HOUSTON – Local energy experts predict that Texas natural gas consumers should likely expert an increase in their energy bills next year as state leadership and the Railroad Commission of Texas have recently approved measures to allow eight major natural gas providers to recoup $3.4 billion in significant losses due to the storm.
This comes after Gov. Greg Abbott signed HB 1520 into law in June, essentially allowing gas utility providers who incurred significant losses during the storm to “issue bonds and impose fees and assessments,” according to the documents, to be able to pay back natural gas wholesalers.
On Nov. 10, the Railroad Commission of Texas unanimously approved for eight gas companies to work with the Texas Public Finance Authority to make up the lost funds due to the storm in February.
The bitter cold weather from February is hard to forget. Many residents in Greater Houston lost power and heat. Ramanan Krishnamoorti, University of Houston’s chief energy officer, has studied and analyzed the supply and demand of energy from that period.
At the time, natural gas supply went down and demand went up, according to Krishnamoorti, giving natural gas wholesalers astronomical profits due to supply and demand.
Krishnamoorti said wholesalers in certain areas were selling natural gas at $400 per million BTUs, or units of heat, when it is usually around roughly $3 to $5 for that same amount in that area. So, Krishnamoorti said gas utility providers -- or the so-called “middle men” at the time -- agreed to the rate in order to maintain service. However, like with any transaction, bills needed to be paid, and that’s where the consumers are left holding the bag.
“They could recoup those costs from the rate payers or from consumers like you and me so that they could pay back the money that they owe the wholesale companies,” Krishnamoorti said.
Krishnmoorti said, for consumers, it is the other side of a free market system, supply and demand and capitalism. In this case, the consumer takes the hit, while wholesalers keep major profits and utility providers look elsewhere to help with that cost or go bankrupt. Krishnamoorti said the consumers are left holding the bag.
”Otherwise, you would have had companies in the middle of the value chain going bankrupt,” Krishnamoorti said. “There are one of two places that could have paid it. The state could have said, ‘We’ll pay for it, and we will claw that back through raising taxes or let’s just put it directly back to the consumers over next 20 to 30 years.’ “
The RRC commented that the HB 1520 was meant to ultimately help keep costs more predictable.
“The bonds provide gas utilities a low-cost source of financing to fulfill outstanding obligations to natural gas suppliers, and allow utilities to recover the extraordinary cost of gas through customer bills over a longer time period, rather than potentially through a single billing statement,” a representative with the RRC said.
The commission has 90 days to submit a financing order to the Texas Public Finance Authority, directing them to issue bonds. The TPFA then has 180 days to begin issuing them.
Krishnamoorti said for natural gas, consumers should expect an increase of around $2-$10 and the increase will likely take effect in the latter half of next year with the full effect of the law felt in 2023.
This is the Railroad Commission of Texas’ full statement:
“During Winter Storm Uri, gas utility local distribution companies (LDCs) incurred extraordinarily high natural gas costs when procuring the necessary supply of natural gas to maintain service to their customers. LDCs are authorized to directly pass-through gas costs, without a markup, to customers. The Legislature recognized that natural gas utility customers could see a dramatic increase in their monthly bills without securitization of those costs and passed House Bill 1520.
“The bill directs the RRC and the Texas Public Finance Authority to work together to issue customer rate-relief bonds. The bonds provide gas utilities a low-cost source of financing to fulfill outstanding obligations to natural gas suppliers, and allow utilities to recover the extraordinary cost of gas through customer bills over a longer time period, rather than potentially through a single billing statement.
“The total securitization amount is approximately $3.4 billion, which can be found in the table of amounts for each LDC on page 6 of the attached document. An LDC can provide you information on their estimate of a customer bill impact.
“HB 1520 requires the financing order to be issued no later than 90 days after last week’s vote, but it’s expected to be issued before that 90-day deadline.”