They call it “anomolous,” referring to last February’s cold temperatures that sent natural gas prices spiking.
What was anomolous was less the weather — we’ve gotten that cold before — than the stupendous price spikes that we will be paying for years from now. Some utilities reported that they were forced to buy natural gas at as much as $1,200 MMBtu (a unit of measuring natural gas equivalent to a million British thermal units) when it had been selling for about $2 to $3 just ahead of last February’s cold snap.
As a result, utilities throughout the Midwest, including Liberty, were hit with hundreds of millions of dollar in costs to buy natural gas to keep generating plants operating. For Liberty, those costs now amount to more than $204 million. Across the state line, OG&E in Oklahoma spent closer to $750 million to keep operating during the cold snap. Bottow line: We will be paying for a week’s worth of energy to heat our homes and businesses for 13 years in Joplin’s case, for decades in the case of some Oklahoma customers.
What this means is that there is essentially no limit now — no cap — on the cost of gas or energy that can be passed through by utilities from wholesalers to consumers. None. No brakes at all. It creates a precedent — a dangerous one.
Lawmakers, wishing to be helpful, then passed securitization measures in Missouri, Oklahoma and elsewhere that would minimize the financial impact. Under the plan, bonds would be issued to cover the utility’s debt, and the utilities will collect that money from the consumer to repay the bond for years or decades. It would be allowed for what are described as “qualified extraordinary costs,” which would appear to include natural disasters, but it isn’t limited to that.
On one hand, securitization will save consumers money versus the traditional means for utilities to recover costs. On the other hand, this creates a mechanism.
So now we have a mechanism to go with that precedent.
Given that we have both, this is not setting up to be a one-off event. If natural gas wholesalers are allowed to get away with these outrageous price spikes once, they’ll be back, and soon. Perhaps again this winter.
We are deeply troubled by where this is headed.
