Electricity Markets

Groups urge expansion of investigation to include dramatic natural gas price increases

The Federal Energy Regulatory Commission (FERC), in coordination with the Department of Energy (DOE), should expand a current inquiry into the operations of the bulk-power system during recent extreme weather to include the significant price increases experienced in the natural gas markets, the American Public Power Association and the American Public Gas Association said in a Feb. 19 letter.

The letter, which was sent to FERC Chairman Richard Glick and David Huizenga, Acting Secretary for the DOE, notes that recent weather events, including Winter Storm Uri, brought record low temperatures to many states and covered nearly 75 percent of the country in snow and ice.

“Many localities are not accustomed to severe winters and the disruptions that can accompany them,” APPA and APGA noted.

Throughout this severe weather, many communities across the U.S. have relied on their public gas utilities to maintain delivery of safe, traditionally affordable, and reliable natural gas for use in space and water heating and cooking, the two trade groups said.

Public power utilities have likewise worked hard to maintain reliable and affordable electric service to their customers, APPA and APGA said.

“Our members have been proud to support and serve their customers in this time of need, as well as throughout the entire COVID-19 pandemic. However, the energy price impacts from Winter Storm Uri have only further compounded all the challenges facing Americans as we continue to address the pandemic and economic recession,” they went on to say.

“Unfortunately, municipal gas and public power utilities, and consequently their customers, have fallen victim to significant price increases throughout this crisis. Natural gas prices, which have hovered around $3/MMBtu, skyrocketed to upwards of $300/MMBtu and even higher in some cases.”

With demand for natural gas rising in response to the cold temperatures, “our members had no choice but to purchase gas at the inflated prices or pay even steeper penalties to ensure their customers could continue to heat their homes or to allow natural gas-fueled electric generation to continue operating. In one case, a municipal utility spent its monthly gas budget each day over President’s Day weekend. In another, a joint action agency expended three times its annual gas purchasing budget just to buy gas for its customers for four days," APPA and APGA pointed out.

“Unfortunately, similar stories abound throughout the Midwest, south-central, and other regions most severely impacted by the storm, bringing into question how many of these communities will be able to purchase needed gas throughout the remainder of the winter, let alone the rest of the year. Without relief, these high prices will be passed directly to consumers, with many customers anticipated to face monthly bills hundreds or possibly thousands of dollars more expensive than usual.”

APPA and APGA said that they appreciate FERC’s inquiry into the operations of the bulk-power system during this extreme weather event “and request that the Commission, in coordination with DOE, expand its inquiry to include the significant price increases experienced in the natural gas markets.”

APGA and APPA members are locally-owned and governed to be accountable to the neighbors they serve, not corporate boards or investors, the groups noted. Community aid and quality service are the mandates for these utilities.

“Understandably, our members are uniquely concerned with how the market reacted in this emergency because publicly owned utilities have rates set at the local level. Consequently, we believe an objective investigation is warranted,” they said in the letter.

The letter was signed by Joy Ditto, President and CEO of APPA, and Dave Schryver, President and CEO of APGA.