TOPEKA — The Kansas Corporation Commission issued orders requiring retail residential ratepayers to bear the brunt of $622 million in extraordinary costs absorbed by public utilities to buy natural gas during a brutal cold snap in February 2021.
The three-member KCC didn’t require utility companies to eat costs associated with a winter storm given the name Uri. There was no negotiation for price breaks on behalf of residential customers, despite private commercial deals reducing by 25% or more their payments tied to the weather.
Nor did the commission launch its own investigation into the mystery of what transpired when natural gas prices surged during a crucial seven-day period.
Jim Zakoura, an energy attorney and president of Kansas Industrial Consumers Group, said he was convinced the pricing of natural gas during the Uri storm didn’t reflect free market forces of supply and demand. State or federal officials have an obligation to explain what really happened to all the retail customers bearing the burden over the next two years to 10 years of costs incurred by utility companies, he said.
“There were indications throughout this period that the pricing was not accurate. I don’t want to say it was unlawful,” Zakoura said.
His central question: How did the price index for natural gas in Kansas move from $2.54 per unit on Feb. 1, peak at $622.78 per unit on Feb. 17 and plummet to $2.46 per unit by Feb. 28?
He said during the Kansas Reflector podcast the lack of a reasonable explanation of what transpired at the wholesale and retail levels should worry consumers because nothing has been done to shield them from price shocks in future storms.
It’s extraordinary
During the 2021 storm, the KCC ordered regulated utilities to do everything possible to sustain natural gas service to customers, to defer billing for price spikes and to develop a long term plan allowing customers to pay the unusually high costs over time to minimize the financial impact. The commission said it was in the public interest for utility companies serving Kansans to temporarily incur the extraordinary costs to ensure integrity of the gas system.
All three of the KCC’s members appointed by Gov. Laura Kelly said the obligation of consumers to pay the extra fees from the storm was an unpleasant reality. They said the commission couldn’t regulate wholesale natural gas because Congress deregulated pricing in the 1980s.
“These extraordinary costs are not profits or money flowing to our utilities,” said KCC commissioner Andrew French. “These are associated with the cost of procuring a wholesale, unregulated commodity product and that is a cost that unfortunately has to be passed on to the customer.”
French said the KCC had taken every step available to minimize the additional natural gas costs to customers in response to the storm.
He said the commission put in place a structure requiring proceeds recovered by utility companies from state or federal investigations of possible market manipulation or price gouging would be passed to customers. In February, the Kansas House approved a resolution urging the Federal Energy Regulatory Commission and Kansas Attorney General Derek Schmidt to investigate potential market manipulation. The Kansas Senate didn’t vote on the measure.
In August, Commissioner Susan Duffy said inquiries by FERC and the attorney general what could be viewed as “nefarious activity” were still active.
“I firmly believe storm Uri was not a one-off event,” Duffy said. “There will be other storm Uris to follow. The bottom line is we learned a lot from this one and hopefully we’ll be much better prepared and will have a better understanding of the costs involved.”
