The enormous spikes in natural gas prices this week are likely to have a substantial impact on Oklahoma gas utility customers’ bills, though the full impact of those wild price swings won’t likely become apparent for weeks, according to gas utility companies.
The subfreezing temperatures that have blanketed Oklahoma, Texas and much of the Midwest and last week caused freeze-offs on many natural gas wellheads and pipelines have severely restricted both production and transportation.
In addition, the cold temperatures increased electrical use, and many of the power companies rely on natural gas for power generation. The largest portion of electricity generated in Oklahoma comes from natural gas-fired generators.
The sudden supply squeeze and high demand sent the price of natural gas soaring.
Attorney General Mike Hunter said his office was looking into the natural gas market price increases that contributed to state’s energy problems this week, which included rolling planned blackouts by utility companies at the behest of the Southwest Power Pool. The state’s Emergency Price Stabilization Act, also referred to the state price gouging statute, prohibits an increase of more than 10 percent for the price of goods or services after a declared emergency, which have been declared by both state and federal authorities.
“We are looking into the circumstances of the natural gas cost and supply phenomenon and in discussions with state leaders on a mitigation plan for its impact on consumers moving forward,” Hunter said.
On Monday, Brandy Wreath, the Oklahoma Corporation Commission’s public utilities and consumer services director, said there had been reports of spot prices for natural gas of $1,000 per one thousand cubic feet (MCF). For comparison, the average natural gas industrial price in February 2020 was around $3.54 per MCF, according to the U.S. Energy Information Administration.
For the natural gas utility customer, the result is likely to be a significantly higher bill in the future, though the extent of the price increases from this week won’t be known for a few weeks and is likely to vary.
“While we do not markup the price of natural gas, these events will have an impact on customer bills. At this time, we cannot quantify what the impact will be, said Alex Schott, director of customer communications for Oklahoma Natural Gas, the largest natural gas utility company in the state. “We will be working with the Oklahoma Corporation Commission on options related to the impact to customer bills associated with the current price spikes in natural gas.”
Though there is likely to be an increase in bills based on the cost of fuel, it is not considered a “rate increase,” which is a flat, across the board increase that excludes fuel cost and must be submitted to and approved by the Oklahoma Corporation Commission. Rather, it would be a Cost of Gas Factor that changes monthly to reflect charges by natural gas suppliers and transporters, Schott said. Oklahoma Natural Gas submits monthly filings with the Corporation Commission that includes the costs of gas and results in the COG Factor, he said.
Any bill increases based on the cost of gas this week will likely not show up in customers’ bills until at least April, Schott said.
Meanwhile, smaller utility companies are also warning customers to expect a significant jump in their future gas bills.
On Wednesday the City of Grove and its utility company, the Grove Municipal Services Authority (GMSA) sent out a notice to its customers asking them to conserve gas. High demand had depleted the GMSA’s natural gas reserves on Tuesday and was exceeding the daily amount it had contracted to receive from suppliers. That meant the excess gas the utility needed to cover customer demand was having to be purchased on the spot market, right when prices were spiking, said Grove City Manager Bill Keefer.
The notice stated that, while the gas GMSA had previously contracted to receive cost around $3 per dekatherm, gas was trading on the markets on Wednesday for $622 per dekatherm.
“Now that we are buying, once our daily nominations usage expires during the course of day, we’re getting gas at whatever the spot market prices is at that time we put the order in on the gas to get us through the rest of the day,” Keefer said. “This past week, we’ve heard unbelievable numbers (for natural gas prices).”
In addition to Grove, GMSA is the utility company that provides gas service to the towns of Afton, Fairland and Jay, as well as Rural Water District #10.
In a Facebook post by the city of Jay, Mayor Becki Farley asked residents to conserve gas by turning down thermostats, eliminate nonessential gas usage, and warned residents to expect a much higher gas bill.
Farley, who did not return messages from The Frontier on Thursday said the price of $622 per dekatherm would result in enormous bills for residents, though it will take a few months to know the exact price since natural gas prices are continuously fluctuating.
“As an example a household of 5 people last month used 7500 cu ft of gas and had a bill of $91.80 at this rate of $622 their gas bill would be $4788.90,” Farley wrote. “Please anticipate an extremely significant higher gas rate. Which we or GMSA have no control over.”
Grove resident Bridget Sisley-Smith, 57, said when she saw the notice by GMSA on Facebook, she called and tried to have her gas shut off, but was told that GMSA was unsure if it could do that.
Sisley-Smith, who said she and her wife are both low-income and disabled, said she instead shut off her hot water heater, turned down the thermostat to 64 degrees, and plans to severely limit her gas usage.
“Those are things we just won’t be doing. I can’t afford it,” she said. “What do you do? We count on what our bill is every month and we live within our means so we can live. With this, it’s 2,000 times the amount is normally is. That means our bills will be more than anyone in this town can afford.”
Sisley-Smith said she is frustrated because the utility company can’t tell her how much her bill will be.
“They can tell you they can raise it, but they can’t give you any idea how much it’s going to be or whether they ca shut it off,” she said. “The answer I got was ‘these are unprecedented times and we just don’t know.’”
Keefer said he too is looking for answers.
“I have no idea at this point in time, and our (natural gas) broker can’t tell us and neither can anyone else, what exactly our costs are going to be at the end of the day,” he said. “Hopefully, we’ll know sooner or later. I do not know. I just know we’re paying whatever the market price is.”
At this point, that was the reason for the public notice to conserve gas, Keefer said – to try and keep the gas bill relatively low.
“We’re trying to minimize the amount of gas we’re receiving under that unknown price category,” Keefer said. “That’s what we’re trying to protect ourselves from through the conservation. We believe the numbers are pretty outrageous and I can’t imagine anyone who purchases gas would think differently. We’re sort of at the mercy right now of what’s happening out there and we’re trying to minimize that impact on our customers.”
Keefer said the natural gas price increases should be examined to see whether they could be considered price gouging under state law.
“We’re praying and hoping that might apply to the gas prices too,” Keefer said. “I don’t know if it will or not.”
Alex Gerszewski, spokesman for Attorney General Mike Hunter’s office, said though not every raise in price during an emergency would run afoul of the state’s price gouging statutes, the only commodity that is exempt from the statute is petroleum. That means both natural gas utilities and natural gas commodities markets are both subject to the law, he said.
“We don’t have anything that says the natural gas commodity spot market is excluded,” Gerszewski said.
Under the law, charges can be brought against violators up to one year after the emergency declaration has ended, he said.
For utility customers with electric heating, a price of fuel increase on their bill may not be out of the question, but for electric utilities regulated by the Corporation Commission, a bill increase for customers will require them to file a mid-year adjustment sometime during the summer.
Electric companies regulated by the commission are required to submit their anticipated cost of fuel to the commission during the fall, and those prices take effect in January, said Stan Whiteford, spokesman for Public Service Company of Oklahoma.
At this point, it is too early to know whether a mid-year adjustment filing with the commission will happen, he said, and any increases in utility bills for the next few months at least are likely to be the result of increased usage.
“Without knowing what the impacts have been to us yet, I can’t say whether or not there will be,” Whiteford said. “But what I can tell you is this — what is more likely to affect customer bills is whether they used more or less electricity during this time.”
Brian Alford, spokesman for OG&E also said it was too soon to know what the impact on customers’ electric bills would be, but the impacts of the natural gas price volatility was likely to become clearer within the next 30 days.
“While we’re moving in a very positive direction, we really won’t be in the clear until we see natural gas prices stabilize,” Alford said. “I think it’s much too soon to have a gauge.”
The Grand River Dam Authority, whose rates are not governed by the Oklahoma Corporation Commission, did not respond to requests for comment by The Frontier.
Hamid Vahdatipour, CEO of Lake Region Electrical Cooperative in Hulbert, said the co-op purchases power from the Associated Electric Cooperative based in Missiouri, and that while the natural gas price increases over the past week may have some impact on LREC customers down the road, prices are locked in on a yearly basis, so it is not likely to affect them for the coming year.
Also, around 73 percent of the power purchased by LREC is generated by coal, according to the co-op’s site, while only 7 percent of power purchased comes from gas.
“Coal is really reliable and the price is very stable. Gas is a good system but the prices are volatile,” Vahdatipour said. “When it gets down to it, the high prices will affect the generation co-op. Some of it they can absorb, and what they can’t absorb, the members will end up having to pay the next year and the next year. It could affect prices but not immediately, and it may or may not affect prices going forward depending on how much financial damage there is.”
Vahdatipour said the co-op saw usage go up over the last week by 20 to 25 percent higher than the previous high, but while some customers whose utilities are part of the Southwest Power Pool were having controlled blackouts, LREC customers did not.
“We came awfully close to having to do rolling blackouts. We were on standby for it, but we never ended up doing that,” he said. “Hopefully, going forward things look good.”
Meanwhile, state and tribal governments are anticipating an influx of applications for heating assistance programs for low-income people.
“Families are staying home more and using more gas and electricity to stay warm,” said Jennifer Kirby, interim director for Cherokee Nation’s human services. “This is not only due to the recent winter weather, but also because of the COVID-19 pandemic and the financial strain it has put on families’ finances. Cherokee Nation Human Services is seeing increased requests daily for information on the LIHEAP (Low Income Home Energy Assistance Program) program and applying for utility bill assistance.”
The tribe anticipates it will serve close to 1,900 applications this year, and though it usually stops accepting applications at the end of December, this year it extended the deadline to apply for the program to March 12.
Similarly, the Muscogee (Creek) Nation is also expecting to see more applications for its LIHEAP program, as well as its emergency heating assistance program.
“I think we will prioritize those (emergency program applications) and get the staff ready to possibly see an influx,” said Erin Saltsman, social services program manager at Muscogee (Creek) Nation.
Enrollment for the state LIHEAP assistance ended Jan. 22, said Oklahoma Department of Human Services spokeswoman Casey White. However, people can still apply for the Energy Crisis Assistance Program, which helps low-income individuals faced with an active utility cut-off order within 72-hours, or the Life-Threatening Energy Assistance Program.