Natural gas ‘anomalies’ during the Feb. 2021 freeze point to the need for a market monitor

Some sort of funny business happened in the natural gas markets during the deadly February 2021 freeze and power outage.

That’s what Federal Energy Regulatory Commission Chairman Richard Glick indicated when he said the commission had found trading “anomalies.” According to the Houston Chronicle, Glick told reporters that FERC is investigating.

During the winter freeze last year, millions of Texans lost power because power plants stopped working. Some plants froze because of a lack of winter maintenance, and some were unable to get natural gas fuel when pipelines and other equipment froze. Prices for electricity and natural gas spiked, prompting concern that some industry players took advantage of the emergency to boost profit.

The Texas Railroad Commission, which regulates oil and gas in Texas, has so far declined to investigate, saying the commission has no authority over private, proprietary contracts of pipeline gas flows between buyers and sellers.

Fair enough; nobody wants the government mucking around in private contracts and trades on free markets. The problem might seem intractable. But, O Fortuna, a solution has just recently arisen among Texas policymakers: a gas market monitor.

This is an idea that the chief executive of the Electric Reliability Council of Texas, Brad Jones, floated last month, and which we support. It’s similar to the setup in the electric markets, which are observed by an independent market monitor employed by the Public Utility Commission.

The idea is, this person would track and observe market movements to identify any fraud, manipulation or anomalies and get to the bottom of it. The PUC hired an independent market monitor after an instance of market manipulation, and the monitor acts as both a watchdog and deterrent.

Texas regulates the free market for wholesale electricity with firm guardrails, such as hiring an independent market monitor, because electricity is vital to our health and economy. Natural gas is also vital because it fuels about half of Texas’ electricity, and it provides heat to many homes and businesses. Natural gas regulators should hold their industry to standards that mirror those of electricity regulators.

We were pleased that state senators at a recent hearing before the Business and Commerce Committee were receptive to requiring more transparency and standards in the natural gas business. While Railroad Commission Chairman Wayne Christian said the agency lacks the authority to monitor gas markets, senators indicated that part of the agency’s mission is to ensure fair dealing.

“I hope the commission is understanding … that y’all have a commensurate responsibility, in times of crisis in particular, to make sure gas flows, to make sure that the industry is acting in an upright manner, and not utilizing their legal mechanisms ... to disadvantage the people and cause undue expense and hardships on Texans,” said committee Chairman Charles Schwertner, R-Georgetown. He offered to carry legislation in the next session.