So far, no evidence has surfaced that any pipeline company inappropriately withheld gas supplies to increase profits. However, Texas pipeline companies routinely keep excess gas in storage and on pipelines to sell when prices are at a premium — which they are forbidden to do on the interstate system, according to the newspaper report.
The potential for Texas pipeline companies to exercise vast market power and accusations that they may have engaged in price gouging during last year’s system-wide power outages is the subject of a new investigative report by the Houston Chronicle.
Drafted by veteran energy journalist James Osborne, the May 4 investigative piece outlines how the price of natural gas during the 2021 winter storm shot up to $150 per million British thermal units — about five times the state’s previous record — and then quickly jumped from there to $225 per mmbtu and then $500 per mmbtu. Those soaring prices led to massive profits for pipeline companies, but bankrupt some electricity providers and will result in years of higher prices for utility ratepayers.
“The massive increase in natural gas prices during (the 2021) blackout has set off a wave of litigation in state and federal courts and prompted an investigation by the Federal Energy Regulatory Commission, casting a spotlight on the workings of Texas’s complex, opaque and lightly regulated natural gas market,” Osborne reported. Citing legal filings and policy experts, Osborne wrote that the Texas natural gas market provides opportunities for pipeline companies occasionally to name their own prices during gas shortages. This is different from other gas markets in the country, according to Osborne’s report.
Accusations of Price Gouging
He reported that CPS Energy of San Antonio, Vistra Energy of Dallas, and Brazos Electric Cooperative of Waco have accused pipeline firms of price gouging, and that pipeline companies Energy Transfer and Kinder Morgan earned combined profits of $3.4 billion during the storm. “The skyrocketing prices also left Texas natural gas customers with a $3.6 billion bill that will take a decade to pay off,” he wrote.
“When supplies are short and gas available from interstate lines is limited — such as when wells across the Southwest froze in February 2021 — companies operating pipelines within Texas gain outsized market power as buyers scramble to lock down supplies before someone else does. Since buyers have no idea how much competitors are offering or paying, Texas pipeline companies can sell their gas at whatever price they think the market can bear.”
Other revelations from the report:
- So far, no evidence has surfaced that any pipeline company inappropriately withheld gas supplies to increase their profits. However, Texas pipeline companies routinely keep excess gas in storage and on pipelines to sell when prices are at a premium — which they are forbidden to do on the interstate system.
- Analysts at the Federal Energy Regulatory Commission have noted more than 2,000 instances of unusual market behavior around the country at about the time of last year’s winter storm. The analysts have referred two cases to the commission’s Division of Investigation for further examination.
- The chief technical adviser for the North American Electric Reliability Corporation has cited anecdotal evidence of market manipulation in the Texas market during the statewide outages.
You can read Obsorne’s full report here.