Utilities’ gas price gouging claims examined
February storm that hit Texas caused prices to increase sharply
Zia Natural Gas Co. alleges it had to pay 150 times the typical price for gas during a massive storm in February, and it wants authorities to investigate.
At least four state and federal entities are doing exactly that. They primarily hope to shield New Mexico customers from rate shock and learn why gas became so scarce and costly during the storm.
Among those investigating are the New Mexico Attorney General’s Office, the New Mexico Public Regulation Commission, the Federal Energy Regulatory Commission and the North American Electric Reliability Corp.
“Right now we have launched our own inquiry,” Public Regulation Commissioner Joseph Maestas of Santa Fe said this week. “I think the attorney general might have more enforcement authority than we do.”
There is no way utility companies can absorb such costs without passing them on to customers, the companies say.
Some, like Ruidoso Downsbased Zia, intend to secure loans to pay the cost rather than smacking customers with a onetime price jolt.
Leslie Graham, general manager of Zia, reiterated to the Public Regulation Commission this month that her company wants the matter investigated. If another event like this were to take place in the near future, she said, “the utility industry and its customers would be in a world of hurt.”
Maestas said the PRC’s review is “on behalf of not just the customers but on behalf of the utilities.” He said the “alleged gougers … are the people that sell energy on the open market.”
Zia said in a letter to the attorney general that its gas suppliers during the period in question were Shell Energy North America, DCP Midstream and United Energy Trading.
Shell said Wednesday: “The extreme weather in Texas impacted nearly every resident and corner of the state — and some outside of it. Throughout the week, we were in close contact with our Shell Energy North
America customers and relevant regulatory agencies and that remains the case as we continue to assess the aftermath of this devastating weather event.”
DCP said there was “a supply-demand gap and extreme commodity price volatility outside of DCP’s control.”
Zia said in late February its typical gas costs are $10 million a year. But natural gas during “the event” in mid-February cost an estimated $18.7 million, the company said.
On Feb. 1, it paid $2.55 per MMBTU — metric million British thermal unit, a measure of energy value — and on Feb. 17, the price hit $381, Zia said.
Matt Baca, a spokesman with the Attorney General’s Office, said this week the office’s involvement seeks to “ensure that consumers are appropriately protected from any unlawful utility price increases.”
Baca wrote in an email the review is ongoing. Asked if the investigation includes gas suppliers as well as utility companies, he said it involves “any potential harm to consumers.”
A Federal Energy Regulatory Commission spokesman said only that the agency’s investigations remain ongoing.
Public Service Company of New Mexico, the state’s largest electric utility, said its preparedness for such situations precluded having to take out loans or severely ding customers. Tom Fallgren, a PNM vice president, said customers’ April bills will show a 4 percent increase in adjusted fuel prices.
Fallgren said PNM’s long-term contracts; decrease in gas use at the time; and increase in use of other resources, such as nuclear energy, solar power and wind energy, cushioned the blow.
Fallgren said natural gas prices did rise enormously. Gas supplies ran short as demand rose, he said, and oil well equipment in Texas froze, cutting supply.
“There’s always an opportunity to vilify somebody,” he said. “I think the take-home message is adequate resource planning.”
Other companies have cited similar problems to those faced by Zia.
Raton Natural Gas Co. said in its letter to the attorney general that in “almost 60 years of providing utility service, we have never experienced anything comparable” to this situation.