As economic impact of winter storm nears $1B, some large Kansas customers want to investigate
KANSAS CITY, Mo. — The total cost from a more than week-long cold snap that brought the Midwest power supply to the brink of collapse is nearly $1 billion — and growing.
The greatest breakdown during the storm, which forced controlled electrical blackouts in Kansas and Missouri, industry groups have said, was natural gas, which was in short supply and rose to 200 times its normal price during the worst stretch of the storm.
So far, two of Kansas’ largest natural gas companies have filed to collect a combined $539.5 million from ratepayers over as long as 10 years. Some Evergy customers in Kansas will pay for $152.3 million in power costs from Winter Storm Uri over two years.
But as regulators review those companies’ plans and prepare to pass on the costs to Kansas ratepayers, some groups representing large-scale customers say that — even six months later — the state has more work to do investigating the cause of huge natural gas price spikes during the storm.
“We don’t know who got the bag of cash, but somebody got it,” said C. Edward Watson II, an attorney representing several large-scale customers, including the Catholic Diocese of Wichita.
Watson, on behalf of his clients, joined a motion filed with the Kansas Corporation Commission by the Natural Gas Transportation Customer Coalition to subpoena a national gas price index to look for signs of market manipulation or dysfunction. NGTCC, represented by attorney Jim Zakoura, also wants the Kansas Gas Service to disclose the names of suppliers that charged such high prices during the storm. In the filing, Zakoura wrote KGS has not challenged the extraordinarily high February gas prices.
“Essentially, KGS has abandoned its advocacy on behalf of its Kansas ratepayers — the very ratepayers who will be obligated to pay $451 million for seven days of natural gas, if ordered by the commission,” the filing says.
KGS has yet to file a response to the motion but said in a statement it cooperated with investigations into the natural gas price spike and disputed some invoices from its suppliers. It did not answer whether it agreed with the call for subpoena of S&P Global Platts Gas Daily.
At the same time, the attorney general’s office is investigating whether any price gouging took place during the storm.
The Citizens’ Utility Ratepayer Board, the state’s dedicated consumer advocate, said it’s important the parties cooperate with that investigation.
In a statement, Black Hills Energy’s spokesman, James Williams, also pointed to the attorney general’s investigation.
“Identifying who profited from the winter storm is the responsibility of governmental bodies, but the cost of gas is a pass-through expense for Black Hills Energy,” Williams said. “We’re committed to helping find a solution for our customers that lessens the impact of this historic event.”
In Missouri, Spire has yet to file a plan to recover the costs it incurred to keep heat on for Kansas City-area and Western Missouri residents during the storm. In an email, a spokesman said the utility would file with the Public Service Commission this fall.
Spire is currently in a battle over a pipeline it installed in the St. Louis area, which it says was instrumental in avoiding the need to cut off gas service to residents in eastern Missouri.
‘$1 billion and it’s all gone’
All told, the Kansas Gas Service incurred an additional $390 million in extraordinary gas costs in February, plus carrying costs. It has filed a plan to recover those over five, seven or 10 years, increasing customers’ bills by anywhere from about $5 to $11 per month.
Black Hills customers could see their bills go up by $12.23 per month to recoup $87.9 million in costs over two years.
Atmos Energy has yet to file a plan, but according to its quarterly report with the Securities and Exchange Commission, it incurred an estimated $76.7 million in excess natural gas costs.
Along with Evergy’s filings, loans taken out by municipalities that supply their residents power, and cooperatives across the state, the total cost of the storm is $953.9 million, according to a filing by NGTCC. That doesn’t account for costs incurred by large-scale customers that purchase their natural gas directly, such as hospitals, school districts and large businesses.
Zakoura noted Kansas ratepayers weren’t getting any new wind or solar farms, new or safer pipelines, or other upgrades in exchange for their high bills. He called it the “most costly event in the last 50 years.”
“This is $1 billion, and it’s all gone,” he said.
David Nickel, executive director of the Citizens’ Utility Ratepayer Board, called the event substantial but said the utilities were doing their due diligence to lessen the impact on customers. He said he understood Zakoura’s point that no new infrastructure came from the huge sum, but he said it depends on “how you determine value.”
“The whole concept of being able to live through this event without having massive curtailments, without having blackouts that roll through the states, like we did in Texas … I think there’s value to that,” he said.
To recover those costs from residents, the gas utilities have to incur them prudently. If they don’t, the KCC can deny the unreasonable costs. Nickel said he doesn’t see any evidence the utilities took on unreasonable costs, but that CURB and KCC staff will investigate.
Williams said Black Hills’ purchases followed regulators’ instructions to “do all things possible and necessary to ensure continued natural gas service.”
And while some municipalities or large consumer customers are challenging their bills, Zakoura said utilities supplying gas to residential customers aren’t doing enough to challenge the exorbitant gas prices they paid before passing the surcharges on to their customers.
Between Feb. 1 and Feb. 18, average gas prices on the Southern Star Pipeline, which serves Kansas, rose from $2.55 to $622.79, according to the S&P Global Platts Gas Daily, which relies on gas companies to report their purchases. Zakoura said on the days the prices were highest, only a handful of trades were reported to make up that average.
Zakoura filed a motion in the Kansas Gas Service’s proceedings before the KCC to subpoena the index, saying there was “overwhelming circumstantial evidence of a dysfunctional market that was characterized by unconscionable price increases” during the cold snap.
The filing claimed KGS had made no effort to challenge the high prices it was charged for gas.
“This docket is not a docket that is solely focused on the issue of ‘the length of time’ that Kansas ratepayers will have in order to pay KGS $451 million,” the filing said. “It is equally, if not more focused on whether KGS ratepayers should pay KGS $451 million, and whether Kansas residents, businesses, and governments should pay $1 billion for seven days supply of natural gas.”
In its statement, KGS said it had made purchases tied to the S&P price, which isn’t known until the market closes at the end of the day. That amounted to about 30% of the gas purchased during the storm.
The utility hasn’t “lodged an independent investigation of the prices,” said spokeswoman Dawn Tripp, who added that KGS disputed invoices from some of its suppliers.
KGS has yet to file a response with the KCC but has resisted Zakoura’s filings seeking to have the company disclose its suppliers, saying those are confidential business dealings.
Tripp said the company submitted documents to the KCC, CURB, attorney general’s office, NGTCC and others under a protective order. It noted the KCC staff and CURB had not objected to the protective order.
Tripp said KGS purchases gas through a competitive bid process it considered confidential.
“Natural gas suppliers may be reluctant to sell gas to Kansas Gas Service if the only option is under a public contract,” Tripp said. “With fewer suppliers available to purchase gas from, it would likely result in higher gas prices paid by Kansas Gas Service’s sales customers.”
Black Hills, too, said it does not publicly disclose contract prices.
KCC staff filed a response Thursday to Zakoura’s motion supporting KGS’ position that the documents should be confidential. In its filing, it noted the KCC and CURB are designated to protect residential consumers, not NGTCC.
“While staff fully understands and appreciates the extraordinary nature of the winter weather event,” the filing said, “staff finds it difficult to agree that the extraordinary nature of the event requires an extraordinary deviation from traditional commission practice related to confidentiality.”
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