch official investigations similar to those in Kansas and Oklahoma. But the industry’s political allies have blocked every effort so far.
Lt. Gov. Dan Patrick recognized the profiteering immediately. He demanded that the state claw back the higher profits than the companies could expect over five years of operations. But the acting chair of the Public Utility Commission, Arthur D’Andrea, promised executives they’d get to keep their money, and Gov. Greg Abbott backed him up.
Afterward, the CEO of Energy Transfer Partners, Kelcy Warren, gave Abbott a $1 million campaign donation. The CirclesX lawsuit alleges Energy Transfer’s decisions before the storm led to the blackouts.
PART TWO: Texas pipeline operators triggered deadly 2021 blackouts while chasing profits, lawsuit alleges
Failed oversight
Texas regulators promised to investigate. But the Texas Railroad Commission, which regulates pipelines, later decided it did not have the authority to investigate allegations of market manipulation. The commission did not respond to a request for additional comment.
Attorney General Ken Paxton announced in March 2021 that his office would investigate allegations of price fixing but has not released any results. The attorney general’s office did not respond to a request for an update.
The GOP-controlled Texas Legislature did not hold hearings or pass significant legislation regarding intrastate pipelines. Despite decades of complaints from well operators who sell their gas to pipelines and the power plants that buy it, the Legislature has not passed any significant reforms.
PART THREE: Rival companies, state AGs accuse Texas pipeline operators of fraud over prices during Uri
One of the most senior lawmakers took extraordinary steps in 2022 to protect pipelines from an effort to monitor pipeline activity to prevent another blackout.
ERCOT has long recognized natural gas’s critical role in Texas’ energy supply. Officials proposed establishing a desk at its 24-hour operations center to monitor the intrastate market to ensure the gas supply was reliable.
At a hearing on Dec. 5, state Rep. Todd Hunter, a powerful Corpus Christi Republican, promised the Public Utility Commission that ERCOT would face less trouble before his committee and the Legislature if it killed the idea.
PRICING ANOMALIES: FERC official: 'Anomalies' found in natural gas market pricing during 2021 freeze
“If you say yes (to killing the plan), there are a lot of questions that will just disappear,” Hunter said. Donors associated with the energy and natural resources sector gave Hunter more than $95,000 in campaign donations during the 2022 election cycle. Hunter’s office did not respond to a request for clarification.
After noting 2,000 suspicious incidents in pipeline operations, FERC Commissioner Richard Glick said last year his agency was looking into prices.
“We are investigating potential allegations of manipulation that may have happened in jurisdictional electricity markets, and we did find some anomalies,” Glick, who is no longer a FERC member, said. A spokesperson for FERC confirmed on July 17 the investigation is ongoing.
Who will investigate?
Texas Republican leaders have spent the last two years vilifying renewable energy sources that played little or no role in the 2021 blackouts. The Legislature considered dozens of bills and heard hours of testimony painting clean energy as a danger to the grid. But no Texas regulator or legislative leader has dug into the allegations against pipeline companies.
State leaders have proven Texans cannot rely on them for protection against another blackout or price gouging. Instead, we must depend on lawsuits brought by CirclesX and Kansas’ attorney general, as well as investigations by Oklahoma’s attorney general and FERC for justice.
Once the evidence is undeniable, maybe Texans will get the protection they deserve before the next winter storm strikes.