Protect consumers from price gouging, blackouts by monitoring the natural gas industry

According to the Federal Energy Regulatory Commission (FERC), 31% of blackouts during Winter Storm Uri were a result of natural gas wells and processing facilities shutting-in due to a lack of weatherization, resulting in catastrophic shortages of gas available to power plants as demand surged. Even as Texans were left in the cold, Texas gas was exported internationally via LNG tankers. Gas prices soared, with some companies crowing about “hitting the jackpot.” 

Noting “anomalies” during Winter Storm Uri, FERC is currently investigating potential market manipulation and have referred two cases to the commission’s Division of Investigation for further examination. Power companies such as CPS, Vistra Energy and Brazos Electric Cooperative have accused pipeline firms of price gouging during Winter Storm Uri, leaving Texas natural gas customers with a $3.6 billion bill that will take a decade to pay off.

And despite the passage of SB 3 in 2021, the gas industry continues to have problems during cold weather. According to the Dallas Federal Reserve, during the 2022 Christmas holiday, Texas experienced a 25 percent drop in natural gas production, “a cause for concern especially when recognizing how much less severe the weather system was relative to the 2021 deep freeze. Likewise, a gas distribution company in North Texas experienced service interruptions due to the conditions. Limited resources and self-policing appeared to hinder state inspection and implementation of weatherization standards.” 

The Texas Legislature needs to take additional steps to protect consumers from high natural gas prices and gas supply chain-related blackouts.  

Monitor the gas industry industry for market manipulation

According to the Houston Chronicle, “Texas pipeline companies routinely keep excess gas in storage and on pipelines, to sell when prices are at a premium, “ a practice allowed in Texas, but forbidden in the interstate system.” The Texas Legislature should protect consumers by: 

• Passing HB 2128 (Bailes) to make clear the Attorney General has the authority to take enforcement actions against companies which demand an exorbitant or excessive price in connection with a sale of natural gas in intrastate commerce
• Requiring the Railroad Commission to regulate the rates charged by pipeline companies
• Establish an independent market monitor(similar to the watchdog that oversees Texas’s electric industry) to identify any potential market manipulation and hold violators accountable. 

Create a “gas desk” at ERCOT

ERCOT “operates a handful of “desks” that gather and manage basic information on various sectors, such as transmission or renewables. In doing so, the state regulatory body is able to keep tabs on available energy at any given time.” But despite the major role the natural gas sector played in the Uri blackouts, ERCOT doesn’t yet have a “gas desk.”  

Recommendation: Require that gas utilities that own or control facilities that are registered as critical facilities or that provide physical gas delivery to a power generation company, municipally owned utility, or electric cooperative to provide information in real time about gas supply, including through telemetry or the use of a hotline.