Oklahoma Attorney General Mike Hunter said Monday that there is evidence that some natural gas market sales during the historic winter storm that hit the state and nation last week may have violated state price-gouging laws.
Hunter’s comments came during a press conference of top state officials addressing the possibility of customers possibly facing high utility bills as a result of restricted supply and spiking demand during the previous weeks’ sub-freezing weather and winter storms.
Over the past two weeks, Oklahoma — and much of the Midwest and Texas — experienced an extended period of sub-freezing temperatures. The Southwest Power Pool, which encompasses 14 states including Oklahoma, began requesting that utilities perform planned rolling blackouts last week as demand for power skyrocketed, energy supply for generators was squeezed by natural gas pipeline and wellhead freeze offs, and several power plants went offline.
However, even before the worst of the winter weather hit on Tuesday, Feb. 15, natural gas markets showed an enormous spike in spot prices — the price to buy natural gas directly without a long-term contract in place — for the commodity, with reports of prices in some areas exceeding $1,000 per MCF (thousand cubic feet), officials said. Usually, the price is between $2 to $3 per MCF, said Kenneth Wagner, Oklahoma secretary of energy and environment.
On Friday Feb. 12, Gov. Kevin Stitt declared a state of emergency as the first round of winter storms was expected to move in over the weekend. That emergency declaration triggered the state’s Emergency Price Stabilization Act, also referred to the anti-price gouging statute, which prohibits an increase of more than 10 percent for the price of goods or services after a declared emergency.
Hunter said that there were already significant price increases of natural gas on the spot markets on Friday, and that his office is “looking carefully at the extent to which the Price Stabilization Act has been violated.”
“We’re essentially looking at what that price determination was on Friday of last week in order to start looking at violations,” Hunter said. “There’s supply and demand, and that’s certainly part of this phenomenon, but there is evidence that there’s been market manipulation that’s gone on. And to the extent that we discover market manipulation, in which entities have taken advantage of the suffering of Oklahomans, we’re going to hold those entities responsible.”
Hunter asked that both electric and gas utility companies temporarily cease collecting automatic payments from customers and bill manually, so that customers’ bank accounts aren’t suddenly hit with a potentially larger bill resulting from increased utility usage to combat the cold.
“It is in everybody’s interest, it’s in your interest to suspend automatic payments that are in place and go ahead and bill people manually because people haven’t contemplated the bills we’re going to perhaps be looking at,” Hunter said.
As first reported by The Frontier last week, the restricted supply of natural gas caused by increased demand and well-head and pipeline freeze offs, in addition to restricted electrical generation across the greater Southwest Power Pool, left some utilities buying gas off the open market at highly inflated prices, which could translate to much higher cost of fuel prices on some customers’ bills, though the full cost would not be known for weeks.
Wagner said any increased fuel costs for customers of Oklahoma Corporation Commission-regulated utilities, rural electrical cooperatives, the Grand River Dam Authority and Municipal Power Authority would likely be spread out over the year, and that any immediate bill increases would likely only reflect increased usage, rather than increased fuel cost.
Gas utilities must submit fuel costs increases monthly to the Oklahoma Corporation Commission, while electric utilities submit them annually, but can submit mid-year adjustments.
“We will see increases in bills as a result of two to three times the amount of usage. Your bill at the same gas costs and fuel costs, will reflect proportionately the amount of increased usage you did as a result of this historic storm,” Wagner said. “Those costs which are ultimately passed along, will not be passed along immediately.”
However, it is unknown what would happen to customers for smaller unregulated gas utilities, such as the Grove Municipal Services Authority (GMSA), which provides gas utility for several surrounding towns and communities.
Last week, increased demand by customers for gas caused GMSA ran out of it’s natural gas reserves and go over its contracted amount of supply, forcing it to go to the open market to purchase gas, which was selling for more than $600 per dekatherm at the time, Grove’s city manager told The Frontier. The utility began telling customers, some of whom asked to have their gas service suspended, to conserve gas just to keep their costs down.
“There is a section of people who need to be aware that we don’t know what the impact could be on theirs. It’s a small section, but it’s those municipal customers who get their gas from a non-regulated gas provider,” Wagner said. “So if you have a municipality with its own utility and we don’t know who they have their gas provided from and we don’t regulate on a rate basis.”
Wagner said those customers should contact their city utility for more guidance. The state and federal government and regulators, as well as utility companies are all working to mitigate the impacts on customers, he said.
“I know all of us up here are willing to help in any way we can as those become known to us and we are pledging to do anything we can to mitigate those impacts,” he said.
Unlike Texas, whose gas and utility customers have been stuck with astronomical bills during the crisis, Oklahoma regulatory agencies such as the Corporation Commission, serve as a backstop against such widespread issues, Wagner said.
The issue of natural gas market prices and the performance of utilities during the cold-snap will also be the subject of public House Utilities Committee hearings and hearings by a select Senate Committee headed by Sen. James Leewright, said Senate Pro Tempore Greg Treat.
“The people of Oklahoma are very concerned what that is going to mean to them on their next set of utility bills,” said House Speaker Charles McCall. “It is not acceptable to the House of Representatives to have skyrocketing utility rates.”
McCall said the House would be willing to “step in and help stabilize the situation,” if necessary.
Gov. Kevin Stitt said the state government is unified to help Oklahomans deal with the aftermath of the winter weather, and that the two main goals are to help get financial assistance for utility bills and understand how the utility grid was so unprepared for the crisis that unfolded.
“We’re going to get through this,” Stitt said during Monday’s press conference. “We’re going to do everything we can to help Oklahoma’s families get through it. And we’re going to get to the bottom of what happened and make sure it doesn’t happen again to the state of Oklahoma.”
Stitt said he plans to meet with the state’s federal delegation in Washington D.C. on Tuesday and Wednesday to push for more federal aid to the state.
“This truly was a once in a lifetime storm,” Stitt said during Monday’s press conference.
However, thanks largely to humans putting more greenhouse gases such as carbon dioxide in the atmosphere through burning of fossil fuels, most mainstream climate scientists have predicted that those weather events that could previously be considered once-in-a-lifetime will become more common and more extreme. Scientists also say that man-made climate change has had an effect on the northern hemisphere’s Jet Stream that can cause winter weather conditions to stall out over large swaths of the globe for extended periods of time.
During the recent cold-snap, Oklahoma spent more than a week without temperatures above 20 degrees, saw several inches of snow and Oklahoma City hit a low of -14 degrees at one point, a low temperature not seen since there since 1899.
Stitt and Wagner said the state has an “all-of-the-above” approach to energy generation. The largest portion of the state’s electricity is generated by natural gas, around 45 percent, while wind makes up around 40 percent of electrical generation and coal makes up around 10 percent on average.
Wagner said that on Tuesday, when the SPP-ordered planned blackouts began, it was wind generation that helped generate enough electricity “and actually took us out of curtailment,” he said. “So wind saved the day in that moment.” However, the next day, the winds fell, as did electrical generation from wind, he said.
To fill the gap on Wednesday, which also saw planned rolling blackout, coal generated electricity jumped up to around 40 percent of the state’s electrical generation, Stitt said.
“We are an all of the above approach to energy in Oklahoma,” Stitt said. “Coal was really bailing us out in the (electrical) production (on Wednesday). We need an all of the above approach to energy. We’re about renewables in Oklahoma, but we also need to make sure that we develop infrastructure with our gas pipelines.”
The cold weather also caused damage to more than 120 public water systems, said Mark Gower, director of Oklahoma Department of Emergency Management, though the recent federal disaster declaration does not cover compensation to homeowners or businesses that experienced damage or loss as a result of the weather.
Gower asked that anyone who did experience flooding, power surges that caused damage, days without water or other utilities, or displacement because of the winter weather report that to damage.ok.gov.
